OFT loses in Bank Charges- Implications for Foxtons

The Supreme Court has handed down their judgement in the case of OFT v Abbey National & Others (the ‘Bank Charges’ case). A copy of the judgement and a press summary can be found here.

The Court was not ruling on the fairness of bank charges themselves but on whether the OFT could investigate them at all. The banks were contending that their charges were part of the, so-called, “core bargain” between them and their customers and were therefore exempt from investigation for unfairness under the terms of Regulation 6(2)(b) of the Unfair Terms in Consumer Contract Regulations 1999. This regulations states that so long as a term is in plain and intelligible language terms are exempt from an assessment of their fairness if they relate “to the adequacy of the price or remuneration, as against the goods or services supplied in exchange”. This, “core bargain” term, was claimed by the banks to exempt their charges for unauthorised overdrafts and other similar charges from consideration. This argument was rejected both by the High Court and the Court of Appeal who in effect carried out a process of dividing charges into “core terms” which were exempt from consideration and “ancillary terms” which were not.

However, the Supreme Court has overruled both of these decisions stating that the banks system of charges must be seen as an overall package for the provision of a banking service which is ‘free while in credit’ and this falls within the exemption provided by Regulation 6(2)(b). They were critical of the exercise of dividing charges up into core and ancillary charges and questioned whether such an exercise could realistically be accomplished.

The Supreme Court made brief reference to the OFT v Foxtons decision but pointed out that the core bargain issue was, while relevant in that case, not vital as Foxtons’ terms of business were ruled not to be in ‘plain and intelligible language’.

The Supreme Court has not made any ruling, or any substantial comment on whether a ruling on unfairness of terms should be pursued retroactively.

Turning to the case against Foxtons. It was ruled that the average landlord would not view a renewal commission as part of the “core bargain”:

That [Foxtons' publicity material] is hardly likely to engender a realisation or acceptance that the renewal commission is part of the core bargain. As far as the landlord is concerned the core bargain will be getting the tenant in, in exchange for commission which would seem naturally to be associated with that activity, that is to say the commission payable on the first period’s rent.

However, this part of the ruling is now in doubt as a result of the Supreme Court decision. The Supreme Court were not prepared to accept the argument advanced by the OFT in the Bank Charges case that charges levied by the banks would not be acceptable from the consumers viewpoint. The Supreme Court felt that the matter should be viewed from the point of view of both sides and a balanced view adopted. It is not possible to simply state that one party would not have contemplated the charge and leave it at that. Allied to this is the view adopted by the Supreme Court that it is artificial to separate one charge levied as a part of a contract from other charges and deem some of those charges as “core” and some as “ancillary”. This would suggest that this exercise, as conducted in the Foxtons case, is inappropriate and that all the charges should be considered together as a part of an overall package.

It is quite likely that Foxtons will now seek to appeal the decision of Mr Justice Mann. Given that the banks’ charges must now be construed as a package they will no doubt seek to argue that their charging regime must be seen in a similar manner. They will still have the difficulty of their terms being held not to be in “plain and intelligible language” and this is an issue they will need to deal with. No doubt we will find out shortly if Foxtons are to renew their request for permission to appeal or withdraw it altogether.

For other agents, this decision provides substantial comfort. Provided that their terms of business and charges are expressed in “plain and intelligible language” it will be much easier for them to make the case that their charges are a part of an overall package and should be exempt from a consideration of unfairness. The importance of clear and well-constructed terms of business is magnified by this decision and the pressure is removed from many agent’s charging models.

PainSmith Solicitors has always maintained that the terms of business it supplies to agents do (and always have) express charges in a “plain and intelligible” manner. However, they have amended their terms of business as a result of the OFT v Foxtons case to make the charging structure even clearer.

