Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

OFT v Foxtons- The Final Order

The final sealed order in the OFT v Foxtons case has been made available on the OFT website. A copy can be found here. This order gives effect to the judgement of the High Court and is now the final word on the matter as Foxtons have withdrawn their appeal.
There are some interesting points to note:

  1. Nothing in the order prevents Foxtons from defending claims against them based on monies already paid under clauses that have now been found to be unfair;
  2. Foxtons are entitled to keep using the original renewal commission clauses in full management agreements;
  3. The wording of the offending clauses used by Foxtons is quite extreme in terms of their ability to charge commission on a long-term basis even where the tenant has been changed. The new terms (in the last Schedule) are much less severe
  4. The approved terms are still charging a renewal commission even though Foxtons has no involvement in the negotiation of a renewal but it is limited to 2 years after the initial tenancy and is clearly stated at the start of the terms of business
  5. Fxotns have removed their ability to take a fee where the landlord has sold the property to another landlords with the tenant in place and where the landlord has sold the property to the tenant

The OFT has made clear in its press releases that it intends to use this decision to put pressure on other agents. How far this will go is unclear and whether the OFT will seek to impose a limitation on other agents as to how long they can continue to collect a renewal commission for.

Unfortunately this will probably lead to another raft of ill-informed letters from landlords stating that the renewal fees they have been charged are unfair. However, agents should consider how they wish to move forward and take advice as to their fee structures to avoid a visit from the OFT.

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

Landlords Warranties and Agents

We have been pondering the new proposals from the Government in response to the Rugg review. Many of them are as expected.

What is deeply concerning about the proposals is one specific aspect of agent regulation. One of the key requirements of any regulation regime is “Enforceable undertakings around the quality of stock let and managed by agents (including energy efficiency)”. This represents a potentially radical change in the legal position.

It has long been the case that landlords make no warranty as to the fitness for habitation or the suitability of the properties they let. To use the words of the House of Lords, “Caveat Lessee”. Additionally, it has generally not been the case that agents have a liability for their landlord’s actions. These proposals seem to wish to change that position.

If it is the case that agents have to give undertakings on stock quality they will then be forced to impose those undertakings on their clients. However, a landlord who is not using an agent will not have the same requirements and will not have to warrant the quality of their stock. This is plainly iniquitous. The position could be even more unfair where an agent is not managing the stock and is employed solely on a let-only or tenant-find basis. If the sole role of the agent is to find a suitable tenant and set u a tenancy then they should not have to give any undertaking as to the quality of the stock after the expiry of their instruction.

Additionally, this will mean that agents increasingly will be fixed with liability for the actions of their principals. Of course, this already occurs to some extent. Agents have liability for Gas Safety Certificates, some liability in relation to improvement notices under the HHSRS where they are collecting the rent, and a degree of liability for failure by landlords to register tenancy deposits. However, it is debatable whether this liability should be extended further, particularly where individual landlords do not themselves have such a liability.

Any situation where landlords using agents are held to a stricter standard than those not using agents is plainly ludicrous. Agents already do much to improve the quality of management and standards in the properties they are involved with simply be promulgation of good advice and best practice. To add a formal requirement that agented properties should have a standard of fitness that does not currently exist is simply wrong. If the Government wishes to address this issue then the answer is to bring forward legislation that alters the Common Law position on landlord’s warranties.

If this is the sort of proposal that the current Government believes is appropriate for the industry then lettings agents could be forgiven for hoping that it is not returned to office later this year.

Filed under: England & Wales, , ,

High Court decision on TDP

We are pleased to report that the High Court has handed down its decision in the case on Tenancy Deposit Protection that we have previously mentioned on this blog.

In Draycott v Hannells Lettings Ltd, PainSmith Solicitors have been acting for the Defendant lettings agency and have used Mr James Browne of Lamb Chambers as counsel. The facts of the case were undisputed and the essential issue is that Hannells registered the deposit with the custodial scheme operated by DPS more than 14 days after receipt.

The tenants claimed for the usual penalty of three times the value of the deposit and after decisions in their favour at lower courts the matter came before Mr Justice Tugendhat in the High Court.

