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

Landlords as Consumers

One of the biggest difficulties in dealing with unfair terms questions relates to the point that it only applies to consumers. The Unfair Terms in Consumer Contract Regulations 1999 (UTCCR) define a consumer as “any natural person who … is acting for purposes which are outside his trade, business or profession”. This definition is particularly problematic when we consider the position of a landlord. While it seems fairly clear that a casual landlord with one or two properties is largely within the definition of a consumer the position becomes less certain when dealing with landlords who own several properties, who may be highly sophisticated and experienced, and who derive a substantial percentage of his income from his activities.

In the past there has tended to be a view in the industry that a landlord with more than a certain number of properties should be viewed as being outside the ambit of a consumer. However, this immediately raises the question of precisely how many properties should mark the boundary. The Solicitors Ombudsman Scheme has indicated recently that it views the threshold to be four properties but it has not provided any clear understanding of how it arrives at that position.

The question of how to categorise the more sophisticated and knowledgeable client has, surprisingly, not exercised the Courts a great deal but the one apposite case indicates that a concentration on the number of properties may be missing the point.

In Standard Bank London Ltd v Apostolakis & Anor [2002] CLC 933 the Court was required to consider a contract relating to currency trading between a UK bank and a Greek couple. The Greek couple were highly educated professionals, being a civil engineer and a lawyer, and had been trading currency for many years. The income of this made up approximately one-fifth to one-quarter of their total income from all sources. During the course of a number of futures trades the couple built up a significant exposure which the bank eventually liquidated when the situation turned radically against them in 1998. For a number of reasons the Court was required to consider whether the Greek couple could be found to be consumers under the terms of the UTCCR.

The Court found that a contract for foreign currency trading was not part of the normal trade or profession of the Greek couple. The Court further found that despite the couples evident education and experience with currency trading they were still not acting in the course of a trade or profession by entering into the currency trading that they had. The Court found that they were rather “disposing of income which they had available.” They were “using their income in what they hoped would be a profitable manner” and were not “trading in foreign exchange in the sense that a bank or dealer can be said to trade.”

If we bring this view across to the world of the private landlord we paint a bleak picture. It would appear by analogy that a private landlord who simply invests his income in a degree of property speculation should still be viewed as a consumer as they are not speculating in the sense that a property developer does. To step outside the realms of a consumer the landlord would appear to need to be dealing by way of a company vehicle or be deriving the majority of his or her income from such transactions.

In short, it would be a dangerous tactic for any agent to rely on showing that an individual landlord was not a consumer as a means to defeat a claim under the UTCCR.

Filed under: Uncategorized , Unfair Terms

OFT v Foxtons- Renewal Commissions and Mis-reporting

Following the decision in OFT v Foxtons on Friday there has already been a great deal of mis-reporting of the outcome.

One of the most noticeable points relates to the issue of renewal commission and the suggestion in much of the media that renewal commissions are unfair and that landlords will be able to recover commission already paid.  This is simply incorrect.  Unfortunately, as a result of these misunderstandings many agents have already been contacted by landlords demanding repayment of alleged unfair fees.

It is worth considering the judgement in detail at this point.  In paragraph 33 of his judgement Mr Justice Mann said the following:

I should first make clear what I am not deciding, and what I am not asked to decide. I am not asked to decide, and do not decide, that renewal commissions (in the sense used in these proceedings) are always unfair. I make that clear because some of the evidence and submissions of the OFT come close to asserting a case that they are always unfair, and some of the correspondence seemed to be based on such a proposition, though Mr Nicholas Green QC, for the OFT, eventually made it clear that that was not his case. Mr Michael Kent QC, for Foxtons, opened his submissions by saying that I would eventually have to, and should, rule on renewal commission generally, but he moved away from that. I shall not decide whether or not renewal commission is always unfair to consumer landlords.

Therefore, the judgement in no way states that renewal commission is unfair.  What was decided was that Foxtons renewal commission clauses were not worded in plain and intelligible language and were excessive in the level of commission charged and in their wider definition of renewals by associates of the tenant which would also attract a fee.

The other area of mis-reporting is in relation to the rights of parties to demand the return of sums already paid.  Contrary to the decisions made in the various cases involving bank charges there is nothing in this judgement which allows for monies already paid to be recovered.  This particular issue was one which Foxtons fought hard to avoid and at the current time the Court has not made any ruling in relation to it.

In short, no agent is in any way obliged by Friday’s decision to return monies to any party.

Filed under: Uncategorized , OFT, Unfair Terms

Initial response to OFT v Foxtons

Following the ruling today in this matter, letting agent terms of business may well contain some significant flaws and unenforceable terms.  In particular any term which seeks to charge a commission fee where the landlord sells the property to the tenant will be deemed unfair.  In addition, where an agent seeks to charge commission on a renewal where the landlord has sold the property to another landlord such clauses will be deemed unfair.

What is not unfair is the charging of a renewal fee, even where the agent has not been involved in the negotiation of the renewal, provided that this charge is signposted to the landlord at the outset of the instruction and drawn to their attention.  The reporting of this matter is inaccurate in this aspect.

Nothing in today’s judgement requires agents to refund monies to landlords but it will prevent agents from using or relying on clauses that have been found to be unfair.

PainSmith have already amended our standard terms of business and are able to provide these for immediate use as a stop-gap measure until such time as agents can amend their standard terms.

Filed under: Uncategorized , litigation, OFT, Unfair Terms

OFT v Foxtons Links

The OFT press release on today’s judgment can be found here

The judgement can be found in full here

Filed under: Uncategorized , OFT, Unfair Terms

OFT v Foxtons – early hints

Its 9.30 and we’re waiting for the judge to give his decision which should start 10.00. It appears that both parties have had early copies of his judgment and hints have started to leak. First indications appear to show that the oft have succeeded on the matter of charging commission to landlords who sell their property to tenants or occupiers and this type of provision may well now be considered unfair.

The oft have further succeeded in relation to charging commission to landlords who have divested themselves of their interest in the property and where the new landlord renews a tenancy with the original tenants. It appears, however, that charging of renewal commission in other circumstances even where the agent has not been directly involved in the negotiations of the renewal is acceptable provided that the terms of the agreement are expressed in plain and intelligible language. It may well be that many clauses currently in use fall short on that requirement.

It seems that some early comments on the news media this morning may have been premature. More information as we get it.

Filed under: Uncategorized , OFT, Unfair Terms

OFT v Foxtons

The judgement in this matter is being rendered at 10am tomorrow in the High Court. PainSmith solicitors are contracted to one of the main organisations representing lettings agents to provide a brief electronic response and a full consideration. The brief response should be available late tomorrow.

Filed under: Uncategorized , OFT, Unfair Terms