Filed under: Uncategorized , OFT, Unfair Terms

Emergency Accommodation and EPCs

Many people in Cumbria are now looking for emergency accommodation. It is worth bearing in mind that there is a statutory defence to a requirement to have an EPC prior to letting a property in an emergency situation.
This is provided by regulation 42 of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007. This regulation stipulates that it is a defence to a prosecution under the regulations when:

1. The letting was to provide emergency accommodation for the tenant due to a need for urgent relocation;
2. There was no EPC currently in the possession or control of the landlord and there was insufficient time to reasonably obtain one prior to the letting; and
3. An EPC has been obtained and provided to the tenant as soon as was reasonably practicable after the letting commenced.

Obviously, any landlord seeking to take advantage of this exception would be well advised to obtain written confirmation from the prospective tenant that it is an emergency and they should also book the EPC as soon as possible, and ideally before the start of the tenancy.

Filed under: Uncategorized , emergency letting, energy efficiency

Tenant’s Notices to Quit, Holding Over and Double Rent

In these difficult times tenants are increasingly giving notice to end their tenancy and then seeking to withdraw that notice or staying for a few days beyond their original term. This practice is known as holding over. Where a tenant has given notice to quit, either under a break clause or in relation to a periodic tenancy, that notice is binding on the tenant even if it is defective and it can only be withdrawn or rescinded with the consent of the landlord.

Where a tenant gives notice to quit and then does not in fact vacate the premises, staying for a few extra days the provisions of section 18 of the Distress for Rent Act 1737 come into play. This section states that to discourage tenants causing “great inconveniences … by … refusing to deliver up the possession when the landlord hath agreed with another tenant for the same” the landlord may seek double the sum normally charged in rent.

This can only occur where the tenant has given a valid notice to quit which the landlord accepts as a valid notice and where the landlord is, therefore treating the tenant as a trespasser while they hold over. In other words it can only apply where the landlord would have a right to seek possession through the Courts but is unable to do so because the tenant will not be remaining in the property for long enough to make it a practical option. The landlord may not seek double rent for a full period of the tenancy (as this would be inconsistent with treating the tenant as a trespasser) and must charge it on a daily basis. It should also be noted that failure to return keys promptly is not sufficient to engage this principle.

A landlord can recover his double rent in the normal manner from the tenant’s deposit or through the Courts although landlords are warned that, in general, neither tenancy deposit protection adjudicators or judges are familiar with this legislation and so a claim may be hard to pursue in practice.

It should be noted that this stipulation does not apply to tenants who remain in a property for a few extra days at the end of the fixed term or who try to leave part way through a period of a periodic tenancy. In both of these cases the tenancy does not end and the landlord cannot treat these persons as trespassers. The tenancy simply continues for another period until the notice is properly given.

Filed under: Uncategorized , notice to quit, rent, revision

Distance Selling

We have noted a marked increase in queries regarding consumer protection legislation. As such a little reminder about the The Consumer Protection (Distance Selling) Regulations 2000 may be of some help.
These regulations are secondary legislation under the European Communities Act 1985 and the intention behind them is to regulate distance selling business transactions. That is contracts concluded at a distance where there has been no face to face contact, which are for the provision of services. Tenancy agreements are specifically included within the general scope of the Regulations, because the tenant will have been supplied with a service, and so the Regulations will apply to landlords in distance selling situations and therefore agents should familiarise themselves with the basic provisions.
The regulations have 2 important effects for landlords regarding distance contracts, which the agent should ensure that the Landlord is aware of:
1. allow the tenant the right to cancel the distance contract
2. require that a landlord (or agent on his behalf) provides certain specified information to the tenant
The Regulations imply a right to cancel by the tenant into any distance contract under the Regulations unless this right has been specifically excluded by agreement of the parties.
Cancellation operates when the tenant gives a notice of cancellation to the landlord or the agent on his behalf if permitted. Where it applies, the right to cancel can be exercised by the tenant within seven working days of concluding the agreement if the Written Information requirements have been complied with, or within three months and seven working days if they have not.
Agents should note that the tenant’s right to cancel does not apply for the supply of services if the tenancy has started and the tenant has been informed that there will be no rights to cancel the contract once it had started. It is therefore recommended that agents attempt, where possible, to have the agreement signed in their presence at the time they release the keys for the property.
The Written Information that must be supplied to the Tenant prior to the signing of the tenancy agreement is mostly in the tenancy agreement itself and includes such things as the Landlord’s and where applicable the Agents contact details, the fees in arranging the agreement if applicable, the rent payable, the duration of the agreement and so on.
We have noted that many people assume that the Regulations apply to Guarantor Agreements however given that the Guarantor receives no service for entering into the agreement, this is inaccurate.
Incidentally, contrary to some advice we have seen, the Cancellation of Contracts Made in a Consumer’s Home or Place of Work Etc Regulations 2008 also does not apply to guarantee agreements as no service is provided and it does not cover tenancy agreement but do cover agent’s terms of business.

