Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Not an AST?

In Kahlon v Isherwood the court held that a tenant that had a Assured Tenancy but agreed to the grant of an Assured Shorthold Tenancy as part of a settlement of court proceedings was, in fact, still an Assured Tenant.

Isherwood became a tenant in 1994. Since 2000 there had been 3 claims for possession due to rent arrears. On the third occasion the parties agreed to mediate and reached an amicable solution to Kahlon’s claim for arrears and Isherwood’s claim for disrepair. As part of this agreement Isherwood also agreed to sign a new Assured Shorthold tenancy for a period of 12 months and in return arrears of rent were written off.

The ‘new’ tenancy term began on the 2 June 2008. This agreement included a break clause at any time upon the expiry of 2 months notice. The ‘new’ tenancy did not have the same security of tenure as an assured tenancy where such notice would be ineffective as a means to end the tenancy.

On the 31 March 2009 Kahlon served notice on Isherwood to expire on the 2 June 2009. Upon the expiry of the notice possession proceedings were issued and Isherwood defended claiming he was an Assured tenant.

The county court rejected Isherwood’s defence and awarded Kahlon possession. Isherwood appealed.

The Court of Appeal held that when a tenant losses his security of tenure he must be fully aware of the effect of this change in status. That in this case Isherwood should have been served with a prescribed notice pursuant to section 20 and schedule 2A of the Housing Act 1988.  This notice has a prescribed form and must  include a warning of the legal consequences of becoming an Assured Shorthold tenant and this would have assisted Isherwood in making an informed decision about the change of status.

The court held that in the absence of this notice Isherwood was still an Assured tenant and set the order for possession aside.  The notice requirements were not negotiable and could not be waived by the court even where the original agreement which demoted the tenancy had been approved by the court.

Whilst the decision seems a little unfair on the landlord who wrote off a substantial amount of arrears as part of the mediation agreement the court made the only decision available to it. The legislation makes the process very clear and attempts to circumvent the procedure will fail.  Care should be taken when entering into any form of agreement to demote a tenancy from Assured to Assured Shorthold and advice should be sought.

Filed under: England & Wales, FLW Article, , , , ,

Gladehurst Properties Limited v Hashemi

Call me lazy but here’s the summary of the case.

The Court of Appeal in their judgement held that the case of Tiensia did not assist the landlord in this case because the landlord had never complied with the initial requirements or provided the prescribed information and given that the lease had now ceased they cannot do so.

The landlords arguments in defence of the application were:

  • That it could not be the intention of the legislature to require compliance with s.214 of the Housing Act 2004 after the lease when deposits were generally handed back after some appropriate deductions;
  • That the word ‘tenant’ in s.214 could only mean a tenant in a lease that was subsisting;
  • That none of the schemes intend for deposits to be registered once the lease has ended and if the claim by Hashemi were to succeed this would mean that tenants could have a claim for some years after the lease is over;
  • As an alternative that the landlords liability should be limited to the deposit amount that is held by the landlord because most of the despot had been returned.

In response to the above arguments the court held that the legislation does not make it a prerequisite of any application by a tenant that the lease must still subsist. The legislation also does not include a definition for ‘tenant’ although it is accepted that the word is used to refer to former tenants by the DPS. Finally that the word deposit had a clear meaning which was the deposit money paid at the commencement of the tenancy.

Taking all of this into account and the circumstances of this case the Court of Appeal has made the decision that the court cannot make an award for three times the deposit where the lease has expired. Whilst it was recognised that a landlords failure to register the deposit was unlawful it was not a criminal offence for which there were criminal sanctions imposed.

The obvious problem with this decision is that if no liability is going to be imposed then landlords will simply choose not to register the deposit and will only do so if the tenant makes a threat to go to court during the tenancy. When this was put to the court the response was that tenants could still rely on the Act to make an application for the award during the tenancy. In relation to the loss of the benefit of the deposit adjudication services that tenants would experience from this becoming a common strategy the Court noted that they would be able to make use of the small claims track in the county courts…..which was one of the things that tenancy deposit protection was introduced to get away from!

Filed under: England & Wales, FLW Article, , ,

Changes, always changes….

On 16 March 2011, the Energy Bill was introduced into the House of Commons with its First Reading. The Second Reading was delivered on 10 May.

