Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Deposits: so what is next?

We continue to receive many enquiries relating to deposits and the effect of changes brought in by the Localism Act.

It seems clear that the Courts are aware of the requirements generally and certainly the experience we have is that Judges are alive to the issues and are considering them. The up to date Accelerated Possession Claim form requires information about any deposit taken to be included and also for the Claimant who is the landlord to confirm compliance with the rules of the relevant scheme including the giving of prescribed information and compliance with any other conditions such as the requirement to serve the Terms and Conditions of DPS on a prospective tenant. This means that any solicitor instructed must ask questions with regards to the above and satisfy themselves that there has been compliance before they can sign a statement of truth and commence proceedings in the County Court. Without such compliance any section 21 notice served will be invalid and proceedings would be dismissed.

It is therefore important that all agents and landlords regularly audit their portfolios to ensure compliance and perhaps more importantly ensure that they have systems ion place to be able to demonstrate that compliance has taken place meaning that all prescribed information has been served and the deposit protected within thirty days of the tenancy commencing or the deposit being taken whichever is the earlier. As we have blogged about previously the consequences of not being able to demonstrate compliance may make obtaining possession under the no fault section 21 ground difficult and leave both agent and landlord open to claims for a penalty from the tenant under the Housing Act 2004.

With regards to penalties as yet there seems little guidance regarding the factors the Court will take into account. As a result it is vital that if a landlord or agent becomes aware they have not complied they should urgently consider what action should be taken. In general terms they can either try and remedy any breach (e.g. by serving prescribed information out of time); an/or return the whole of the deposit to the tenant. It is not believed that this will prevent a claim but it may stand as good mitigation if a claim is made by any tenant. Agents in particular should be able to show why a lapse occurred and what steps they have taken to prevent this happening again. The impression seems to be that Courts will look favourably on those who are open and straightforward and save the harshest penalties for those deliberately flouting the rules and then prevaricating when claims are made. A documented system and protocol for dealing with deposits may be useful evidence. It seems likely that professional indemnity insurers will become alive to these issues and may impose their own requirements upon agents whom they offer cover.

It is worth remembering that certain aspects of the pre- Localism Act case law still applies. Certainly it is believed that where there is a joint and several tenancy agreement any claim will need to be made by all the named tenants. It may be that other aspects as time goes by will be upheld. The difficulty currently for advisers is that we have little guidance and so the advice offered must err on the side of caution.

No doubt over the coming months more cases will be reported and certainly as and when we become aware of them we will post further articles on this topic but if any of our readers have any experiences we would really like to hear them.

Filed under: England & Wales, , , ,

So what is a “house”?

The Supreme Court consisting of a panel of seven Justices handed down its Judgement in the cases of Day v. Hosebay and Howard de Walden Estates Limited v. Lexgorge Limited [2012] UKSC 41 on 10th October 2012.

This was an appeal to determine what is a “house” under the Leasehold Reform Act 1967 with regards to the enfranchisement of houses. The Act is in place to allow the owners of leasehold houses to enfranchise and thereby purchase their freeholds. Issues arose as a result of amendments made under the Commonhold and Leasehold Reform Act 2002 which removed the previous residence requirement. As a result of these amendments companies which owned leaseholds and those sub-letting or owning as a second home were able to exercise rights under the legislation.

In the Judgement (given by Lord Carnwath and agreed by all six other Justices) consideration was given to the intentions of Parliament in making such amendments and highlighting that the purpose was to address perceived flaws in the “residential leasehold system” and not in the wider sense.

In all of the lower courts it was found that the buildings in question were a “house” and so could enfranchise.

The property in Hosebay at the date of service of the relevant notice was being used as a self-catering hotel. In Lexgorge they were being used as offices. The Court said that this was not “a house reasonably so called”. Simply because the properties looked like a house and might sometimes be referred to as a house did not displace the fact that their use was entirely commercial.

What seems clear is that the Supreme Court has taken account of the intention of Parliament. The legislation should apply to properties genuinely being used as residential accommodation and simply because of the amendments made by the 2002 Act this should not be extended to allow buildings which may originally have been “houses” but are now used for commercial purposes being able to enfranchise. Undoubtedly the great estates in London and other property companies will be breathing a sigh of relief.

Filed under: England & Wales, , ,

Service charges: Reasonableness of charges caused by breaches of other leaseholders covenants

An interesting case recently came before the Upper Tribunal (Lands Chamber) relating to what is the position when service charge costs have risen because of the breach by some leaseholders of their covenants.

