Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

New Code of Management for Residential Properties

In quick succession two codes of practice in respect of service charges for residential leasehold property have been granted approval by the Secretary of State.

Readers may recall that under the Commonhold and Leasehold Reform Act 2002 the Secretary of State had powers to approve certain codes of practice.  He had previously approved codes produced by Association of Retirement Housing Managers (ARHM) and the Royal Institution of Chartered Surveyors (RICS).  Both of these codes have now been updated and as from the 1st June 2016 there is a new code.

The RICS code is the best known and is now in its third edition and here is a link to the statutory instrument granting approval of the code.

If you are involved in the management of long residential leasehold property then you ought to be familiarising yourself with the Codes. Both Codes are considered best practice and any court or tribunal adjudicating on long residential leasehold will have regard to the Code in determining the issues.

As with previous editions the Codes are written in clear easily understood terms.  The ARHM is aimed at those managing properties in the retirement sector and for all other long leasehold property the RICS code would be relevant.

Filed under: England & Wales

Immigration Act 2016

The Act came into force on 12 May 2016 and is intended to clamp down on people in the country illegally. Below is a summary of some of the provisions.

 

Offences by Landlords and Agents

 

Under section 33A of the Act a Landlord is committing an offence if he knows or has reasonable cause to believe that his tenant is in the country illegally. It is a defence to the offence if the Landlord can prove that he has taken reasonable steps to terminate the tenancy promptly on knowing or having reasonable cause to believe that his tenant is illegally in the country.

 

Under section 33B, letting agents will also be committing an offence if they know or have reasonable cause to believe that the tenant is illegally in the country and did not notify the Landlord prior to the Landlord entering into the tenancy. The defence available to Landlords above is unfortunately not available for agents.

 

The maximum penalty for a breach of section 33A and B, is a prison term of 5 years and/or a fine.

 

Eviction

 

Where the Secretary of State notifies a Landlord that all of his tenant/s are illegally in the country the Landlord will be expected to terminate the tenancy under Section 40. The Landlord will need to give the tenant/s 28 days’ notice in prescribed form. If the tenant/s do not vacate on the expiry of the notice the Landlord may use reasonable force to evict himself of instruct a High Court sheriff to evict the tenant/s. This section applies to Rent Act 1977 and assured shorthold tenancies under the Housing Act 1988.

 

Where the tenancy is a Common Law tenancy, Landlords will need to serve a section 146 notice on tenants illegally in the country.

 

New Ground 7B, Section 8

 

Where the property is let to a mix of tenants lawfully and unlawfully in the country, a Landlord may seek possession under Section 8, Ground 7B. This new ground permits Landlords to commence possession proceedings where they have received a notice from the Secretary of State advising that one or more of the tenants is unlawfully in the country. However, tenants that are lawfully in occupation of the property may apply to have the tenancy transferred into their names provided there have been no other breaches of the tenancy.

 

Comment

 

The Act is an unwelcome addition to the Landlord’s obligations to check the immigration status of their tenants. The Act fails to address some important issues such as the Deposit position where lawful tenants apply to have tenancies transferred to them. It remains to be seen how the new prosecution powers will be used and whether the courts will be prepared to sentence Landlords on the bases of these offences.

Filed under: England & Wales

Address for Service

In Levett-Dunn and others v NHS Property Services Ltd, the High Court in Birmingham found that a tenant’s notice to exercise a break clause had been validly served on a their landlord at the address set out in the lease, even though the landlords no longer used those addresses.

 

The tenant served notice under a break clause in a 10 year lease. The notices were sent by recorded delivery on each of the individual landlords named in the lease at the business addresses provided in the document. However, the landlords no longer used those addresses. In fact, only one of the four named landlords had retained any connection with the address given for him in the lease but he had transferred his interest in the property in 2011. The tenant followed up the notices by email to the Landlords’ property manager.

 

Prior to the expiry of the notice the tenant contacted the property manager to arrange for the return of the keys. The manager sent a careful reply accepting the keys without prejudice to the landlords’ contention that the notices were invalid. So the landlords were aware of the tenant’s intention to leave even though they were taking the view that the break clause notices were ineffective because they had not been served on them properly. On 13 October 2014 the landlords leased the property to another tenant while disputing the validity of the notices and claiming that the original leases continued.

 

The court held that where a contractual relationship existed they would take note of the agreed details for service. The leases specifically provided that the landlords were to be served at their last known place of abode or business, and also set out that address. The tenant had complied with the contractual provisions.