The Energy Bill has been designed to provide for a step change in the provision of energy efficiency measures to homes and businesses, and make improvements to enable low carbon energy supplies and fair competition in the energy markets.

The Energy and Climate Change Secretary Chris Huhne announced plans to introduce regulations to ensure that all landlords face minimum energy efficiency standards under the Green Deal.

At the Second Reading the proposals included amongst other things:

• From April 2016 landlords will not be able to refuse reasonable requests from tenants, or local authorities acting on behalf of tenants, to improve their property;

• From April 2018 the government will make it unlawful to rent out a house or business premise which has less than an “E” energy efficiency rating, ensuring at least 682,000 properties will have to be improved.

The Green Deal is the coalition’s national plan of home improvements to make houses and businesses cheaper to run through better energy efficiency.

The proposals will help the most vulnerable as more than a quarter of a million of the worst insulated rented homes are classed as fuel poor.

Energy and Climate Change Secretary Chris Huhne said:

“Our proposals provide a voice for tenants living in poorly insulated, draughty homes. The Green Deal is a win-win opportunity for landlords by removing the upfront cost of work to upgrade the property making it cheaper to run, more environmentally friendly and ultimately more attractive to rent.
For those landlords who don’t take up the Green Deal then we will get tough so that by 2018 the poorest performing rented housing stock is brought up to a decent standard.”

Measures may include financial support for landlords making the changes and incentives to get the work completed sooner rather than later. However the coalition government has not given any details on this aspect of the Green Deal, which will no doubt mean, many will be reluctant to begin the work until they do.

Filed under: England & Wales, FLW Article, , , ,

Hashemi – a summary

Gladehurst granted Mr Hashemi and Mr Johnson (the tenants) an assured shorthold tenancy of a flat for a fixed term of one year from September 2007. The monthly rent was £2,080. A deposit of £6,240 was paid to Gladehurst. The terms of the agreement provided that the deposit was to be held by Gladehurst. The deposit was never registered in accordance with the Housing Act 2004.

The tenants vacated the property in October 2008. Following an inventory check out, Gladehurst paid back the deposit minus various deductions. Mr Hashemi then wrote to Gladehurst requesting receipts and a breakdown of the sums deducted from the deposit and he put them on notice that he would make a claim for three times the deposit under s214.

In February 2009, Mr Hashemi issued a claim against Gladehurst in both his own name and that of Mr Johnson. Gladehurst in its defence pleaded that it had not been fully aware of the impact of the 2004 Act, but accepted that it applied. The defence also asserted that the landlord had all the necessary receipts for the dilapidations and other expenses paid on behalf of the tenants.

In April 2009, District Judge Manners, of her own motion on the papers, struck out the claim on the basis that the tenancy ended before the application was made. Mr Hashemi applied to set that order aside. District Judge Stary dismissed that application in so far as it related to the s214 claim, but reinstated the claim for the deductions of £618. Mr Hashemi appealed.

HHJ Cryan allowed the appeal and found for Hashemi. He noted that the landlord:

… never dealt with the deposit in the correct way in accordance with Act and still retains part of it … There can be no question that in accordance with the scheme of the Act a landlord should not be holding any part of a qualifying deposit at this stage, or at least without the safeguards of the Act being in place.

Gladehurst then appealed to the Court of Appeal.

Filed under: England & Wales, FLW Article, , , ,

notices

In HEARTPRIDE LTD v SAWHNEY (2011) the appellant landlord (L) appealed against a recorder’s decision to strike out its claim against the respondent tenant (T) on the basis that its Notice of Increase in Rent was invalid. L had had a long lease on premises of which T had been a tenant. L served a Notice of Increase of Rent pursuant to the Rent Act 1977 s.45(2) dated March 27, 2001. The notice was registered and took effect from March 20, 2001. When T then fell into arrears L commenced possession proceedings in 2007 based on the higher rent. T, in his defence and counterclaim, denied service of the notice and sought repayment of an overpayment of rent.

At a later case management hearing a recorder struck out the claim on the basis that the notice was invalid, as it was served on March 27, 2011 but took effect from March 20, 2011. L submitted that the recorder erred as the proper construction of s.45(3), on which the notice was based, permitted limited retrospection of an increase in rent of not more than four weeks from service of the notice to registration of the rent.

