More Key Tenancy Deposit Cases Come to Court

Next week is a big week for political parties but it is also a big week for tenancy deposit protection.

Two key cases, Universal Estates v Tiensia and Honeysuckle Properties v Fletcher, are both being heard together before the Court of Appeal on 7 May.

Universal Estates concerns late registration of a tenancy deposit with the MyDeposits scheme. At first instance, the County Court held that the MyDeposits scheme had an initial requirement that the deposit be paid within 14 days on the basis of a statement made on a leaflet supplied to the tenant by the scheme. This is in direct contrast to the ruling of the High Court in the case of Draycott v Hannells Lettings which we have discussed on this blog at length.

The facts in Honeysuckle Properties are unknown but it is a case on which the Government are intervening and was originally intended to be the one that set the marker for all tenancy deposit protection cases.

The Court of Appeal ruling will be important and could overturn the High Court decision in Draycott so it will no doubt be awaited with baited breath by a number of different groups.

Filed under: England & Wales, deposits, Housing Act 2004

Further PainSmith Seminars

PainSmith Solicitors have more seminars coming up soon.

After the success of their seminar on the changes in the maximum rent threshold in Housing Act 1988 tenancies in March their will be two further seminars.
On 26 May 2010 there will be a seminar on the issues of Money Laundering and Data Protection which cause confusion for many lettings agents.
On 22 June 2010 there will be an extra seminar looking at the new planning status for HMOs and how this works.

More information can be found on our website at www.painsmith.co.uk/seminars.

Filed under: England & Wales, seminars

CLG View on Tenancy Deposits After 1 October

As we have previously reported the maximum rent threshold for Housing Act 1988 tenancies is to be altered on 1 October from £25,000 to £100,000.

One of the key questions has been what the position will be for tenancy deposits taken in respect of tenancies which start prior to 1 October and are not ASTs but which will become ASTs on 1 October. There has been some uncertainty as to whether these tenancy deposits will need registration with an authorised scheme or not. If they do need registration then there is some doubt as to when that will need to occur.

It seems that DCLG thinks they will need registration. They have been advising stakeholders that:

Our intention is that these new assured shorthold tenants should have the same protection as existing tenants, so if the tenancy started after 6 April 2007, the landlord will have to protect the deposit.

It is debatable whether they can, in fact, achieve this as the trigger for the protection of a deposit is receipt in connection with an AST. These deposits were received prior to the change and were not received in accordance with an AST and so did not require protection as at the time they were received. Clearly, however, the DCLG thinks different and will seek to encourage the Courts to rule on this basis.
The DCLG recognises that landlords will not have been able to register deposits within 14 days of receipt but states that

we would expect them to protect the deposit as soon as possible.

Apparently they will ask the Courts to give landlords leeway on this issue although after the ruling in Draycott v Hannells the Courts should not be acting on late registration anyway so it is hard to see what useful guidance can be provided.

While we have some doubts about the validity of the DCLG position the message is clear. Protect all tenancy deposits as soon as possible and definitely promptly after 1 October. We hope the deposit protection schemes are prepared for the rush.

Filed under: England & Wales, deposits, guidance, Housing Act 2004, rent threshold change

HMO Changes in Northern Ireland

Some key changes in the way HMOs are operated are forthcoming in Northern Ireland.

Currently the legislation governing HMOs is part IV of the The Housing (Northern Ireland) Order 1992. This is being amended by some new and proposed legislation.

The first change is being made by the Housing (Amendment) Act (Northern Ireland) 2010 which was passed on 13 April 2010, although it has yet to come into force. The new Act makes a small amendment to the 1992 Order in order to clarify the definition of HMO. Currently the definition of an HMO in article 75(1) states that:

house in multiple occupation” means a house occupied by more than 2 qualifying persons, being persons who are not all members of the same family.

The change amends article 75(1) to make clear that the definition of family is to include “uncle, aunt, nephew and niece”. Apparently this is to recognise that members of an extended family increasingly live under the same roof while still forming one household.