Filed under: Uncategorized , consumer protection, regulations, revision

OFT v Foxtons Rides Again (Maybe)

At 9.45am on Wednesday 25 November the new Supreme Court will give judgement in OFT v Abbey National & Others. This case will be well known to most as it relates to the ability of banks to make charges to customers who overdraw their accounts and on the level of those charges. There should also be an indication as to whether banks will actually have to repay money they have previously collected in charges. Quite apart from the impact this case may have on the UK’s leading banks, possibly requiring them to repay hundreds of millions of pounds in charges, there will also be an impact on the ongoing matter of OFT v Foxtons. This is because Foxtons sought permission to appeal from the Court at the most recent hearing after the judgement criticising aspects of their fees had been handed down. However, they specifically requested that the Court refrain from considering their permission request until after the Supreme Court ruling in OFT v Abbey National. Therefore, depending on the judgement of the Supreme Court, Foxtons will either withdraw their request or will seek to appeal the matter to the Court of Appeal.
Additionally, there will be great interest as to whether the banks actually have to pay money back. If they do, this potentially opens the floodgates for previous Foxtons clients to claim return of fees paid to Foxtons which were paid on the strength of clauses deemed by the High Court to be unfair. This could end up costing Foxtons tens of millions of pounds. Naturally, an effort to make Foxtons return money will also have an impact on other agents who have already faced suggestions from landlords that their fees are unfair as well, notwithstanding the ruling against Foxtons being based entirely on the unusual wording used in their terms of business.
PainSmith will aim to post on Wednesday as soon as we have had time to digest the Supreme Court judgement. Watch this space!

Filed under: Uncategorized , litigation, OFT, Unfair Terms

TDP. New Case and a Summary

District Judge Burn at Bromley County Court has ordered a landlord to pay 3 times the deposit and to return of the initial deposit paid to his former tenants due to his failure to lodge the deposit with an authorised tenancy deposit.

In the recent case of Da Costa v Pinter the claimants were assured shorthold tenants whose tenancy had come to an end. The tenancy agreement required the rent of £1,950.00 a month and a payment initially of £4,200.00. A dispute arose with regards to the Deposit and the tenants issued court papers in order to recover the deposit amount. The court papers were then subsequently amended by the tenants for a further claim of £6,750.00 representing 3 times the initial deposit amount under the Housing Act (HA) 2004 section 214 (4). After proceedings were issued the deposit was then placed in an authorised tenancy deposit scheme.

The judge confirmed that she was happy that the £4,200.00 included a deposit of £2,250.00 and that the agent had described it as such. There was a clear breach of section 213 of the HA 2004 since the deposit was not paid into a scheme within 14 days of receipt. The judge was satisfied that the ‘initial requirements’ of a tenancy deposit scheme were not met and that the remedies of ss 213 and 214 therefore applied, that is the return of the deposit and an award of 3 times of the deposit. Undoubtedly, the judge was assisted in her decision by the fact that the tenancy had actually come to an end prior to the deposit being protected.

This case illustrates the ongoing problems both landlords and agents are having with the tenancy deposit schemes. The case law surrounding this area is mostly unreported however having viewed some judgements there does appear to be some uncertainty over whether the ‘initial requirement’ is to both lodge the deposit with a scheme within 14 days and to provide the prescribed information within the same period or whether lodging the deposit alone is enough. This uncertainty will no doubt continue until a court of record (High Court or above) is asked to rule on the point. Until such a time agents and landlords are warned that judges will decide each case as they see fit given that the decisions of the lower courts are not binding on other lower courts.

