Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Right to Manage: Make sure you get the process right!

September saw 2 interesting decisions made by the Upper Chamber (Lands Tribunal) concerning Right to Manage (RTM) applications.

In the first case re 15 Yonge Park a claim notice under section 80 of the Commonhold and Leasehold Reform Act 2002 was served by the RTM company set up for the purpose of exercising the right to manage. Sadly on the Notice the wrong address was given for the Company in that it did not give the Registered Office address of the RTM Company but some other address. At first instance the LVT appears to have accepted that there was an error but that this was not fatal. Unfortunately the Upper Tribunal disagreed.

On appeal it was determined that the requirements set out in Section 80 of the 2002 Act are mandatory. The registered office should have been set out. If there had been some sort of minor error in this address such as a typo this could have been corrected under Section 81 of the 2002 Act but as complete failure to provide the registered office address (although some other address was provided) meant that the Notice as served was defective and invalid. Back to the drawing board for this RTM and almost inevitably a sizeable bill of costs.

The second case was re 6-10 Montrose Gardens. Reading between the lines of this decision it would appear that this was a hard fought RTM with this appeal not relating to the first notice served but the third! One can only guess why earlier notices had been withdrawn or deemed withdrawn.

On this occasion Notice was served which was disputed by the Landlord. The Landlord objected on the basis that an Invitation to Participate had not been given to those Qualifying Tenants who were not members of the RTM Company. Subsequently a couple of days before the 2 month time limit for applying to the LVT expired an application was faxed to the LVT but without any of the supporting documentation which was not received until after the 2 month period had expired.

The questions for the appeal were whether the application had been made properly and if so was the Landlord’s ground for refusal correct.

To deal with the second point it appears to have been agreed that no invitation to participate was served prior to the service of this notice but an invitation had been served prior to an earlier invalid notice. The terms in effect of this notice were the same as those following the Invitation to Participate. Also those persons who were originally served with the Invitation Notice had remained the same. The Tribunal found that there was no need to serve a further Invitation Notice simply because other RTM Notices had been withdrawn or deemed withdrawn. Care should be taken particuarly to make sure that those who should be served the invitation Notice have not changed and good practice must say that it would be better (and safer!) to reserve the Invitation Notice to prevent any argument on this point.

With regards to the application to the LVT the Upper Tribunal was not so generous. Whilst the Upper Tribunal accepted that the LVT may have a discretion they must have received sufficient documents to allow them to deal with the claim and here they had only received an application form. As a result the Upper Tribunal determined that the right of discretion had not even arisen. As a result the application was said to be out of time and there was therefore a deemed withdrawal. It appears therefore they are now on to RTM Notice number 4!

In practice these cases provide a clear lesson that you must make sure you comply with the procedure as set out in the Act fully and you are unlikely to be able to correct mistakes. Further evidence of the need to take care in respect of all Notices but particularly leasehold reform matters as the decisions are clear that strict adherence to the statutory process is required.

Consider yourselves warned!

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

Back to basics 2: Notice to Quit

A second opportunity to delve into the basics of Landlord and Tenant law has arrived. This time I am looking at Notices to Quit and the common pitfalls that are easily made but fatal to the effectiveness of the Notice.

It is important first of all to nip in the bud a common misconception when it comes to Notices to quit. They and Section 21 notices are NOT one of the same thing. They indeed are used in completely different situations. Granted, the way they are applied can be seen as similar, however they should not be confused as it would result in a notice as useful as a chocolate teapot.

A notice to quit is a tool to be used to bring about the end of a common law/company let tenancy. Section 21 notices are used to end an assured shorthold tenancy. So if the tenancy agreement that is in place is an AST serve a Section 21 not a Notice to Quit.

A point of law that makes numerous Notices invalid is when the date of expiry should be and when it should or can be used. The date of expiry must be either at the end of a complete period of the tenancy or on the first day of the new period. If this is a little too vague, there is an alternative method. The case of Chez Auguste Ltd v Cottat stated that there was no need to give an exact date on the notice. This may appear harsh on the tenant but there was a caveat to this declaration. It just needs to be clearly identifiable to a reasonable tenant as to when the Notice will expire. As well as this, it cannot be used in the fixed term unless it is used in conjunction with a break clause.