The second change is proposed as part of the consultation on the Draft Regeneration and Housing Bill. Much of the bill is of little interest to the PRS. However, the key alteration is to who deals with the setting of HMO standards and creation of schemes. Currently the Housing Executive is required to prepare and submit a scheme to the DSDNI for its approval. This power is now to be devolved to individual councils. This will allow for HMO schemes to be tailored by each council to their individual needs but has the downside, which has been evident in England & Wales of massive differences between individual local authorities. This may be reduced by the fact that the DSDNI has to approve each scheme but there is the danger that disputes over the contents of different Council schemes will lead to a raft of wasteful litigation. These issues do not appear to have been addressed at all in the consultation document.
This consultation is available for responses until 26 April 2010.

Filed under: Northern Ireland, consultations, HMOs, Northern Ireland

Long Leases in Scotland

Those who know about Scottish law will be aware that it is not now practically possible to create a lease in excess of 20 years in Scotland. Additionally, feus were prohibited in 2000 and most were converted into an ownership for the vassal. A similar arrangement is now being proposed for certain long leases which have survived previous reforms.

The Land Tenure (Reform) Act 1974 acted to prevent longer leases occurring because it allowed landlords to terminate the lease at any point after 20 years. This meant that no tenant would normally be prepared to enter into any such arrangement and longer leases accordingly dropped away. However, some leases, created prior to that Act, are still in existence and were not removed by the various legislation in 2000 and 2003 which aimed at removing feudal tenures. Some of these leases are ludicrously long (one million years in the case of several in Paisley). In 2006 the Scottish Law Commission produced a report suggesting a further ‘clean up’ of these anomalous leases by converting what it called ‘ultra-long’ leases into a right of ownership.

The Scottish Executive has responded to this report by producing a consultation supplemented by a draft bill in which it proposes converting any lease for more than 175 years which has more than 100 years left to run into a right of ownership for the tenant.

The proposed bill contains mechanisms for sporting rights to be preserved for landlords. This is unsurprising as one of the reasons for the creation of such leases was to preserve these rights for landlords whose primary interest in the land was for its leisure facilities. They are also of substantial value in some cases and there would be difficulty in compensating landlords for their loss. The bill also proposes to compensate landlords for the loss of their title in the land to be based on the rent level and calculated in a similar manner as was carried out during the abolition of feus. There are also provisions for higher levels of compensation to be payable in certain limited circumstances if the landlord serves an appropriate notice on the tenant. It is intended that higher levels of compensation will be payable by way of instalments.

The consultation continues until 30 June 2010.

Filed under: Scotland, consultations, long lease

Selective and Additional Licensing Consent

We have previously posted on proposed changes to the consent process for local authorities wishing to introduce selective or additional licensing of HMOs or other properties in their areas of responsibility.

The government has now published a summary of the responses to the consultation it carried out on this topic. The response break down much as expected. Local Authorities supported a move to give a general unfettered consent and opposed anything which would limit this. Landlords were opposed to the whole idea.

The plan going forward is not clear. The summary report states that the responses will now be considered. With the election in the offing it now seems unlikely that anything will happen before any new government takes power and therefore what happens will depend entirely on the outcome of the election as the Conservatives are unlikely to give a blanket consent.

Filed under: England only, Housing Act 2004, licensing

New Right to Enfranchise

In May 2009 a consultation on new provisions on the right to enfranchise (RTE) were published. A summary of responses to this consultation has just been published.

The RTE provisions in the Commonhold and Leasehold Reform Act 2002 (the 2002 Act) set out to provide long leaseholders (qualifying tenants) of flats with a right to participate in an action by other qualifying tenants in the same building to exercise rights to collectively purchase their freehold (known as collective enfranchisement).

The collective enfranchisements rights under the Leasehold Reform Housing and Urban Development Act 1993 (1993 Act) were conditional upon minimum qualifications being met such as proportions of residential use and numbers of flats owned by tenants in the building and participation.

However, amendments were made by the 2002 Act and the restrictions were relaxed so that eligibility depended upon a building having no more than 25% non-residential use, provided at least two-thirds of those flats were held by qualifying tenants and that at least half of the tenants in the building were willing to participate.