In order to assist with the uncertainty The Dispute service (TDS) has amended its rules and now confirm that its initial requirements are that the deposit be registered with the scheme within 14 days of receipt and that the prescribed information must be provided within the same 14 days. Consequently members that miss the 14 day deadline will automatically find themselves in breach of the initial requirements of the TDS and risk being ordered to pay 3 times the deposit.

In the case of Universal Estates v Tiensia MyDeposits have also been held to have similar ‘initial requirements’ to the TDS.

It is also vital that agents are particularly careful when landlords are registering the deposit themselves. Section 212 (9) (a) of the HA Act states:
References to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies.
This is of course open to interpretation but from an initial reading it seems that where the landlord fails to lodge the deposit the tenant may have a claim against the agent for the landlord’s failure to register. County Courts appear to support this position and agents may, therefore, wish to consider including a indemnity in their terms of business protecting them from the landlords failure. It may be prudent for the agent to seek confirmation that the landlord has registered with a scheme prior to sending the deposit to him or in the case of the custodial scheme that is Deposit Protection Service (DPS), sending the deposit to them directly. However this does not deal with the issue of relying on the landlord to ensure that the prescribed information is also provided to the tenant within the 14 day deadline. For a more ‘belt and braces’ approach, agents may wish to consider insisting on registering the deposit themselves through their own scheme membership.

The purpose behind the HA 2004 is to secure deposits and to return them quickly to tenants in the event of no dispute or to refer the matter to adjudication where there is, without the need for court. Landlords that do not secure the deposit within 14 days of receipt and then attempt to deduct monies upon the expiry of the tenancy are seen to be flouting the sprit of the legislation and agents need to ensure that they are not seen in the same light.

Filed under: Uncategorized , deposits, Housing Act 2004, litigation

When is a Trial Not a Trial……

When it is a hearing of course! The recent case of Forcelux v Binnie in the Court of Appeal reviewed the status of initial hearings under part 55 of the Civil Procedure Rules, which govern possession actions. It seems that the first hearing before a Court is not a trial even though a possession order may be awarded and it may be the only hearing.

The key upshot of this is that it is far easier for a tenant to apply to set aside any possession order made at such a hearing where it has been made in his absence. This is because any attempt to set aside a decision made at trial can only be made by application under rule 39.3(3) and this requires that the party seeking for the order to be set aside must show:
1. He acted promptly;
2. He had good reason for his non-attendance; and
3. He has reasonable prospects of success at an re-trial.
This can be hard to do and therefore has the effect of preventing many re-hearings of matters where the defendant was not at the original trial. However, as the first hearing of a matter under CPR 55 is not a trial CPR 39.3(3) does not apply and the Court power to set aside the hearing is provided by CPR 3.1(2)(m). This does not require prompt action or the Defendant to show that they have reasonable prospects of success but merely requires a the Court to be persuaded that justice will not be done without a proper hearing.

In practice, this means that many more Defendants may have the opportunity to apply to the Court to set aside possession orders where they can show that the overriding objective of fairness will be best served by doing so. Agents and landlords should be aware that this may allow unscrupulous tenants to delay possession further and should also be aware that simply proceeding to a hearing without the presence of the tenant may not be the ideal situation that it may first appear to be.

Filed under: Uncategorized , litigation, possession, procedure

EPCs and the HHSRS

We have been surprised to be told of a few cases where Local Housing Authorities are serving improvement notices under the Housing Health and Safety Rating System on landlords because they have a very poor Energy Performance Certificate rating. Presumably this is on the basis if the ‘excess cold’ hazard profile in the HHSRS. However, an EPC is a measure of the cost of heating and lighting a property and says nothing about how warm or cold that property can be. Therefore it is hard to see on what basis action is being taken.

If anyone would care to give some more information we would be grateful!

Filed under: Uncategorized , energy efficiency, HHSRS, Housing Act 2004

Accuracy of Information on Websites

Many people will be aware of the problems of obtaining accurate information on the internet. As a law firm we frequently receive communications from individuals telling us what the law on a particular matter is. Often this is based on poorly written commentary or, more amusingly, on the law in other parts of the world.

