Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Legionnaire’s disease

Legionnaire’s Disease is contracted by inhaling droplets of water which contain the Legionella bacteria and those with weaker immune systems are particularly at risk. Although the Legionella bacteria can be found in most water systems, the main areas of risk are where the bacteria can multiply and increase to dangerous levels. This is where water of between 20 and 45 degrees can become stagnant and there is rust, sludge, scale or organic matter for the bacteria to feed upon and multiply. This means that most modern water systems will not require any action further than the carrying out of a risk assessment but old water systems and dirty or poorly maintained air conditioning systems may require further work to be carried out.

The HSE has recently changed its Code of Practice for Legionnaire’s Disease and water systems of a volume of less than 300 litres are now included. This means that landlords now need to carry out appropriate risk assessments otherwise they may risk prosecution. The risk assessment may be carried out by a third party or the landlord if he is competent to do so but the ultimate responsibility is the landlords.

A risk assessment should ask the following questions:

 Is the water stored between 20 and 45 degrees?
 Is there stagnant water in any areas of the water system, for example redundant pipework?
 Is there rust, sludge, scale or organic matter in the system?
 Do the thermostatic valves on outlets release water within the above temperature range?
 Are there any outlets which are not frequently used, for example showers or taps in second bathrooms?

You should also consider whether your tenants are particularly at risk due to age, illness or weakened immunity.

Where a risk is identified then steps should be taken to deal with it, such as flushing out the system, avoiding debris getting into the system, maintaining the correct temperature and advising tenants of the risks and how to avoid them (for example, flushing out system after periods of lack of use). If any redundant pipework is identified then this could also be removed. The risk assessment should be reviewed regularly and whenever any element of it changes, ie. Vulnerable tenants move in, and written records should be kept of risk assessments and when they are carried out.

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

Neighbour disputes: please do try and avoid!

As a firm we often are asked to assist people who find themselves involved in a neighbour dispute. Often by the time someone approaches us relations are to say the least strained and what appeared a small issue has now escalated.

We tell everyone from the outset that they should do everything to resolve the matter. The Courts are loath to deal with such disputes and in our experience whilst a huge amount of money (six figure sums on costs are not unheard of), time and emotional energy will be spent on dealing with the matter almost inevitably the outcome is not one which either party is 100% happy with. Often the Court will appear to almost exercise a judgement of Solomon in determining the issues.

So if you find yourself in a position where you think there may be a dispute or potential for one what should you do?

The first thing is think about talking. We find that often parties may have misunderstood the others intentions. It is always worth trying to talk and if that has become difficult you could see whether you have a mutual friend who is prepared to try and act as a go between. Remember if you find yourself in dispute as and when you come to sell your property if you are an owner occupier you will have to disclose this.

If sadly you cannot resolve things between yourselves it is worth sometimes seeing if your local authority runs or can point you to a local voluntary mediation service. Certainly today we would always recommend that parties explore the possibility of mediation or the various other forms of alternative dispute resolution (ADR). If you cannot find a voluntary scheme you may find it useful to take some advice from a solicitor who then ought to be able to find a suitable mediator and or point both parties towards one. With regards to disputes purely relating to boundary issues the Royal Institute of Chartered Surveyors (RICS) runs a scheme which has certain fixed fee options.

If we are approached whilst we may advice you on the merits or otherwise of your case and a way forward we may still recommend that you try and correspond with your neighbour. We advise this in some situations as we have found that the involvement of lawyers can act to entrench parties positions. This is what should be avoided at all costs.

Ultimately if you cannot agree Courts can but as we say above the outcome is uncertain and often not what either party wants. You will find you are still neighbours and it can affect your ability to sell your property. Early mediation and resolution is best and all parties should be prepared to compromise as Court actions over principles are never sensible!

If you have a problem we are always happen to discuss in confidence and explore options. As a firm we have qualified mediators available and are experienced in assisting with these cases.

Filed under: England & Wales

Daejan v. Benson: where are we at?

We have made various posts about service charges etc on long leaseholds but still have questions asked about the infamous case of Daejan v. Benson.