There are certain other points that must be followed when the Notice has been served. Once the Notice has been served, rent cannot be demanded. Payment of mesne profits (equal to the rental sum) must be taken instead without prejudice to the effect of the notice to quit. It must be made clear to everyone who looks at the transactions that there is no intention to create a new tenancy found. Street v Mountford tells us that if there is no intention to create legal relations then no tenancy is created. This is particularly important because the last thing you want as a Landlord or Agent is to get to the point where the Notice to Quit has expired and possession is close, only to find that the tenancy will continue due to a few seemingly innocent statements.

These requirements must be strictly applied otherwise the notice will generally be found to be invalid. It may seem like a lot of effort but caution is the best approach. Make sure as many checks as possible take place and that will ensure that time is not wasted, particularly in a situation like possession matters where time is generally of the essence.

A number of you may well be signed up to our helpline. If you indeed are and wish to access a Notice to Quit, then it is available via the document vault which you have access to.

It is worth noting that if it is a common law tenancy and your sole ambition is to gain possession at the end the of the fixed term, a letter stating you require possession will suffice. A letter will also suffice if the tenancy has a break clause, again no Notice to Quit is required to exercise the right. A Notice to Quit is only required once the tenancy has become periodic.

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

The Tenants Bankrupt!

We have come across two decisions from earlier this Summer dealing with the problem of what to do when faced with a Tenant who is made bankrupt or enters into a Debt Relief Order.

Generally anyone who is made bankrupt or obtains a Debt Relief Order is subject to certain moratoriums on proceedings and the recovery of money which they owed prior to the Court Order making them bankrupt etc. This means that landlords can find themselves with a tenant who has run up arrears which they then cannot recover save for making a claim in the insolvency process under which it is likely they will only recover a small proportion of the monies.

In Sharples v. Places for People Homes Limited (bankruptcy) and Godfrey v. A2 Dominion Homes Limited (debt relief order) the Court of Appeal gave consideration as to whether a Landlord may bring Possession proceedings relying on arrears as a ground for possession not withstanding that the Tenant was subject to some form of insolvency procedure.

The Court determined that Landlords could bring proceedings relying on the rent arrears in the usual way if the ground could be made out then the insolvency of itself would not prevent the court making an Order for Possession in these circumstances. What the Court did say is that the Court could not make a monetary Judgment and nor could it suspend any Order on terms requiring the arrears to be paid.

Whilst often a Landlord may be best advised to rely on Section 21 if at all possible obviously this is not always available. Landlords will therefore still have the option of Section 8 proceedings.

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

Sentencing…

This not really a heading that one would expect on a Landlord and Tenant blog but with the country up in arms in many cases about the sentencing of the rioters and the recent Court of Appeal decisions we thought it prudent to mention the case of Premier Places.

Brandon Weston and David Christopher Williams ran Premier Places, a lettings agency with offices in Worcester and nearby Redditch. They were sentenced this week for a long-running fraud but the sentences were suspended.

Weston who ran the business pleaded guilty to four charges of fraud between 1 April 2007 and 28 February 2008 and was sentenced to 12 months in jail. But the sentence was suspended for two years and so he will not go to jail unless he is convicted of another offence within that time. He was also ordered to serve 250 hours of community service which is an alternative to custody. Williams, the book keeper, was sentenced to serve eight months, suspended for two years plus 150 hours of community service. He pleaded guilty to three charges of forgery of an accountant’s signature.

In sentencing, the Judge at Worcester Crown Court took into consideration the fact that Weston exhibited genuine remorse and was bankrupt with the events having had a devastating effect on his family.

According to prosecutors, Weston had interests in a restaurant, “The Glasshouse” in Worcester, a family home, a house in France and seven other houses in Worcester he was also allegedly taking £8,500 out of the business every month.

Daniel White of Counsel for Weston confirmed that he had signed over to the prosecution or sold all his assets and that his life had been turned upside down following his bankruptcy.

Premier places were a member of TDS (the Dispute Service) which has made good the losses suffered by both tenants and landlords at a cost of some £63,000. As most of you know the deposit should be held in a designated client account which is treated as a trust account and is therefore ring fenced from the assets of any company. However the deposits were not ring fenced despite the reassurances given to the tenants and landlords.

Steve Harriott, the Chief Executive of TDS, says that the sentences are “a kick in the teeth” for the tenants and landlords who were the victims of the scheme and that it “undermined the excellent work of properly self-regulated agents.”