For agents this is a particularly important issue as property advertising on the internet continues to grow. The risks of misrepresentation and misdescription (which for estate agents is prosecutable under the Property Misdescriptions Act 1991) are growing and the modern phenomena for sites taking automatic data feeds from agents own software means that small (and otherwise inconsequential errors) can rapidly be magnified into major problems.

However there is some good news. A recent case in the Court of Appeal dealt with the liability of a company for incorrect information appearing on its website. In Patchett v SPATA the Court of Appeal held that the Defendant was not liable for a misleading representation on its website in relation to the quality of third party contractors. This was primarily because the website “urged independent enquiry”. The website made reference to other documents supplied by the Defendant and set out a series of enquiries that should be made before relying on the contractors mentioned on the site.

Agents would be well advised to take this on board by making clear on their websites that further details of properties are available and should be sought before reaching a decision on rental or purchase.

However, agents should also take care of the details appearing on their websites and on other internet portals and should make sure they have a proper procedure in place to review this information and check its accuracy on a daily basis. Not only will this help avoid mistakes but it will also provide a defence against any threatened prosecution under the Property Misdescriptions Act.

Filed under: Uncategorized , internet, litigation, negligence, property details

Mortgage Repossession Protocol Changing Behaviour

It seems that the new mortgage repossession pre-action protocol (which we talked about here) is having an effect on mortgagee’s behaviour with a dramatic drop in repossession actions.

Whether the protocol has been responsible for this or whether mortgagees are less inclined to take possession due to the difficulty in recovering their investment by selling the property is a moot point. The key issue from the point of view of the landlord and tenant professional is the increased willingness of mortgagees to appoint receivers and reach sensible commercial arrangements.

From the tenant’s point of view this means that they may be able to remain in a property they have rented by paying rent to a receiver appointed by the mortgagee. However, it should be remembered that the receiver is frequently not accepting the landlord’s responsibilities (just the money!) and so it will still be necessary to look to the landlord to repair the property.

For buy-to-let landlords the new willingness of mortgagees to reach sensible commercial arrangements coupled with a reduction in interest rates may be sufficient to allow them to weather the downturn. However, it is notable that many mortgagees are refusing to remortgage with buy-to-let landlords so this may not be sufficient.

Whether this new attitude from mortgagees will continue when they can more easily sell property remains to be seen but the current change in attitude will benefit landlords who make an effort to negotiate with their mortgagee if things are difficult.

Filed under: Uncategorized , comment, Law of Property Act 1925, mortgages

TDS, Evidence, and Bias

We often hear allegations that tenancy deposit protection schemes are biased towards tenants. This, in part, conceals a fundamental misunderstanding of the nature of a deposit.

The tenant’s deposit belongs to the tenant and continues to do so until such time as the landlord becomes entitled to make reasonable deductions from it. Therefore the default position is that all the deposit should be returned to the tenant unless the landlord demonstrates that the deposit should be sent to them. This is not bias but the correct application of the law.

It is for landlords to show that the tenant’s deposit or parts of it should be passed to them by providing evidence of the tenant’s breaches of the tenancy agreement. This should be weighed on the balance of probabilities but the landlord will need to provide solid evidence that the loss or damage has occurred and that the valuation placed on it is realistic. Where this is not provided or the tenant provides evidence to the contrary then the money should be returned to the tenant.

In summary, the various schemes are no more biased than the Courts. They start from the proposition that the money belongs to the tenant and require the landlord to show that it should be given to them. Where insufficient evidence of that proposition is provided then the money will be returned to the tenant.

Accusations of bias toward tenant should perhaps be viewed as an admission that the landlord could not make a strong enough case. Looking at the statistics it can be seen that the schemes make awards almost equally to both parties. Given that they should be starting from the premise that the money is the tenant’s this shows that landlords do relatively well from scheme adjudications.