There were three issues before the Court:

  1. Could an agent be held liable for a failure to protect a deposit or was it entirely a matter for the landlord;
  2. Was the requirement to register the deposit and give the required information within 14 days as required by section 213(6)(b) of the Act subject to the penalties set out in section 214; and
  3. Is it an actual or implied initial requirement of the DPS scheme that the deposit be registered within 14 days of receipt.

If point 1 was found in favour of Hannells they could not be liable under any circumstances but if they failed on this point then both points 2 and 3 would also have ot be found in their favour for them to escape liability.

On point 1 the Court decided that the wording of section 212(9)(a) was clear in stating that in the section of the Act relating to deposit protection:

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…

Accordingly, the Court found against Hannells on this point.

In relation to point 2 the Court looked at the wording of section 213(6) which reads:

(6) The information required by subsection (5) must be given to the tenant and any relevant person—
(a) in the prescribed form or in a form substantially to the same effect, and
(b) within the period of 14 days beginning with the date on which the deposit is received by the landlord.

and the wording of section 214(1)(a) which provides that an application can be made to the Court where a person believes:

(a) that the initial requirements of an authorised scheme (see section 213(4)) have not, or section 213(6)(a) has not, been complied with in relation to the deposit;

The Court noted that the Circuit Judge whose decision was being appealed had taken the view that to suggest that the 14 day requirement set out in s213(6)(b) did not attract the penalties set out is section 214 was to “drive a coach and horses” through the intent of the Act as it would permit a landlord to not protect a deposit until such time as they were challenged in Court. However, it also heard submission that this view was overly draconian as it penalised innocent error and that a failure to protect the deposit properly would always be penalised by section 215, which prevents the service of a section 21 notice while the deposit remains unprotected. Ultimately the latter position prevailed and the Court agreed that the Act itself does not impose a requirement that the deposit be protected within 14 days as long as it is protected prior to the matter coming before a Court.

The third point was more complex. Initially, none of the schemes had formally set out any initial requirements. In December 2008 the TDS scheme altered its rules to make clear that it had an initial requirement that any deposit registered with it be protected within 14 days of receipt. It was common ground that section 214(1)(a) allowed for a penalty to be imposed where an initial requirement had been breached. What was at issue was whether the DPS scheme imposed such a requirement. On looking at the DPS rules it could be seen that they had a clause stating that the deposit should be lodged with them within 14 days of receipt. However, there was no mention of this being an initial requirement. The Court took the view that a simple restatement of the Act did not amount to an expression of an initial requirement and that while it could be seen that an initial requirement of the DPS scheme was that a deposit be lodged with it it could not be taken that it was required that the deposit be lodged within 14 days. Therefore, this point was found in favour of Hannells.

Therefore, although it was found that Hannells were potentially liable for a failure to lodge a deposit it was found that their late lodging of that deposit with the DPS was not a breach of the Act or of the initial requirements of the DPS scheme and accordingly the appeal was allowed and the judgement against Hannells of the lower Court was set aside.

Therefore as things currently stand agents are liable for a failure to register the deposit, late registration does not automatically attract the penalties set out in section 214, and the DPS scheme has no initial requirement that the deposit be registered with it within 14 days of being received.

This is by no means the end of the matter though. This case is still capable of being taken to the Court of Appeal and there are at least two more cases which will see judgements handed down from that Court within the next few months and they could have the effect of altering the position again.

Although, there are other decisions from more senior Courts in the pipeline, this is the first binding decision on the issue of Tenancy Deposit Protection and, as such, is very important. We are pleased and proud to have been involved in this case.

A copy of he handed down judgement is available in Word format.

Filed under: England & Wales, ,

Decision in High Court TDS Case

We have been informed that a decision in relation to the High Court case of Draycott v Hannells Lettings is to be handed down tomorrow (Friday 11 February 2010).

This is a case relating to Tenancy Deposit Protection in which PainSmith has been acting for Hannells. It represents the first binding decision in relation to this area.