Whatever your opinions maybe on the sentencing of these agents we at PainSmith Solicitors do agree that the industry needs to be regulated and that just like lawyers agents should undergo a minimum amount of training every year.

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

How long do I need to own my lease for to get an extension?

For a leaseholder to seek an extension under the Leasehold Reform Housing and Urban Development Act 1993 (“The 1993 Act”) it is still necessary to have owned the lease for a period of two years.

Whilst various amendments have been made to the 1993 Act (under the Commonhold and Leasehold Reform Act 2002) the requirement to have owned the lease for a continuous period of two years still remains. This is important particularly for people buying a lease where the term is getting close to only having 80 years remaining. You should remember that if the term falls to 80 years or less then the freeholder will be entitled to receive 50% of any marriage value which exists. In respect of many leases this means that the premium payable will be significantly higher than if a lease extension was obtained before the term fell to less than 80 years.

So the Leaseholder must have been a qualifying tenant for at least two years under section 39(2) of the 1993 Act. The period of ownership is calculated going backwards form the date of service of the Notice of Claim under section 42 of the 1993 Act. The period must be continuous but you can rely upon periods where the leaseholder has been a joint owner for calculating the 2 year period. Also it seems that provided you have owned the same flat it does not matter that you have been granted a new lease of that flat. It is the period of ownership of the premises which is crucial. This does mean that if a Leaseholder has acquired a new lease under the Act they would not need to wait a further 2 years before applying again for an extension (if you wanted to!).

It is however the case that the 2 year period will only start from the date of registration at the Land Registry as under section 22(1) of the Land Registration Act 1925 (and subsequent amendments) and various authorities it is believed that the Leaseholder only becomes the legal owner of the lease upon registration. Leaseholders and their conveyancers need to be aware of this point as sometimes registration can take some time and certainly should not be overlooked. In an unreported case in Central London County Court (Wellcome Trust Limited v. Baulackey 2009) the Court determined that the purchaser of a lease was not entitled to serve a Notice under section 42 of the 1993 Act until they had been registered as proprietor for at least 2 years.

As a result if you are looking at buying a lease with say only 83 years remaining consideration should be given to having the outgoing Leaseholder serve a Notice (assuming they have a 2 year qualification) which can then be assigned. Whilst incurring further costs at the time of purchase (which many Buyers wish to avoid) in the long run it can save substantial costs. It is also worth noting that some Freeholders will grant voluntary terms or agree an extension even if the criteria for qualification are not made out although often at a price!

Yet a further point which advisers serving Notices of Claim and those advising on receipt of the same need to be alive to. Yet a further example of the pitfalls within the 1993 Act!

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

What is a Flat?

This was the question which HHJ Cowell had to answer last week at Central London County Court in respect of a claim for Collective Enfranchisement made under the Leasehold Reform and Housing Development Act 1993 in the matter of Farndale Court Freehold Limited v. G & O Rents Limited.

The claim concerned a building which can best be described as akin to a student halls of residence. The building consisted of a terrace of 4 blocks. In one block was a management office which belonged to the freeholder and also a room used as a laundry. On either side of the stairwell on each floor was a Unit which typically consisted of 6 en suite bed sitting rooms, a corridor and a communal Kitchen/diner. There were 30 of these units and a Qualifying majority of tenants had given a Notice to Enfranchise under the 1993 Act. The Defendant freeholder had served a Notice alleging that the Units were not flats within the definition of the 1993 Act Section 101(1).

Further the Defendants also alleged that the Units were used as business premises. This was not raised in the Counter Notice.

As a result the Freeholder alleged that the Claimant nominee purchaser was not entitled to enfranchise.

The Claimant bought proceedings for a declaration under Section 22 of the Act that the participating tenants were entitled to enfranchise.

The Judge in deciding if the leases were of a flat took the view that each lease was for a separate set of premises and that each formed part of the building as a whole and had been constructed and adapted for use as a dwelling. The Judge did not feel that the cases relating to “houses” and enfranchisement under the Leasehold Reform Act 1967 assisted him but he did refer to Malekshad v. Howard de Walden Estates and the view of Scott LJ at paragraph 101 that a dwelling was either a house or a flat.