It was held that the recorder erred in holding that the notice was invalid because L failed to give T four weeks’ notice of it. The four-week period in s.45(3) ran from the date of service, which was March 27, 2001 in the instant case, and the date specified, namely March 20, 2001, was within that period. This was supported by Section 46 of the Act which was similar to s.45(3). It followed, therefore, that the recorder was wrong to hold that the possession claim was bad because the notice of increase was invalid. Accordingly, the recorder’s order was set aside and the case was to be remitted for directions.

Filed under: England & Wales, FLW Article, , ,

Hashemi v Gladehurst

We believe the decision will be handed down on Thursday.

Filed under: England & Wales, England only, , ,

Solicitors and Costs

In Neil Hare-Brown and QCC v Tent and Alison Trent and Co, QCC had 3 commercial leases for a property in Fleet Street, London. However, QCC had “swapped” company names and this had potential adverse consequences for Trent the landlord. The possible consequences were:

1. as income had been directed by QCC to the new company, there was a risk that QCC would be unable to pay the rent.
2. the presence of the “new” company was likely to cause problems as it was a requirement of Alison Trent’s lender that the demised premises be contracted out of the Landlord and Tenant Act Part II (1954).
3. another company, QCC Interscan, had been permitted by QCC to use the premises in breach of covenant.
4. there was a security issue about electronic security fobs that had been issued to named personnel of QCC which had then been distributed to other individuals who had no right to enter the demised premises.

Upon discovering the issues Trent claimed that she was put to some considerable amount of work to put the situation right both in her capacity as landlord and solicitor. The work included the variation of leases and where necessary licenses to assign. Trent looked to QCC to pay the bills for this work and although QCC paid they did so under protest and now seek an assessment of the costs.

The question for the court was therefore could the landlords costs be assessed?

QCC argued that Trent had been appointed their solicitor upon her suggestion and that Trent had refused to acknowledge QCC’s request to use their own solicitor to draw up documents which left them with no other option than to permit her to do the work.

Trent argued that the costs that QCC was seeking to challenge related to costs due pursuant to leases and other commitments arising from applications under the leases, and breaches of the leases, by them. She further argued that the costs were due to her in her capacity as landlord and argued that she has never acted as solicitor for QCC or anyone connected with QCC.

The court held Trent could not, as she had done, require QCC to pay the costs to which she has been put as landlord arising from breaches of covenant and at the same time, deny that QCC had any entitlement to a detailed assessment of those costs under the Solicitors Act 1974.

The court acknowledged that whilst it is right to say that the invoices were not printed on the Solicitor’s headed notepaper, nonetheless, Trent had accepted in her witness statement that her firm acted for the Landlord. In these circumstances, the court was satisfied that there was a solicitor/client relationship between Alison Trent as landlord and Alison Trent & Co as solicitor and that the firm rendered invoices to Alison Trent which, in her capacity as landlord and party chargeable, she has passed on to QCC for payment as tenant and third party. It follows, in the judgment that QCC is in principle entitled to an assessment under s.71 of the 1974 Act.

We often get told on the helpline that the landlord is a solicitor and that attempts are being made to impose certain restrictions which in a landlord and tenant situation are simply inappropriate. We therefore thought some of you would enjoy the article.

Filed under: England & Wales, FLW Article, , , ,

Drafting….

The pitfalls of bad drafting – be warned!

In Perriam Limited v Wayne and Daly, the High Court had to decide whether Wayne and Daly were still liable pursuant to a Deed of Variation (“Deed”) they entered into.

Wayne and Daly were the guarantors under a commercial lease with Perriam. Perriam pursuant to the Deed was attempting to recover for dilapidations, unpaid rent and service charges amongst other things.

The decision with regards to the service charges etc is not relevant for the purposes of this article.

The Deed was executed on the 24th April 2007 and pursuant to clause 4.2 Wayne and Daly agreed that:

“the obligations of the tenant in the lease shall be varied so that there is no continuing obligation to repair, keep in repair or replace the external windows in the premises”.

Wayne and Daly argued before the High Court that the purpose of clause 4.2 was to release the commercial tenant, Ideas’ (now insolvent) and therefore them, from any continuing obligation in respect of the windows as at the 24th April 2007 and that meant that they were therefore not now liable.