To recap this started life as an LVT claim as to whether service charges were recoverable or if they were capped due to a failure by Daejan to comply with Service Charges (Consultation Requirements) (England) Regulations 2003 and subsequently on application to dispense with the need to consult under the Landlord and Tenant Act 1985. In both instances the LVT found against Daejan who appealed to the Upper Tribunal (Lands Chamber) who in November 2009 upheld the LVT decisions. So off went Daejan to the Court of Appeal.

The Court of Appeal gave its judgment in late January 2011 (Daejan Investments Ltd v Benson & Ors). The Court of Appeal upheld the previous decisions and therefore found against Daejan. Not put off Daejan sort leave to appeal to the Supreme Court and was granted the same at the end of June 2011. Currently we understand that the matter is likely to be heard by the Supreme Court and judgment given towards the end of this year.

So where does this leave the law? If you are a Landlord (whether arms length or residents) you must ensure that you comply with the Section 20 Consultation requirements to the letter! To do otherwise leaves you open to significant risk that costs will not be recoverable. As the law stands the financial consequences to the freeholder are not a matter for the LVT to take account of when considering prejudice. What needs to be shown is that a failure to comply must not cause any genuine prejudice to the Leaseholders. Whilst LVT’s may have substantial sympathy with residents management companies under the regulations no differentiation is made. LVT’s currently are likely to take a strict view given the fact that the current statement of the law was supported by both the Upper Tribunal (Lands Chamber) and the Court of Appeal.

Landlords and those advising them do have options. Given the serious ramifications of a decision going against a Landlord after works have been completed it is worth bearing in mind that they can apply for a prior determination. When there is opposition to a scheme and it is clear from the conduct of some leaseholders that they will challenge the works this may mean despite there being a delay that an application should be made to the LVT. Given most LVT panels can hear cases with fairly short timescales ( assuming no appeals) then this can be factored in to the process and quotes etc can be obtained which perhaps have a longer “shelf life” than normal to allow for an application. It seems to us that given the various rules and regulations specifically allowing prior determinations this must be the prudent step given that it provides Landlords with a safety net to check compliance if any doubt in the Landlords or their agents mind.

We will of course have to see what view the Supreme Court takes and we will be sure to blog on this when we know more!

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

Break Clause requirements go both ways.

As I am sure many of you who subscribe to the helpline will be aware, the advice for a Landlord or an agent invoking a break clause to bring about an end to the tenancy agreement is to follow the provisions of the break clause exactly. If this means serving the notice by hand whilst balancing a bowl of water on your head then that is what needs to be done.

The Avocet Industrial Estates case makes clear that this is not just the case for the Landlord and Agent but also the Tenant.

In this case the requirements of the break clause in a 10 year commercial lease, were that the break would be ineffective if “any payment” due under the lease remained unpaid and if a sum equivalent to 6 months rent was due. The day before the break date the tenant handed a cheque for 6 months rent which was due to the Landlord and handed back the keys. The Landlord challenged this claiming that simply handing a cheque does not constitute the amount being paid. This would mean that there were still monies owed at the break date and the break invoked by the Tenant should be ineffective.

The court agreed deeming that a cheque was not legal currency and therefore there was default interest amounting to £130 still owed. This meant that both requirements of the break clause were not satisfied and the Tenant could not rely on the break clause. The court accepted that the result was rather harsh but the decision was based on the legal principle of certainty.

This case simply demonstrates that parties continue to do things without reading the tenancy agreement. On the helpline we often have people that serve section 21s by hand and assume that its deemed served the same day if posted before 4.30pm. However the tenancy agreement states something different, which is that it is deemed served the next day. The section 21 is therefore invalid. This is common and should not be if people just took 10 minutes to read the agreement, assuming you are familiar with it is simply not good enough.

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

Charges for underletting: what is reasonable?

In February the President of the Upper Tribunal (Lands Chamber) gave Judgement in respect of various charges for underlettings in a number of joined cases, the lead case being Holding and Management (Solitaire) Limited v. Norton [2012] UKUT 1 (LC).

Suffice to say the President substantially reduced the fees payable both for advance and retrospective consent determining the fee payable should be £40+VAT.

Obviously, as we have repeatedly blogged upon, the starting point is the lease terms and what they provide. Many leases however do provide that either some form of advance consent is required or notice must subsequently be given. Generally if such provisions exist there will be an express or implied right for the Freeholder/Managing Agent to charge a reasonable fee. In making such a charge they must ensure that the same is reasonable and also serve the appropriate Summary of Rights.