The Judge in this case found that the Units had been constructed for people to live in. Further he determined that whilst most units had 6 rooms, each room could not be said to be a separate dwelling since each was used with the kitchen. He went on to say that if each room could be said to be a flat that was in his view unrealistic and the alternative that there were no flats was equally unrealistic.

He held that each of the Units were a flat within the definition of Section 101(1).

The next point was whether the Defendant was entitled to rely upon the business user despite having failed to mention this in the Counter Notice.

The Judge relied upon a decision of HHJ Cooke at Central London County Court in the case of Bishopsgate Foundation v. Curtis [2004] and found that the argument over business user had not been thought about or hinted at in the counter notice and the Defendant could not rely upon this since there was no reference in the Counter Notice.

He did however go on to consider the business user point. The Judge did state that he could see that a layman looking at the letting arrangements and the units may well conclude that this was a business user but he was satisfied that this was not the correct test. The correct test was to have regard to Section 23 of the Landlord and Tenant Act 1954. The Judge was referred to Graysim Holdings v. P & O [1996] but determined that the current case was on all fours with this authority.

The Judge found that there was not a Business user (save for a short period in respect of two units only as a hotel).

As a result the Claimants were successful in their application although the Defendant may appeal.

It is believed that this is the first case on the point of what is a flat under the 1993 Act. It seems that if you have a dwelling then if it is not a house it will be a flat! Plainly the factual situation is going to be important and we still await the House of Lords decision in Hosebay which may or may not provide further assistance.

Further the Judge did make clear that in his opinion a Freeholder must set all arguments in the Counter Notice although he does not need to go into in detail. This is perhaps surprising but the Judge was clear that in effect the Counter Notice is akin to a pleading.

Perhaps not of huge interest save for those who practice in this field but an interesting decision none the less.

PainSmith were instructed on behalf of the Defendant Company and are happy to advise with regards to all residential long leasehold matters.

Filed under: England & Wales, , ,

SHELTER REPORT

Many of you will have heard on the news today about the publication of SHELTER’s report on rent levels. We felt it was worthy of mention here on the this blog given our interest in all things relating to the private rented sector.

Campbell Robb, Shelter’s Chief Executive, says: ‘We have become depressingly familiar with first time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic.
With no cheaper alternative, ordinary people are forced to cut their spending on essentials like food and heating, or uproot and move away from jobs, schools and families.’

The report focuses on the affordability of accomodation in the private rented sector and is part of an ongoing series of reports which SHELTER intend to publish. The report highlights the large rises in rental levels over the decade prior to 2007 and suggests that in large parts of the country rental levels are now at a level that makes them unaffordable. As a result SHELTER is calling on the Government to stabilise the market and bring in policies which will bring rental levels into line with earnings.

What is clear from the report is that the supply of rental properties in some areas are not suffcient for those seeking such property. With changes to Housing Benefit there must be real concerns as to the effects this will have on many families. Plainly some elements of the Localism Bill (particuarly those in relation to planning) are supposed to assist in this area but this will take time to filter through. We are sure that this report will generate much debate and would welcome readers comments.”

Filed under: England & Wales, ,

Housing Act 1988

CLT Conference

Excuse the plug but we are promoting the attached course for no other reason than the fact that Dee Clair will be speaking amongst others. The course will cover section 8, 21, 13, deposits and even common mistakes, and is designed for all those involved in lettings.

Filed under: England & Wales,

Ground 14

Most of you will have heard about the coalition governments crack down on anti social behaviour especially in light of the recent rioting and looting. However, the coalition government is taking it that one step too far, in our humble opinion, and suggesting that those that are convicted of anti social behaviour should be evicted from rented accommodation even where the anti social behaviour has nothing to do with the rented property.

In August 2011 the Department for Communities and Local Government released its consultation on “A new mandatory power of possession for anti-social behaviour.” The consultation is aimed at making Ground 14 of Schedule II of the Housing Act 1988 a mandatory ground for possession.

Looking at the consultation itself statements that should be noted are:

“It is clearly right that eviction for anti-social behaviour should remain exceptional: the loss of one’s home is a serious sanction and eviction may simply displace the problem elsewhere rather than providing a long term solution.”

“But where landlords turn to possession as a last resort in order to provide respite to communities and as a serious sanction against perpetrators that process can take too long”.

“Most importantly though lengthy possession proceedings mean that the suffering of victims is further extended”.