Wayne and Daly further argued that the commercial purpose of the agreement was:

“So far as the external windows were concerned, the agreement was that there should be no continuing obligation in the sense of no ongoing liability to replace or repair whensoever the windows fell into disrepair and similarly no obligation to discharge any of the remaining repairing obligations. Mr Manning had the deed drawn up by his firm, Fox Hayes…We therefore signed the deed believing that we were thereby released from any ongoing personal liability to guarantee any of Ideas’ obligations under the lease and that Ideas were released from any liability to maintain external windows.”

The court was a little derogatory about the drafting of the Deed which included a catalogue of errors such as referring to Wayne and Daly as tenants and failing to draft a Deed which reflected the agreement reached by the parties.

The court therefore had to determine if Wayne and Daly were liable for the dilapidations. Upon listening to the arguments of both sides the court decided that in the absence of a date in clause 4.2 the intention of the parties was for liability to cease immediately upon the Deed being executed. That even on the reading of the wording of the clause this made common sense because there was no reference to a future event in the clause.

The court then went further and held that the wording of clause 4.2 meant that Wayne and Daly were no longer liable in respect of the windows. The basis for this decision was that the Deed failed to address the issue of the condition of the windows and where and when Wayne and Daly’s liability would end. That it strained common sense to pursue a claim for the windows when it was not mentioned in the Deed and in fact made it impossible to pursue due to the lack of a schedule of condition amongst other things.

Clause 4.2 did therefore operate in the courts interpretation as a release to Wayne and Daly, such that after the 24th April 2007, they had no liability for the condition of the windows. The clause therefore provided them with a complete defence to the claim for the costs of the dilapidations’.

When documents like this Deed are put before the courts the commercial reality and the obvious intention of the parties is usually the deciding factor. Therefore if you intended for something to happen then you are advised to ensure that a clause reflecting that intention is in the agreement. Badly drafted documents are common especially in our line of work but its unnecessary when templates can be purchased and advice sought. Cutting corners is simply to risky and potentially expensive.

Filed under: England & Wales, FLW Article, , , ,

Potts –v- Densley & Pays

The High Court has handed down its decision in the case of Potts v Densley today. Previous blogs can be viewed here.

We acted on behalf of the Claimant who in this instance was the Tenant with James Browne of counsel.

Facts

The landlord first let the property for a term of one year commencing on 12th May 2007. The property was managed by a lettings agent. A deposit was taken of £1,500, which was correctly registered with the TDS scheme. In 2009 an agreement was made between the parties that a new tenancy would be agreed at a lower rent, without the management of the agents. It was agreed that the deposit would be withdrawn from the TDS and paid direct to the Landlord who would be responsible for protecting it themselves.

In order to assist the Tenant the Landlords agreed not to insist on a further deposit upon this renewal. Instead they agreed to wait for the return of the deposit from the agent and then register it upon receipt. The Landlords received the deposit of £1,590 on 18th June 2009. In the meantime on the 15th June 2009, the Tenant exercised a break clause bringing the tenancy to an end on 15th August 2009.

On the 10th August the Landlord offered to pay the deposit back to the Tenant however, the Tenant refused the deposit and insisted that the Landlord register the deposit with a scheme pursuant to their obligations under the section 213 of the Housing Act 2004. The Landlords failed to do so and the Tenant issued proceedings on the 12th August 2009. The Landlords in response no doubt registered the deposit with the DPS custodial scheme on the 17th August 2009, 2 days after the Tenant vacated.

The Prescribed Information as required by s213 (3) and s213 (6) was never served.

Before Her Honour Judge Hallon, it was held that there had been a breach of the requirement to secure the deposit, because the initial requirements of the scheme can not be complied with after a tenancy has come to an end. This is despite the decision in Tiensia. However, the judge refused to award the penalty of three times the deposit because she held that there had been a technical breach of the requirement to secure the deposit and that given the:

“unusual circumstances of the case, it would not be in the interests of justice to do so”.

She did not deal with the prescribed information at all.

The Tenant appealed.

Two main issues were raised in the appeal. First that the judge had no discretion to refuse to impose a sanction once she had decided there had been such a breach and it thus follows that she was wrong to refuse to award the penalty. Second that the judge erred in failing to deal with the issue of the Prescribed Information.

The Judgment of Today

The Honorable Mrs Justice Sharp when referring to the County Court decision above states at paragraph 23 of her judgment:

“it is obvious that the judge had considerable sympathy with the position of the Landlords on the facts found by her and considered it would be unjust for them to be subject to the sanction provided for non compliance, under section 214 (4) of the Act”.