 In the case of Liverpool Quays Management Limited v. Carol Ann Moscardini [2012] UKUT 244(LC) The President of the Upper Tribunal considered these points and various other points on appeal from the LVT.

 The facts were that this development in Liverpool was directly adjacent to the Liverpool Echo Arena which opened in 2008.  As a result of this and the fact that the development was experiencing problems from short term lettings of the flats the cost of providing security for the estate escalated significantly with the costs approximately doubling.  The Respondent challenged these sums and the LVT at first instance disallowed part reducing the amount to that of previous years stating that there had been “excessive increases over previous years”.

 The leases contained no covenant against short term letting although they did contain the usual provisions re nuisance and covenants that the properties only be used as private apartments and not for trade or business.  There was a covenant for enforceability by the management company but Mrs Moscardini had not exercised this.  Mrs Moscardini submitted that the real reason for the increase was as a result of the management company not properly policing and controlling short term and hotel type lettings leading to various problems including a large number of incidents involving the police.

 Invoices were produced by the management company and a director explained how the contractor had been chosen.  The President was satisfied that the increase was due to the opening of the arena and the problems with the short term lets.  He was satisfied that the response was adequate and the service provided was of a reasonable standard.  Whilst he recommended that the management company did look at taking some enforcement action he did accept that there response in increasing security was proportionate (and recoverable under the lease) and even if they had taken action this may not have successfully dealt with the problem during the period in question. Such action was a long term solution and would not alter the need for security.

 What is clear is that the President in reaching his decision was trying to balance the invidious position the management company found themselves in.  This is a not unusual situation where leaseholders are faced with a proportion of leaseholders not sticking to the terms of the lease.  For the management company they may not have funds available to take action directly themselves without some mandate from the leaseholders.  Most leases today have a mutual enforceability covenant which can be relied upon although as in this case it may require the leaseholder to offer some form of costs indemnity.   It would have been interesting to see if the decision would have been different if Mrs Moscardini had looked to exercise this or the application was supported by a wider group of leaseholders who could show a pattern of complaints to the management company.  The implication is that it might have been different if the management company had not then acted to deal with this nuisance. 

 Clearly if you are faced with a situation where you believe service charges are increasing due to breaches of covenant pressure should be bought to bear upon the management company to take action.  You should try and involve other leaseholders for them also to complain and require action by the freeholder or management company.  Records should be kept.  Whilst some freeholders will then take action if asked for an indemnity or some money on account it would always be wise to take advice to check what your liability is going to be or what action you can expect.

 One of those situations where perhaps it is important to understand fully your lease not just for what you can do but what you can prevent other doing!

Filed under: England & Wales, , ,

Appeals from the LVT and the Upper Chamber (Lands Tribunal)

Applications to the LVT appear to be on the rise.  Whilst currently the rules for these Tribunals are subject to consultation pending the formation of the Lower Tribunal (Lands Tribunal) it is worth reminding everyone about the current rules.

 Once you receive a decision of the LVT you have 21 days from the date when it was sent to apply for leave.  The Tribunal has produced a standard form for making such an application although this is not mandatory.  This time scale is quite short and it is open for a party within this period to request an extension of time together with reasons which the LVT will then need to consider.

 Generally as with most applications for leave to appeal the original panel will be reluctant to grant leave unless it is a clear cut case or there is some particular point of principle.  The reasoning behind this is that generally it is felt that the appellate court should determine what work it is hearing.

 If leave is granted the appeal continues to the Upper Tribunal.  If not granted it is then open to the parties, again within 21 days, to renew the application to the Upper Tribunal who will have the final say.  It is worth remembering that appeals to the Upper Tribunal can be by way of re-hearing in appropriate cases.

 Once a decision has been made by the Upper Tribunal this in effect is a final determination.  The Court of Appeal has recently considered the matte3r in the case of The Wellcome Trust Limited v. 19-22 Onslow Gardens Freehold Limited [2012]EWCA Civ 1024.  In this case the Court of Appeal reiterated that there was no right of appeal to the Court of Appeal. A challenge to the decision should be made by way of application for judicial review in the Administrative Court.

 So that is the process if you need to appeal.

Filed under: England & Wales, , ,

Moneybox Live 3rd October 2012

Marveen Smith will be appearing this week on Moneybox Live  http://www.bbc.co.uk/programmes/b01n1qy6 to discuss Renting and Letting at 3pm on Wednesday 3rd October 2012. She will be part of a panel of three well known industry experts so get your questions in!

Filed under: England & Wales

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