In this case the Agent asserted that a large amount of specific work was required including review by qualified legal staff. No specific hourly rate was given but it was suggested that in total the process took about 3 hours. There were no details as to what work had been done in each of the cases in question and the President took the view that the list of work was a list of everything that conceivably could be done and was not evidence of what was done.

Certainly many Leaseholders complain that the costs they are charged for underlettings are too high for the work undertaken whereas Landlords conversely argue they have very real duties to all Leaseholders (and sometimes the block Insurers) to exercise appropriate due diligence. What is clear is that the President accepted that a Landlord may need to carry out appropriate checks but in calculating the fee they need to be able to demonstrate, generally, and with regards to the specific case how the fee is justified. It seems that Landlords and their Agents should ensure that they consider whether they wish to maintain time records in case of challenge.

Whilst many people simply pay (even if begrudgingly) there is a route open for challenge of Administration fees and it may only be a question of time before some Landlords make their own advance applications to determine that the charges they make are reasonable.

Filed under: England & Wales, FLW Article, ,

Unsigned terms of business

In Fladgate LLP v Harrison a solicitor sent out an engagement letter to a company director. The director was sent invoices as and when work was undertaken by the solicitor however the director then denied liability for the invoices on the basis that there was no written or oral agreement.

However Mrs Justice Lang stated that “the giving of instructions by a client to a solicitor constitutes the solicitors retainer by that client. It is not essential that the retainer is in writing. It may be oral. It may be implied by the conduct of the parties in particular cases.”

In this case the court determined that the general principles of contract law apply. Previous case law was considered and in particular the contention that, “whether there is a binding contract between the parties, and if so on what terms, depends upon what they have agreed…upon a consideration of what was communicated between them by words or conduct and whether…they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations.”

Generally where there is a dispute over an oral retainer the clients version will prevail however this is not the case where the court finds that the clients case is contradicted by other documentary and witness evidence.

Therefore the moral of the story for agents is try to ensure that you have signed terms of business with your landlords. But where you do not you need to ensure that someone has the full details of the conversations with the landlord noted so that you can support the contention that you have an oral agreement!

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

It’s (not) a gas

A Landlord has been prosecuted, found guilty, fined £2,000.00 and ordered to complete 150 hours’ community service for breaching the gas safety regulations including using unregistered gas engineers for gas safety checks. The HSE report can be read here.

Landlords and agents are reminded that there is no defence to non compliance with the regulations. There may be instances where the HSE decides not to prosecute ( e.g where tenants have refused access) but without mitigating circumstances a landlord must comply. To find or check a Gas Safe Registered engineer in your area click here.

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

Valuation in Lease Extensions and Enfranchisement: What is involved?

We are often asked to explain what is involved in the valuation issues relating to lease extensions and collective enfranchisements under the Leasehold Reform Housing and Urban Development Act 1993 (“the Act”). Whilst our first instincts are always to advise people that they need expert professional help from a Valuer experienced in these matters such as Valuer members of ALEP we thought it might be useful to explain the process. This article is simply an overview and a professional valuation should always be obtained.

The principles for what is required are set out in Schedule 6 for collective enfranchisements and Schedule 13 of the Act for lease extensions. The principles for each are similar and both are based on “market value”. The reality is that this idea of “market value” is somewhat false often involving various assumptions or discounts.

The valuation date for both types of claim are the date of actual service of the Notice. This fixes the date and the valuation is calculated having regard to the facts at that point in time. This can be very important particularly when some claims do not have the price actually determined until sometime (even years) later.

The price payable for a collective enfranchisement is the total of:
• The value of the freeholders interest if sold on the open market
• The freeholders share of the marriage value
• Any compensation.

For lease extensions it is:
• The reduction in the value of the freeholders interest
• The freeholders share of the marriage value
• Any compensation

So what does this all mean in practice? Taking the elements in turn:

Marriage value is the extra value which is gained when the freehold and leasehold interests come together. In collective enfranchisement claims it is only payable in respect of those flats actually taking part and for both following amendments made to the Act the amount payable is fixed at 50% of any marriage value unless the unexpired term exceeds 80 years in which case no addition is made for marriage value. It is this amendment which has meant that it is vital that Leaseholders and their advisers give careful regard to lease terms getting shorter.