She then went on to say that to award the penalty for a breach of a technical nature when the deposit was not returned due to the insistence of the Tenant pursuant to section 214 would:

“do a very considerable injustice”.

With regards to the 2 points of appeal, Mrs Justice Sharp upheld the County Court decision and based her reasoning on the decision on Tiensia. That is that Landlords had until the date of the hearing of the Tenants application to comply with the provisions and having secured the deposit before the hearing they had a complete defence to the Tenants application.

On the matter of the prescribed information, Mrs Justice Sharp held that due to the failure to plead this in the particulars of claim submitted by the Tenant, the judge had not erred. The issue over the prescribed information was mentioned in court by the Tenant and also mentioned in the Tenants witness statement. However, it was held that this was not clearly pleaded but had it been the judge would no doubt have dealt with it.

Conclusion

Whilst we welcome the release of the decision the area of law is not concluded. It does appear that you can register the deposit after the tenancy but the judge did not deal with implied or the actual requirements of the scheme because they had not been pleaded. It may be the case that it is an implied “initial requirement” of all 3 deposit schemes that the deposit be registered before the tenancy ends. Even if it is not an implied requirement is it likely that it will become explicitly stated requirement!

There of course remains the decision of Hashemi v Gladehurst which has the potential of changing this decision.

Filed under: England & Wales, FLW Article, , , ,

Squatters

No doubt most of you will have heard about squatters taking over Colonel Gaddafi’s son’s £11 million mansion in London. Apparently the group calling themselves Topple The Tyrants claim they took over the house because they “didn’t trust the British government to properly seize Gaddafi’s corrupt assets”.

Whatever your opinion on the above is and on squatters in general most clients that we assist with these matters continue to be taken aback when we inform them that squatting is not a criminal offence. It really isn’t….

However the UK Coalition Government is now proposing to make squatting a criminal offence and have in the meantime published some guidance to assist those with squatters.

Section 7 of the Criminal Law Act 1977 states that it is an arrestable offence for a squatter to fail to leave a residential property when asked to do so by a residential home-owner who wishes to occupy the property. There is therefore a criminal element which allows the police to assist and to enter and arrest anyone suspected of criminal damage and theft.

We have all heard the myth of “squatter’s rights” which is in fact no such thing. Section 6 of the Criminal Law Act 1977 makes it an offence to use violence or threats of violence to gain access to premises when there is someone in the premises who is opposed to such entry. However, this does not apply to an occupier who does not have a right to be there and was introduced to protect for example, tenants from unscrupulous landlords.

Whilst the legislation will be welcome there does not seem to be any indication of when it will be introduced. Whether you believe that this is something that should be legislated on when we are in the middle of a financial crisis or whether people should take responsibility for their own properties is of course a debate for another day.

Filed under: England & Wales, FLW Article, , ,

Update

We have heard on the grapevine that the Potts decision will be handed down tomorrow…..All those that would like to read the history please read here.

Filed under: England & Wales, FLW Article, ,

Changes to Court Procedures

The UK coalition government has published proposals to reform the way cases are handled in the county courts. In respect of housing litigation, the proposals include retaining the £1000 small claims limit to housing disrepair cases and the provisions of the protocol mandatory for rent arrears and mortgage possession cases.

The deadline for responses to the consultation is the 30 June 2011.

The protocol for rent arrears applies to social landlords, such as local authorities and housing associations, not to private landlords.

The protocol reflects the guidance on good practice given to social landlords and private registered providers in the collection of rent arrears. It recognises that it is in the interests of both landlords and tenants to ensure that rent is paid promptly and to ensure that difficulties are resolved wherever possible without court proceedings.

Its aim is to encourage more pre-action contact between landlords and tenants and to enable court time to be used more effectively. The protocol requires specifically for the landlords to contact a tenant as soon as possible after the tenant’s rent arrears accrue, to discuss the arrears, the tenant’s financial position and his or her entitlement to benefits.

The protocol no doubt leads to suspended possession orders in order to allow the tenant the opportunity to repay the arrears however, given the current problems we have with court backlogs this is a welcome consultation as it is hoped that it will assist with reducing the number of claims issued.

Filed under: England & Wales, FLW Article, , , , ,

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