Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Need for HMO Planning Consent to Be Reduced

Yesterday Grant Shapps announced that he would make amendments to the system of planning for HMOs.

It is not proposed to amend or scrap the new C4 planning class. Instead what is being proposed is an amendment to the General Permitted Development Order which will allow movement from the C3 planning class to the C4 planning class without a planning application being made.

However, local authorities will be able to use Article 4 of the The Town and Country Planning (General Permitted Development) Order 1995 to override this blanket consent in areas where they consider that there are excessive numbers of HMOs and that control over them is required.

While this will cause relief for many landlords by removing the need to obtain planning permission in many areas it will also make things more complex as individual planning authorities can elect to enforce planning requirements for HMOs or not at their discretion. Therefore while it will reduce the burden for many landlords it will also provide a further trap for the unwary as there will not be a consistent policy across the country.

It should be noted that the changes are not yet in force and will not appear until at least 1 October 2010. Therefore the requirement to obtain planning consent still applies at the current time. It should also be noted that this only relates to England and that there is no requirement for HMOs in Wales to have planning consent at this time.

PainSmith Solicitors are running a seminar on HMOs and planning consent on 22 June and will provide more guidance on this issue at that stage. More information on our seminar programme along with booking forms can be found on our website at www.painsmith.co.uk/Seminars.

Filed under: England only, ,

County Court Judgement on Renewal Fees

We have just been made aware of a case in Lambeth County Court in relation to lettings agent’s renewal fees which has gone poorly for the agent concerned.

Chestertons Global Ltd v The Waterfront Partnership & Nicholas H Finney, heard in March 2010 before DJ Wakem, Chestertons sought to recover the sum of £3,807.20 in unpaid renewal commissions. Mr Finney counter-claimed for renewal commissions already paid in the sum of £3667.83.

Initially it was accepted that the proceedings against Waterfront were improperly brought and these were dismissed.

Chestertons first sought to argue that Finney was not a consumer based on the fact that he had purchased the property as an investment. However, Finney only owned one such property and, as we have suggested in a previous post, this is not sufficient to prevent a landlord being a consumer. Accordingly, the Court found against Chestertons on this issue.

Chestertons conceded in Court that the renewal provisions were not a core term of the agreement and were therefore susceptible to a test of their fairness. Given the comments of the Supreme Court in OFT v Abbey National & Others this may have been unwise.

At this stage the Court reviewed the clauses themselves. The Court found that the clauses were not particularly hidden in the manner that was criticised in the Foxtons case. However, they remained insufficiently clear in that they were not specifically flagged to the consumer, they were not expressed in strong enough language, and their effect was not given significant clarity despite their long-term impact on the relationship between agent and landlord and the onerous monetary obligations that they created.

Chestertons were further damaged by the fact that the tenancy agreement they had drawn up contained an option to renew which would leave the landlord tied to a renewal at the tenant’s whim at a rental to be fixed by Chesterton’s themselves and therefore paying a commission on the basis of decisions made by the tenant and Chestertons.

Interestingly the Court also made an order for the agent to return monies already paid by the landlord by way of renewal fees. This was ordered following the House of Lords decision in Kleinwort Benson v Lincoln City Council. The Court asserted that this case found that “where payment was lawfully due under a binding contract but it subsequently became apparent that was not the case the paying party was entitled to return of the payment”. This would appear to be a misunderstanding of the decision in Kleinwort and of the UTCCR itself. In Kleinwort the Lords decided that money paid under the basis of a mistaken that the contract was binding should be returned. However, the UTCCR does not operate in this manner. In Kleinwort the contracts involved were in themselves void. Th UTCCR does not make a contract, or any part of it, void but rather makes certain clauses unenforceable. We have previously posted on the issue recoverability of monies paid under an unenforceable contract.

However, agents would be well advised to take careful note of this case. Irrespective of the merits of all parts of the decision it seems clear that lower Courts have taken note of the decision of the high Court in OFT v Foxtons and are increasingly unhappy with renewal commission clauses that create an indefinite liability. Foxtons settled the case against them by changing their terms of business to limit the time during which they could seek renewal commission. It may be sensible for other agents to do the same.