Given marriage value only applies directly to those participating on occasion when you have a block with differing lease terms it may not be beneficial to have all leaseholders participating and it is worth highlighting that individual leaseholders cannot demand to be part of the process if others will not allow them to join. An amendment was made under the Commonhold and Leasehold Reform Act 2002 which would have forced all leaseholders to be given an opportunity to join using what was known as Right to Enfranchise Companies (RTE) however these amendments were never given force and in fact are due to be repealed. That being said it is not unknown for notices to be served by only some leaseholders on the understanding that once they have the freehold others will then join in or be given an extension but if freeholders become aware of this (and they are entitled to have notice of any agreements made which may affect value) they can pursue recovery of any value they may have lost.

Compensation is then to compensate the freeholder for any direct loss of value, or reduction in the value of the interest as a result of the process. Often in the various cases this relates to what is known as “Hope Value”. Generally this tends to come into play with collective enfranchisement claims more so than lease extensions.

For the purposes of this article there are two main types. Firstly on enfranchisement claims it will be an amount assessed having regard to the marriage value that is likely at some point in the future to be paid by non-participating flats. A percentage is assessed as to what sums at a later date would be paid by these leaseholders for a lease extension. The second is for loss of any redevelopment potential. The most common scenario is when a freeholder asserts that they could or would be able to build some additional units at the property. It will be a question of looking at all the evidence such as any planning history and assessments which have been undertaken to see whether this is real or imagined to then calculate what value should be attached to this.

Finally there is the value of the Freeholders interest. There are two main parts to this. The capitalised value of the ground rent and the value of the freehold with vacant possession deferred until the end of the unexpired term.

For the ground rent it is a question of working out what the total value of the ground rent is worth at the valuation date. This is a formula calculating the current annual ground rent income, assessing the type of percentage return an investor would want and then calculating the value given the number of years the landlord would be entitled to this income under the current lease(s).

As for the freehold this is a question of calculating the unimproved vacant possession value in what is referred to as a “No Act” world. Generally this will be less than the actual value of the Unit. The idea is to calculate the amount an investor would pay now on the basis that at the end of the lease term they would recover vacant possession. Again once the vacant possession value is calculated then a percentage of this is calculated for what would be paid at the valuation date of that possibility occurring.

These amounts are then added up to give the premium which can be payable.

The process is complicated and does require a thorough understanding of all the valuation principles not least since many of the percentages and rates applied to the actual valuation numbers are calculated having regard to various tables and graphs. The whole area of valuation has given rise to a substantial body of case law as to what percentages should be applied in what situations and almost every aspect of the valuation formula has at one time or another led to cases in the House of Lords (as it then was) or the Supreme Court.

With good advice these issues can be readily tackled and a valuation produced. Given that valuation is an art rather than a science usually you will be advised as to a best, worst and likely figure since as with all valuations there is always room for negotiation!

If you need help or further guidance we would be happy to help.

Filed under: England & Wales, FLW Article, ,

Subletting

It does appear to be quite common now that the person that signs the tenancy agreement as the tenant is not in fact the person that is actually residing at the property. Sometimes agents carrying out periodic viewings attend properties expecting to see a family and are faced with as many as 15 complete strangers.

So what can the law do to help? In Rose Chimuka’s case, she was convicted of fraud and sentenced to 4 years and 3 months imprisonment.

The scam involved Chimuka, often using a false name, approaching estate agents saying that she was looking for a large family home to rent. She would discuss school catchment areas and often confirm that her husband worked away.

However, rather than moving in with family, Chimuka would advertise locally for tenants so that she could sub-let the property to other tenants without the property owners consent or knowledge. She would then sub-divide the houses she had rented and put locks on internal doors and permit up to 15 people in some cases to reside in the properties.

Chimuka would collect rent money in cash from her ‘tenants’ and fail to pay her own rent for the properties she was renting.

Landlords often point the finger at agents accusing them of not carrying out the right checks etc. However, when you are faced with prospective tenants giving false information it can be difficult to detect the lies until it is too late. PainSmith Solicitors has obtained possession proceedings in these circumstances and whilst the proceedings can be slow (due to court backlogs) we have obtained possession at the first hearing. So there is hope and the courts are sympathetic to landlords in these situations.