 

The landlords could have taken steps to inform the tenant of a change of address and, having failed to do so, they bore the risk of any notices not reaching them. Thus the tenant was entitled to a declaration that the leases had been terminated.

 

In the event that the above decision was wrong, the court also held that the landlords had accepted the tenant’s surrender of the lease when they had retaken possession and re-let the property.

 

Comment

This case demonstrates the crucial importance of keeping contact details updated, especially where the tenancy agreement makes clear that those details should be used for service. Landlords and tenants who fail to do this may find themselves being held to have received notices or being served with legal proceedings of which they were entirely unaware.

Filed under: England & Wales

Welsh Compulsory Landlord Registration and Licensing

Landlords have a deadline of 23 November 2016 to be registered and licensed under the Housing (Wales) Act 2014. The Act requires all landlords with property in Wales to register with Rent Smart Wales and to either be licensed themselves if they’re managing the let or use a licensed agent.

 

Registration

Landlords may register online for a fee (currently £33.50). Paper applications will cost more (currently £80.50). The registration has to be renewed every 5 years and the fee is again payable at that point. Some registration details are publicly available.

 

Licensing

Landlords who manage their rental properties will need to apply for a license online for a fee (currently £144.00). Paper applications will cost more (currently £186.00). Landlords will only need 1 license irrespective of the number of properties they manage. The license must be renewed every 5 years and a fee is again payable on renewal. Landlords will also need to undertake relevant training and comply with a Welsh Minister approved Code of Practice.

 

Training

The training is provided by Rent Smart Wales and other authorised providers. The training provides, at a minimum the following:

 

  1. the statutory obligations of a landlord and tenant;
  2. the contractual relationship between a landlord and tenant;
  3. the role of an agent who carries out lettings work or property management work;
  4. best practice in letting and managing dwellings subject to, or marketed or offered for let under, a domestic tenancy;
  1. the role of a landlord who carries out lettings activities or property management activities.

 

Landlords are advised to attend the one-day training in person however, Rent Smart Wales provides online courses too.

 

Code of Practice

The Rent Smart Wales code of practice comprises 2 elements. First, what landlords and agents managing rental property in Wales must do and second, what they can do to raise standards above the legal minimum. A landlord or agent who fails to comply with the requirements of the code could lose their licence and thus their right to let or manage their rental properties.

 

Penalties

The penalties are substantial and involve criminal prosecution, the inability to serve a section 21 notice and orders preventing the collection of and requiring the repayment of rent.

 

Comment

This part of the Act was brought into force in November 2015 and 12 months was intentionally allowed for compliance. Therefore, it is very likely that an aggressive approach will be taken to prosecution and other penalties from November 2016.

Filed under: England & Wales

Fees and the CAP Code

The Consumer Rights Act 2015 requires letting agents to publish a full list of their fees and charges on their website and in their offices. However, there is also a separate code of practice produced by the Committee on Advertising Practice (CAP) relating to how agents advertise non-optional fees alongside rent. These are the additional agency fees and other items (such as a deposit) that a tenant must pay as well as the rent before they will be permitted to rent a property.

 

There is CAP guidance for a range of advertising matters which must be followed by advertisers, agencies, and the media. It is enforced by the Advertising Standards Authority (ASA). A breach of CAP guidance can lead to criminal penalties and a civil claim by the tenant for the return of fees. In a recent ruling, the ASA has been critical of some large agency advertising because they had not been sufficiently clear in indicating that administration charges were excluded from the quoted prices and did not provide enough information to allow the consumer to establish easily how further charges would be calculated.

 

When tenants look at a property advert, they should be in a position to determine the total cost of renting the property. This means the total cost not only including the rent, but also the deposit, referencing fees and the cost of drawing up the tenancy agreement.

 

Letting agents advertising rental prices should include 2 types of fee information, pursuant to the CAP guidance:

 

  1. Rule 3.18 – Quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers.  However, VAT-exclusive prices may be given if all those to whom the price claim is addressed pay no VAT or can recover VAT. Such VAT-exclusive prices must be accompanied by a prominent statement of the amount or rate of VAT payable.