Filed under: Uncategorized , comment, deposits

Further Energy Performance Tweaks

The Energy Performance of Buildings (Certificates and Inspections) (England & Wales) (Amendment) Regulations 2009 came into force on 10 August 2009.

These make a small amendment to the EPC regulations to allow for disclosure of EPCs, recommendations and Display Energy Certificates on the sale of properties. Where an EPC is produced for a property which is for sale and the rating on the certificate is in bands F or G the keeper of the EPC register (ie. one of the licensed bodies who register and maintain records of inspectors) is permitted to disclose the certificate to the Energy Saving Trust Ltd, a body licensed by government to provide information and advice in relation to energy saving in the home.

The objective of the disclosure is to allow the trust to provide information to the owner of the property on things they can do to improve the efficiency of the property and grants that might be available to pay for the improvements.

In general this will have limited effects on the sector except to encourage improvement of less efficient properties. This may be of benefit as these properties are generally less desirable and harder to sell although, in truth, most agents will already be pointing vendors and landlords towards the trust and its free advisory services in any event.

Filed under: Uncategorized , energy efficiency, Europe, regulations

Notices to Quit

A recent Court of Appeal decision sheds light on issues relating to Notices to Quit by tenants. In Bradford Community Housing Ltd v Hussain & Kauser the Court of Appeal ruled on the validity of a Notice to Quit which contains a saving provision and on whether the acceptance of rent or holding back on enforcement can invalidate a Notice to Quit.

Mr Hussain and Ms Kauser held an assured tenancy from Bradford Community Housing Ltd and after allegations of domestic violence their relationship collapsed and Ms Kauser (at the urging of Bradford) served a notice to quit on Bradford. As the tenancy was periodic by this stage the notice was valid to terminate the tenancy without the involvement of Mr Hussain following the well-known decision in Hammersmith & Fulham LBC v Monk. On the back of this notice possession proceedings were taken.

Before the Court of Appeal two arguments were made. The first was that the date on the notice was wrong and that the standard saving provision made the notice ambiguous as the saving provision and the given date ultimately referred to different dates. The second argument was based around correspondence between Bradford and Ms Kauser whereby Bradford had suggested suggested that they would not enforce on the notice to quit immediately and would continue to accept rent monies on an ad hoc basis. It was argued that this arrangement had the effect of renewing the tenancy and thereby made the notice to quit ineffective without the consent of Mr Hussain.

The Court of Appeal dismissed both arguments out of hand.
The Court was in no doubt that the use of the saving provision did not create and doubt in the mind of a reasonable recipient of the notice. This is an interesting point as the same question has been raised (although not at such a level) in relation to section 21(4)(a) notices and the possibility of ambiguity if they contain both a date and a saving provision. It would seem that this argument is now dead.
The Court was also not prepared to accept that a statement by Bradford that they might not immediately enforce the notice to quit and would in the meantime accept rent in any way acted to create a new tenancy. The Court made reference to the case of Clarke v Grant and made clear that mere acceptance of rent after the expiry of a notice could only create a new tenancy if this was the settled intention of the parties.

While this is a small case it provides clarity over one or two points of interest.

Filed under: Uncategorized , Housing Act 1988, litigation

EPC Directive Changes

The European Commission, the primary legislative body of the EU, has put forward proposals to make changes to the Energy Performance of Buildings Directive (EPBD). CLG has published a consultation on the proposals to allow it to reflect the views of UK stakeholders back to the commission.

The proposals are in two categories. The first stage, which UK government supports seeks to clarify and simplify the directive. The other part seeks to expand and strengthen the directive. The UK government is largely opposed to this, in common with its general policy on Europe, and takes the view that many of the issues should remain with member states under the general principle of subsidiarity.

Looking at the key proposals they are as follows:

• buildings occupied by public authorities or where the public visit regularly are to have a Display Energy Certificate on display where the building is larger than 250 sq m as oppose to the current size of 1000 sq m;
• any commercial or domestic building which is renovated will also have to have its energy performance upgraded at the same time for which targets will be set;
• there will be minimum requirements for technical building systems such as boilers in commercial property.