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

EPC- newspaper adverts and window cards

At the last ARLA regional meeting in London, Marveen Smith noted that many of those attending were not happy with the changes to the EPC regulations.

Therefore having called some people and then some more people we were referred to:

Do newspaper adverts or window cards for property lets meet the definition of written particulars? No. The requirement to attach a copy of the front page of the Energy Performance Certificate to written particulars is where an agent proposes to provide written particulars to a person (i.e. a specific individual) who may be interested in buying or renting the building. This implies that a copy of the front page of the Energy Performance Certificate does not need to be attached to ‘advertising material’ – ie – a newspaper or window card.

Can the Energy Performance Certificate be re-sized if the written particulars are produced in A5 format?
The Energy Performance Certificate can be reproduced in a smaller size provided it is still legible and meet any other legal obligations, such as the Equality Act 2010.

Want to read more then click here.

We understand that the guidance will be adhered to therefore we strongly recommend that you keep a copy in the office just in case the enforcement team comes knocking…..

One thing we would like to make clear is that this guidance does conflict with the legislation. Therefore despite the existence of the guidance, agents could still be pursued by trading standards and as such it will be a commercial decision on what to do and what not to do with the EPC and the marketing material they use.

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

New Documents on our shop

Our new tenancy agreements, terms of business and clauses which take into account the changes taking effect on 6th April 2012 are now available in on our Shop. However the changes are not huge and each scheme has its changes freely available on its own website and we leave it entirely up to you whether you wish to purchase the integrated documents from us or not.

Filed under: England & Wales, FLW Article

Missing Landlord: an alternative solution

Many of you will be aware that when a long residential Leaseholder of a flat has a missing Landlord the Leasehold Reform Housing and Urban Development Act 1993 provides a remedy. The process involved requires a Court application and then a determination of the price by the Leasehold Valuation Tribunal using the valuation principles under the 1993 Act, as amended. This means that if the Leaseholders hold leases with less than 80 years remaining then they will have to pay an element of marriage value.

Under the Landlord and Tenant Act 1987 Part III there is an alternative method which may be used. This may be a better route due to the valuation formula used which is believed to be more favourable to Leaseholders in that generally they will not have to pay marriage value.

Under the 1987 Act if there is a building consisting of 2 or more flats held by qualifying Leaseholders (i.e. long leases) and they amount to more than 2/3rds of the total number of flats then the Act may apply (section 25). The commercial parts of the building must not exceed 50% of the total internal floor space ( so further reason why this method can be used rather than the 1993 Act). Subject to these then the 1987 Act will apply.

The starting point is then to look at Sections 27, 28 and 29 of the 1987 Act. Under Section 27(3) when the Landlord is missing an application to the Court can be made to dispense with the service of a Notice. The application can then be made for an Acquisition Order and under Section 29 if the Landlord is not carrying out their management function, which includes repair, maintenance and insurance of the property, as required by the lease (and almost by definition if there is a missing landlord and no intermediate Management Company they will not be) then the Court may make an Acquisition Order. The Order may be on such terms as the Court thinks fit but they will refer the question of price to the Leasehold Valuation Tribunal.

Under S. 33 where the Landlord is missing then the Senior President of the Tribunal shall select a surveyor to determine the price payable. This will be on terms that the interest may realise if sold on the open market and that the assumption that none of the Leaseholders were seeking to buy. Generally it is believed that in instances where marriage value would be payable under the 1993 Act this may be a more favourable valuation method.

The LVT will then make appropriate directions as to the price and other terms. The court may then execute the transfer and subject to paying the monies into Court the acquisition can be created.

Whilst all routes involving missing Landlords are perhaps cumbersome it is worth thinking which route is best. Discussion with the professional advisers is best at an early stage to consider fully the best valuation method. From a time perspective given the actual processes are similar then little can be gained. It is also worth bearing in mind that in instances where a Manager has been appointed under the 1987 Act then provided the Manager has been appointed for not less than 2 years then this method can also be available.

If you have such a situation then we would be happy to advise.

Filed under: England & Wales, , ,

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