Filed under: England & Wales, ,

Gas Safe Register reaches NI

The Gas Safe Register took over from CORGI in providing landlords gas safety certifications for England and Wales, Scotland and the Isle of Man in April 2009. Despite a few small issues they appear to have been fairly successful and have run a significant advertising campaign.

From 1 April 2010 the Gas Safe Register will be taking over from CORGI in Northern Ireland as well after the Health and Safety Executive Northern Ireland decided that it would be in their best interests to follow the same system as the rest of the UK.

Gas engineers should already be registering with the new scheme and agents and landlords should make sure that their regular engineers have done so well in advance of the changeover date as any certification produced by an engineer not registered with the new scheme after 1 April 2010 will not be valid. All engineers registered with Gas Safe will carry an ID card and an example of this can be found on their website. Hopefully, a similar advertising campaign will be launched in Northern Ireland to promote the new scheme.

Filed under: Northern Ireland,

Blog Changes

We have made some small changes to the blog.

First all new posts will be categorised to show which of the main UK jurisdictions (England & Wales, Scotland, Northern Ireland) they relate to. The England and Wales category has sub-categories for matters that are for England or for Wales alone. This should help clarify applicability of material for each area. We will try to go back through posts and add categories to past items as well.

Second, we have (experimentally) enabled a star rating system for each post to allow users to indicate how useful they found an item. This should assist us in targeting future content.

We hope these are useful changes. If you want more or less then please comment.

Filed under: Uncategorized

Foxtons Withdraws Appeal

It is being reported today that Foxtons has withdrawn their appeal to the Court of Appeal to the decision made against them by Mr Justice Mann in their dispute with the OFT.

According to the statement Foxtons have changed their terms of business and these new terms have been approved by the OFT and the Court and so they see no need to carry on.

It is debatable, for the same reasons we have set out here, whether this is a matter that will concern other agents.

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

Emails as Contracts

In University of Plymouth v European Language Centre Ltd [2009] EWCA Civ 784 the Court decided that in legally binding e-mail correspondence it is essential to have an unequivocal offer and acceptance, together with agreed contract terms.

In the case itself , the parties had been in a contractual relationship since 1998. The University of Plymouth had provided European Language Centre Ltd (ELC) with student accommodation and teaching facilities, by a series of annual written contracts. Until 2005, previous contracts had recognised both parties’ intention to continue the contractual relationship in the coming year. However, the 2005 contract contained no reference to contractual obligations for the coming year, 2006.

During 2005, the parties had discussed by e-mail correspondence, the possibility of the University reducing the number of student accommodation available for ELC to use. ELC did not initially reply, but then in later e-mail correspondence expressed that they found the reduction unacceptable and the parties did not therefore formally produce or agree to a contract. ELC later alleged the University was in breach of contract by failing to provide the reduced beds and submitted that that the email of May 2005 constituted an offer of a reduced number of beds, which it had accepted and relied upon.

The Court noted that the parties had established a degree of mutual trust since 1998, and that it was usual for negotiations to be formally concluded by an annual written contract. The Court therefore held that the e-mail correspondence was lacking in detail and considered that it did not amount to an offer nor a clear acceptance. The Court held that an acceptance must be communicated in a way that objectively sets out on what basis the acceptance was being given and based on the facts before them ELC had done nothing which amounted to acceptance, either by words or conduct. The parties’ comments within the exchange of emails together with the previous contracts were not enough to determine that an unequivocal offer and acceptance had been made.

This decision emphasises the importance of the four essential elements which must exist for there to be a legally binding contract that is; offer, acceptance, consideration and an intention to create legal relations.

Agents are therefore advised to ensure that there is clear communication with Landlords and Tenants and ideally all negotiations should be concluded by written contracts which are clear and free from ambiguity. We have noted that many agents automatically place the phrase ‘Subject to Contract’ within their signature which will have the effect of preventing any contract being concluded this way. However, they should ensure that they obtain instructions and clarify that they or their clients do not want to be bound by informal email or telephone exchanges and should not assume that this is the best position.

Filed under: England & Wales, Northern Ireland, , ,

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