“….serious anti-social behaviour and criminality beyond the immediate neighbourhood of the property can clearly be taken into account”.

The consultation then asks those that wish to respond to consider the following questions:

1. Do you agree that we should extend the scope of the current discretionary ground for possession for anti-social behaviour and criminality in this way?
2. Do you agree that we should construct a new mandatory power of possession in this way?
3. Are these the right principles which should underpin a mandatory power of possession for anti-social behaviour?
4. Have we defined the basis for the new mandatory power correctly? If not, how could we improve the definition?
5. As a landlord would you anticipate seeking possession using the mandatory power in some or all of the instances where this would be available?
6. Are there other issues related the introduction of a mandatory power for possession for anti-social behaviour that we should consider?

So how to respond in a rational and clearly though out manner, difficult, but here goes.

If Ground 14 is made mandatory both social and private landlords will be allowed to issue possession proceedings not only where the tenant is convicted for anti-social or criminal behaviour but also if the occupier or a visitor of the tenant has such a conviction. So will this lead to problems with the convicted father visiting his children? Does this contradict one of the coalition government’s aims, to promote family life, I think so.

Its quite clear that this consultation is in response to the riots in August and that there was as much though put behind it as Teresa May’s statement about the Right to Family Life and the cat. But whilst the consultation appears to recognise that the court process is too long it makes no reference to why that is and no reference to how that should be improved. Even where landlords have mandatory grounds for rent arrears the process can take too long with agents and landlords taking their frustrations out on us poor, overworked lawyers (its true!).

One has to wonder however with the current housing shortage and the problems that were recognised with the younger generation following the rioting whether moving people on is really the best we can do. We live by the principle that “if you do the crime you must serve the time” but after that time people are entitled to get on with their lives because this justice system promotes the right to rehabilitation. It is obviously very difficult for some to accept this especially where they have been victims of a serious crime but this consultation is not promoting re-habilitation it is promoting ostracising certain sections of the community which can lead to an increase in crime and looting.

This cycle must end and housing, communities and the court system needs investing. Under Ground 14 it is possible to get possession where the tenants are a nuisance in our experience and this is simply going too far.

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

Look at the lease!

We have posted on this topic before but many questions we receive on the helpline come back to the same answer.

Whether you are dealing with an AST or long leasehold dispute the starting point must always be the agreement or lease. The Courts, adjudicators and LVTs will always look at the lease/agreement as the starting point. It is imperative that advisers check the document carefully to ensure that all terms have been complied with and/or the remedy sort is provided for. Generally Courts etc will not look to imply terms into such a written agreement and will expect parties to comply with the terms that are written. This is particularly true for the party seeking to rely on the same.

Service charge clauses in particular often contain detailed requirements. It is not sufficient to say a party is not prejudiced by a failure to comply strictly with the terms. A careful review should always be undertaken by all managers and owners whether or not it appears that everyone is happy. Parties can and often do raise disputes at a later stage.

The Courts, adjudicators and LVTs have issued a number of decisions over the past 12 months making this clear.

The moral is therefore, check the documents and check you comply!

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

Long Lease.

PainSmith are proud to be members of ALEP

PainSmith have recently been successful in their application to join the Association of Leasehold Enfranchisement Practitioners (ALEP).

ALEP was formed to provide a body of professionals all involved in the field of leasehold enfranchisement who adhered to an agreed level of conduct and service. All members of ALEP to receive membership have to be able to demonstrate that they have sufficient expertise and experience in this complex area of law.

PainSmith Solicitors as a specialist firm of Landlord and Tenant solicitors is pleased to have been made a member of ALEP. PainSmith are able to offer specialist advice on all aspects of long leasehold property and regularly act for Freeholders and Leaseholders in a variety of matters including service charge disputes, lease extensions and collective enfranchisements.

For further information on ALEP please visit the website or for advice please contact us.

Filed under: England & Wales, FLW Article, ,

An apology please, we should be so lucky!

Many people have different opinions on squatting and some of you may have read about it in the Guardian newspaper. We at PainSmith would like to follow the rest (in a sheep like fashion-we ain’t proud) and add our name to those advocates objecting to Mr Weatherley’s comments.

Mr Weatherley, we look forward to the official retraction.

In the meantime if readers want to read more please click here for the nearly legal blog.

Filed under: England & Wales, FLW Article,

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