Naturally this will cause increased costs for many older properties.  However, given the impact of empty building rates on commercial property and the consequent knocking down of some of these properties the impact may well be small.  In residential properties properties being renovated will have to have their performance improved but this would probably be done in the majority of renovations anyway.

The consultation is open for responses until 2 October 2009.

Filed under: Uncategorized , consultations, energy efficiency, Europe

RTM Company Articles

The government is consulting on new default articles for Right To Manage (RTM) companies formed under the Commonhold and Leasehold Reform Act 2002.

It is debateable whether such changes are really necessary. All companies can choose to set up their own articles when they are created. However, many RTM companies are created on the fly by inexperienced individuals and so the creation of some form of pre-defined articles for these companies might be advantageous. It is also worth pointing out the low take-up of the powers offered by the Act and the arguable pointlessness of legislating where the advantage is so limited.

The model articles aim to provide a degree of balance between the rights of tenants and the needs of landlords who have a greater investment in the structure of the property and the common parts. How well that balance is struck probably depends on the side from which you approach the issue. It is difficult though to see how a pre-defined set of articles can properly take account of the large number of different RTM situations and whether there should be a greater emphasis on each RTM company choosing articles to fit its own situation.

The consultation is open until 16 August.

Filed under: Uncategorized , consultations, long lease, right to manage

Mortgage Possession and Tenants

We have previously discussed the problems experienced by tenants when a mortgagee seeks to repossess the property to exercise its power of sale. In a recent alteration to the Civil Procedure Rules some of the issues were addressed by forcing mortgagees to give more notice to occupiers of properties. We reported on this here.

However, providing more notice does nothing to protect tenants whose landlord has not bothered to seek the consent of their mortgagee to the letting. Where the landlord has sought consent the mortgagee is obliged to see out the term of the letting. Non-authorised tenants are not so protected and get short shrift from mortgagees and the Courts. Of course, tenants should always insist on seeing consent to their letting from the mortgagee but this will not help those who find themselves under threat of eviction today.

The government has now produced a consultation on further changes to the process of mortgage eviction in order to help protect unauthorised tenants.

Apparently the government are working with lenders to remind them that they are obliged to see out tenancies which they have consented to and to encourage them to accept unauthorised tenants where possible. We have not seen a great deal of evidence that this engagement is actually working with the worst offenders being Northern Rock and other lenders taken into government control!

The other intended improvement is to make notification to tenants of problems more effective by requiring the letter that is currently addressed to “The Occupiers’ to make specific mention of tenants on its face. This is to come into force in October 2009.

Turning back to unauthorised tenants the consultation intends to achieve a balance between reasonable notice to the tenant and the right of the mortgagee to sell the property with vacant possession. The aim is to allow the tenant two months notice to vacate.

There are a series of different proposals for how this might be achieved ranging from no change through to radical legislative amendment.

There are some real problems with this consultation. For on the government appears to have absolutely no idea how many tenants are affected. They estimate that there are approximately 360,000 properties with unauthorised tenancies but this figure is plus or minus 120,000 which shows the level of uncertainty.

In fact, it is not clear precisely how the government will deal with the situation as a change to assist unauthorised tenants would, in practice, have to be applied in all circumstances where mortgage possession is considered, adding considerably to the cost of mortgage repossession for lenders at a time when they can ill-afford it.

Probably the most practical option is to imporve notification and allow the tenants to attend Court to seek a stay of possession before the judge. Obviously this has the same disadvantage as the current system in that many tenants do not have the knowledge or the desire to attend a Court hearing. Therefore any change is going to have to make the process as painless as possible for those who are, after all, innocent parties. The best option is probably a form sent to the tenant by the lender which permits them to make written representation to the Court.

The consultation is open for responses until 14 October 2009.

Filed under: Uncategorized , consultations, mortgages

TDP and Prescribed Information

It has come to our attention that many agents are still not providing all the necessary prescribed information to tenants on the registration of deposits under the various tenancy deposit protection schemes. Section 213(5) of HA 2004 requires that the tenant is given such information as may be prescribed. Section 216(b) requires that this is given within 14 days of the receipt of the deposit. There is still a lot of debate as to whether there is any penalty for the giving this information late.