PainSmith Solicitors supply terms of business for lettings agents and the current version of those terms includes a clause allowing for the length of time that renewal commission is to be recoverable to be limited in the manner adopted by Foxtons. These terms can be purchased online from our document shop.

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

No More Regulation

In the first session of Communities and Local Government questions yesterday the Housing Minister, Grant Shapps, confirmed what a number of people had suspected. That is, the new government has “no plans to take forward the previous Government’s ideas about further regulatory measures” for the Private Rented Sector.

This means that not only is a National Landlord Register off the menu but also sees the end of any further reform of tenancy legislation as has been recommended by the Law Commission and also the end of regulation of letting and managing agents.

The failure to further regulate lettings agents will be a disappointment to most of the major agent representation bodies who have been calling for regulation and professionalism in the sector for some time.

However, Mr Shapps made clear that there are no plans to overturn the grant of blanket permission for additional and selective licensing schemes and, by implication, that there are no plans to undo the new requirement to obtain planning consent for HMOs. More information on planning consent for HMOs can be obtained by attending the PainSmith Seminar on this topic on 22 June 2010.

The decisions are unsurprising. Given the drive to cut costs it was almost inevitable that these schemes, with their concomitant costs, would be cut. However, Wales has separately expressed a desire to register landlords and regulate letting and managing agents. They cannot currently do so as they do not have the requisite devolved authority but they are pushing hard to have this granted and will probably hold a referendum before the end of 2011 to force the issue. Therefore, while it appears that further regulation of the PRS is dead for the moment it is not true to say that it will not be revived, at least in Wales.

Filed under: England & Wales,

First Speech From the New Housing Minister

Yesterday (8 June) Grant Shapps, the new Housing Minister, gave his first speech at the Royal Institute of Chartered Surveyors.

The speech, entitled ‘Age of Aspiration’, is primarily focused on reactivating the traditional Conservative aim of mass home ownership and how this might be encouraged.

Although it is not in the press release or the draft text it is reported that Mr Shapps stated that he was not in favour of heavy regulation of the Private Rented Sector and made clear that the national landlord’s register, a flagship proposal of the previous Government, was to be scrapped. He promised further responses to the suggestion made in the Rugg review soon. Mr Shapps did say that “We will deal with rogue landlords, but we won’t do that by penalising everybody.” It would seem, therefore, that some new legislation is on the cards but, given the new drive for localism, it is likely to involve handing more powers to local authorities to prosecute or control bad landlords in their areas rather than introducing new forms of centralised control.

The press release from the CLG can be found here while the draft text of the speech is available here.

Filed under: England & Wales,

PainSmith Document Shop Launched

The PainSmith Document Shop is now available on our website.

This allows the purchase of a range of our documents for immediate download.

We have already made available clauses to be inserted into terms of business to deal with the recent changes in planning status of HMOs.

You can access the shop at www.painsmith.co.uk/Shop.

Filed under: England & Wales

Assured Tenancies After 1 October 2010

We have posted already (several times) on the issue of the increase in maximum rent threshold under the Housing Act 1988 which will occur on 1 October 2010.

While it is well understood that this will increase the number of assured shorthold tenancies it has been forgotten that the Act also includes assured tenancies, that is market rent tenancies with a security of tenure for life. These will also be affected by the change.

Therefore non-Housing Act tenancies which began after 15 January 1989 but before the 28 February 1997 will not convert to ASTs on 1 October but will convert to Assured tenancies. Equally, formerly Assured tenants who have lost their protection due to their rent being raised above the £25,000 threshold will regain their assured status.

Presumably this will affect relatively few tenancies but the effect will, of course, be profound. Landlords in this position would be well advised to make sure that they have clearly and unequivocally terminated these tenancies prior to 1 October by either evicting the tenants or, at the very least, signing deeds of surrender and granting new ASTs.

Filed under: England & Wales, England only, ,

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