 

Letting agents who charge potential tenants non-optional fees which can be calculated in advance need to include the fee beside the monthly rent. Fees applicable to all or most tenants should be clearly stated and in a prominent position of the advertisement. This of course means that fees in the ‘small print’ fall foul of this Rule. This Rule applies to all advertisements on websites, brochures and leaflets but not property portals which are outside the Agent’s direct control such as Rightmove, Zoopla, On the Market or others (see below).

 

  1. Rule 3.19 states – If a tax, duty, fee or charge cannot be calculated in advance, for example, because it depends on the consumer’s circumstances, the marketing communication must make clear that it is excluded from the advertised price and state how it is calculated.

 

Some fees can’t reasonably be calculated in advance, because they will depend on the consumer’s circumstances, but the fact that these fees apply or might apply needs to be made immediately clear.  The full fee information and how they are calculated should be included via a hyperlink or in the small print, this should be inclusive of VAT. This applies to all websites, brochures, and leaflets- including property portals. There is also a need to be careful of using the phrase “fees may apply” if the “may” is in fact inaccurate because everyone will pay a fee of some sort.

 

At present, property portals, only need to include a “fees apply” pop-up, identifying all applicable fees, beside the monthly rental price. However, there should be a link to the agent’s website which allows for all fees to be displayed clearly and this should be a single click from the portal to the fees.

 

Comment

 

Rent and agency fees should be advertised together where possible in a simplified format. Agents may consider the benefits of a single fixed fee per applicant per property, including VAT.

Filed under: England & Wales

Deposits and Company Landlords

 

In Bali v Manaquel Company Limited, the tenant succeeded in his appeal against a possession order made by Lambeth County Court.

 

Mr Bali was an assured shorthold tenant. A deposit was taken and protected by his landlord Manaquel Company Limited. Manaquel served a section 21 and sought possession of the property from Mr Bali. The issue raised at first instance and at appeal was whether Manaquel had complied with the requirements on serving the Prescribed Information pursuant to the terms and conditions of the deposit scheme.

 

Mr Bali argued that the Prescribed Information served on him by Manaquel was defective for two reasons:

 

  1. The landlord had not included the Deposit Protection Service leaflet for tenants. The landlord had included a print out of the DPS ‘terms and conditions’ but not the leaflet.

 

The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 includes a requirement at 2(1)(b) to give the tenant:

 

(b) any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act….

 

The appeal judge held that the requirement was to provide ‘any information contained in a leaflet’, not necessarily the leaflet itself. As it was common ground that the DPS ‘terms and conditions’ provided included all the information that was contained in the DPS leaflet, the landlord has satisfied this requirement and ground one of the appeal, failed.

 

The landlord had not properly provided a certificate as required by s.2(1)(g)(vii) of the 2007 Order. Section.2(1)(g) requires:

 

(vii) confirmation (in the form of a certificate signed by the landlord) that—

(aa) the information he provides under this sub-paragraph is accurate to the best of his knowledge and belief; and

  1. (bb) he has given the tenant the opportunity to sign any document containing the information provided by the landlord under this article by way of confirmation that the information is accurate to the best of his knowledge and belief.

 

The second issue raised by Mr Bali was that the certificate provided was ‘signed’ with Manaquel’s name written in manuscript as Manaquel Co. Ltd, and signed PP with illegible initials. Mr B argued that this did not comply with the requirements of s.44 Companies Act 2006 which provides:

 

(2) A document is validly executed by a company if it is signed on behalf of the company–(a) by two authorised signatories, or

(b) by a director of the company in the presence of a witness who attests the signature

 

The appeal judge held that that the Prescribed Information certificate was a document that required ‘execution’ as the accuracy of it needed to be certified for a ‘formal legal purpose’.

Accordingly, the requirement of s.2(1)(g)(vii) of the 2007 Order had not been met, because the prescribed information had not been given in full making the section 21 notice served, invalid.

 

The Judge acknowledged that this might well be a trap for the unwary, but the requirement for the company landlord, was for a signed certificate, and that must be in a manner compliant with the Companies Act 2006.

 

The Order has been stayed for 7 days to allow Manaquel time to appeal.

 

With thanks to Nearly Legal.

 

Comment

 

It is important for company landlords and their agents to ensure that they sign the Prescribed Information certificate and ensure that they comply with the Companies Act 2006. Technical points such as these are important and companies are advised to check the requirements to ensure compliance. There is no need for two directors to sign everything but it must be clear that the person signing is authorised to do so and it would be advisable to ensure that there are two such signatures.

Filed under: England & Wales

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