Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

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: England & Wales, Northern Ireland, Scotland, ,

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: England & Wales, ,

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, , ,

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: England & Wales, , ,

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: England & Wales, Northern Ireland, Scotland, , ,

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, , ,

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, , ,

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, , ,

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