The RTE provisions were geared towards ensuring that all qualifying tenants could take part in the enfranchisement process for their building. However, under the RTE provisions in order to enfranchise a RTE company had to be created and the qualifying tenants then had a defined period by which to join the company. The implementation of these provisions has been delayed and it was this issue that has led to the consultation.

Whilst the whole process and even the creation of the company is in itself quite a simple and straightforward process, there are some concerns related to the costs and expenses of the process. Without clear guidance on how the costs and expenses are to be apportioned there is very little preventing unfairness in their allocation.

There were further problems identified with qualifying tenants waiting until the very last minute to decide whether they wanted to join the RTE company. The number of participants obviously has a bearing on the costs of the process for each individual tenant therefore if some tenants decide that they do or do not wish to take part this may have an adverse effect on the process as a whole with some tenants possibly being unable to afford to continue without other participants.

The consultation in May 2009 therefore had a total of eleven questions which set out the concerns with the RTE provisions and sought views on whether they needed to be addressed prior to the implementation. The upshot is that further amendments are felt to be necessary before the full provisions regarding collective enfranchisement in the 2002 Act are brought into force. No timetable has been proposed for this and so this matter will remain in abeyance.

Filed under: England & Wales, enfranchisement, long lease

Tenant Protection On Mortgage Repossession

As part of the sweeping up process this week in preparation for the dissolution of Parliament on 12 April a number of bills have been pushed through. One of these is the Mortgage Repossessions (Protection of Tenants etc) Act 2010 which received its royal assent on 9 April.

This Act is intended to provide protection for tenants who find themselves being evicted by a landlord’s mortgagee where the landlord has failed to get proper consent for the let. Where a landlord has obtained consent then the tenant will have a right to remain in the property until the end of the tenancy unless the mortgagee can obtain possession using Ground 2 under the Housing Act 1988. Where a landlord has failed to obtain consent the tenant has no rights at all and the mortgagee is not required to honour the tenancy agreement.

The Act gives the Court the power to suspend an order for possession by up to two months. The Court can only exercise this power prior to the Bailiff actually executing the order for possession. The tenant must apply to the Court for a suspension and they will also need to show that they have previously asked the mortgagee for a similar suspension and the mortgagee has refused to allow it.

The suspension power can only be exercised once in relation to a tenancy so tenants cannot keep making further applications. The protection of the new act only applies to tenancies under the Housing Act 1988 or Rent act 1977. Common law tenants do not have any protection.

This Act is not actually in force yet as a commencement order needs to be made. This will presumably not happen at this stage and it will be for any new government coming into power after the election to decide whether they wish to bring the provisions of the Act into force.

Filed under: England & Wales, mortgages

Welsh Consultation

The Welsh Assembly is currently consulting on a series of changes to Landlord and Tenant law in Wales. Housing is now a fully devolved competency for the Assembly and they appear determined not to simply follow blindly in the footsteps of England.

The consultation, entitled the Private Rented Sector in Wales looks at a number of changes to the structure of the sector, many of which have been discussed or brought into force already in relation to England.

The proposals that the assembly are considering are:

• A national landlords register
• Independent regulation of letting and managing agents
• A review of why tenancies end with the aim of encouraging landlords to offer longer term tenancies
• An increase in the Housing Act 1988 rent threshold from £25,000 as has already been carried out in England
• Improving the data collected on the sector

These are all things which have been considered in England or actually implemented in England or Scotland. However, in England there is unlikely to be much further action due to the intervention of the election and the changing priorities of any new Government. Wales may well find itself leading the way, therefore, as they have the time (and energy) to enact some of these measures.

This may well represent the beginning of a sea change in Landlord and Tenant law with the growth of a new type of lawyer, one who specialises in Welsh matters.

The consultation closes on 14 May.

Filed under: Wales only, consultations

Catch us on the Radio

We are pleased to announce that Marveen Smith of PainSmith Solicitors will be part of the panel on the flagship BBC Radio 4 programme Moneybox Live which will air on 14 April.

You can hear her at 15:00 or later on BBC Iplayer.

Filed under: England & Wales