The information required to be handed over is set out by the Housing (Tenancy Deposits) (Prescribed Information) Order 2007. Provision of the tenancy agreement and the information certificate supplied by all of the schemes will satisfy most f the requirements of this Order. However paragraph 2(1)(b) requires the provision of

any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act

Both the insured schemes (TDS & MyDeposits) provide such leaflets and they must be passed on to the tenant to comply with the terms of the Order. This provision is frequently being ignored but failure to fulfil it properly may lead to the usual penalties being applied.

You have been warned!

Filed under: Uncategorized , deposits, Housing Act 2004

Gas Safe Register Confusion

Gas Safe Register appear to be advising on their helpline that a landlord is obliged to obtain a new gas safety certificate every time a tenancy is entered into, notwithstanding any current gas safety certificate that is in place. This is not the position.

The Landlord (or the Agent if it forms part of the terms of business) is required to arrange the annual preparation of a gas safety certificate and ensure that throughout any tenancy a valid gas safety certificate is in place at all times.

An annual gas safety check must be carried out by a Gas Safe Registered engineer. A record of the safety check must be kept for 2 years. A copy of the certificate must be issued to each existing tenant within 28 days of the check being completed, and in any event before the commencement of a tenancy.

This is consistent with the advice as given on the Gas Safe Register website.

The relevant legislation can be read here.

Filed under: Uncategorized , gas safety, regulations

Planning and HMOs

Not sure how we missed this really but the Department of Communities and Local Government has launched a consultation on possible changes in planning systems to deal with HMOs.

This consultation is in response to an increase in HMOs in parts of the country and the tendency for these to be grouped together in small areas. This is sometimes referred to as “studentification”.

The current method of control of HMOs involves the licensing of larger properties. However, there is no power to refuse a licence on the basis that there are a large number of other HMOs in the same area. The problem is made worse by the fact that student naturally wish to cluster and the type of property suitable for conversion naturally tends to be built in blocks.

There is an aspect in which this is a bit ironic in that many of the issues with concentrations of HMOs are caused by the growth of educational institutions and the need to house the resulting large numbers of students. The government encouraged this but made no effort to ensure that the growing establishments provided suitable accommodation for there students. Therefore the private sector has tended to take up the slack. For the government and local authorities to complain about this now is a little unfair and is largely illustration of a failure to properly consider all the consequences of unchecked growth in higher education establishments.

In any event, the consultation ends on 7 August 2009.

Filed under: Uncategorized , consultations, HMOs, Housing Act 2004

Rent Increase Clauses and Statutory Periodic Tenancies

In a periodic Assured or Assured Shorthold Tenancy the provisions of section 13 of the Housing Act 1988 are used to increase the rent. This is not a wholly satisfactory system as it is overly technical and ultimately allows appeals to the Rent Assessment Committee which can be somewhat capricious.

It has been thought that a clause in the agreement which set out a mechanism for increasing the rent, however abbreviated, would be sufficient to oust the provisions of section 13 and the clause would prevail.

In London District Properties Management Ltd v Goolamy [2009] EWHC 1367 (Admin) this view has been overturned. The High Court ruled that the prevailing view was inaccurate. Taking a literal view of section 5(3) of the Act the Court held that in a statutory periodic tenancy the provisions of section 13 would overrule any rent increase clause.

Bizarrely, the legislation appears to draw a distinction between tenancies which are intended to be periodic from the outset and those which start out as fixed term tenancies and become periodic by operation of section 5. The former can incorporate rent increase clauses, the latter will have theirs overruled by the section 13 process once the tenancy has become periodic. While the Court does not mention this point it would seem that the way around the problem is to simply agree a tenancy for a fixed term with a contractual provision that it will then continue as a periodic tenancy. Presumably if it is pre-agreed that this will occur then the provisions of section 5 will not be required to create a periodic tenancy and thus the section 13 provisions will not be given the primacy that section 5(3) provides.

Whether this will work or not remains to be seen.

Filed under: Uncategorized , Housing Act 1988, rent