Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Consumer Rights Act 2015 and lettings agent fees. More duties for lettings agents?

From 27 May 2015 there will be a statutory duty on lettings agents in England  to publicise the fees they charge.

What needs doing?

  1. Agents need to display prominently in each office and on the agent’s website ( if there is one):
    1. A list of fees. The list must give enough information so that a person can work out what exactly they are paying for, and why, and how much it will cost. The list must set out whether the fees are per property or per individual. Where there is a joint tenancy is it one fee for all, or for each individual to pay? The fees must be set out inclusive of VAT ( and any other applicable tax), and where that fee is not determinable in advance, a description of how the fee is calculated, for example Landlord’s commission fees.
    2. If the agent holds client monies, a statement as to whether the agent is a member of a client money protection scheme.
    3. A statement to say that they are member of a redress scheme and giving the name of that scheme.

Who needs to do it?

Lettings agents in the Private Rental sector. Local authorities are excluded. The duty (and therefore any penalty) falls upon the agent and not salaried employees of the agent.

What does “fees” mean in this context?

For the purposes of this legislation “fees” means “ the fees, charges or penalties which a landlord or tenant pays to the agent in relation to letting agency work, property management work or otherwise in connection with an assured tenancy or a dwelling-house let under an assured tenancy”. Some exclusions are set out. Rent and Deposits are excluded ( but not “holding deposits”) and some third party fees e.g. agent paying a contractor on behalf of a landlord.

Penalties for non compliance

Trading Standards can fine an agent up to £5000.00. The first step is that they would serve a “notice of intent” upon the agent setting out the proposed penalty and reasons for it. The agent has 28 days to respond. Trading Standards then decides whether to impose the penalty and if it does, will send a “final notice” requiring payment within 28 days. If the penalty is imposed an agent has a right to appeal through the FTT .

More detail can be found in the explanatory notes to the act.

When does it need doing?

Agents will need to be in compliance by 27th May 2015

In fact, most agents who are already adhering to the requirements of membership of a particular professional body and complying with the rules of their redress scheme, are likely to already be doing the above.   Of course all agents should check that they are compliant with the new legislation, but those who are not already doing the above need to put measures in place to ensure that they are doing so by 27 May 2015.

Filed under: England only, , , , ,

Smoke and Carbon Monoxide Alarms

Smoke and Carbon Monoxide Alarms

We have had a number of helpline calls over the last few days regarding the new regulations relating to smoke and carbon monoxide alarms so we thought it was about time that we put out a blog to answer some of the frequently asked questions.

The government has announced that landlords will soon be required by law to install working smoke and carbon monoxide alarms in their rented properties and that section 150 of the Energy Act 2013 would come into force from 11 March 2015.

Section 150 (1) of the Act states that the government can make regulations which impose the duty on landlords that ‘during any period when the premises are occupied under a tenancy –

  •  the premises are equipped with a required alarm (or required alarms), and
  • checks are made by or on behalf of the landlord in accordance with the regulations to ensure that any such alarm remains in proper working order.’

Section 150 (2) of the Act defines ‘required alarm’ only as a smoke alarm or carbon monoxide alarm.

The regulations which are referred to in the Act, the proposed Smoke and Carbon Monoxide Alarm (England) Regulations 2015, are currently only available as a draft. It is expected that the Regulations will take effect from October 2015. We have outlined a number of key points from the Regulations below, but please note that these will not be confirmed until the Regulations are approved later in the year.

What is the requirement on landlords?

Regulation 3(1) defines the ‘relevant landlord’ upon whom the duty is imposed as the immediate landlord in respect of a specified tenancy and excludes registered providers of social housing.

Regulation 4 sets out what the specific duties of the landlord will be during any period beginning on or after 1 October 2015 where the premises are occupied under a tenancy. A smoke alarm will need to be fitted on each storey of the property where there is a room used wholly or partly as living accommodation. A carbon monoxide alarm will need to be fitted in any room which is used wholly or partly as living accommodation and contains a solid fuel burning combustion appliance. For the purposes of the above, bathrooms and lavatories are included in the definition of a room that is used as living accommodation and a ‘room’ includes a hall or landing.

Checks will also need to be made by or on behalf of the landlord to ensure that each alarm is in proper working order on the day the tenancy begins if it is a new tenancy.

Regulation 4(4) defines the term ‘new tenancy’ and confirms that this duty only applies to tenancies granted on or after 1 October 2015 and does not include:

  •  tenancies granted by an agreement entered into prior to 1 October 2015;
  • statutory periodic tenancies which arise at the end of a fixed term assured shorthold tenancy; or
  • any extensions entered into a the end of an earlier tenancy where the landlord and the tenant have not changed and the premises being let are the same or substantially the same as those let under the earlier agreement.

Enforcement

Under Regulation 5, if the local housing authority has reason to believe that the landlord has not complied with their duties set out in the Regulations, they must serve a remedial notice on the landlord setting out which duties it believes the landlord has failed to comply with and what action should be taken. The notice will require the landlord to take action within 28 days of the date on which the notice was served. If the landlord does not agree with the contents of the notice, they can submit a written appeal within that 28 day period.

Regulation 6(1) states that if a landlord is served with a remedial notice, they must take the action specified within the notice within the 28 days. Under Regulation 7(1) if the landlord fails to comply with the terms of the notice, the local housing authority will arrange for an authorised person to take the action specified in the notice, but only with the consent of the occupier of the premises (Regulation 7(1) and (4)).

A landlord will not be in breach if they can show that they have taken all reasonable steps, other than legal proceedings, to comply with the terms of the notice (Regulation 6(2)).

Penalties

Under Regulation 8, if the local housing authority is satisfied that the landlord has failed to comply with the terms of the remedial notice, they can impose a penalty charge which cannot exceed £5,000. The landlord does have a write to request a review of the penalty charge and can appeal it on various grounds (Regulation 11(2)) to the First-tier Tribunal if they do not agree with the local authority’s decision.

As we have said above, these Regulations will not be in force until October 2015, and we will be sending out another blog closer to the time to confirm what the provisions and remind you of the imminent changes. Until then, it is always best practice to ensure that any rented properties have adequate working smoke alarms and carbon monoxide detectors to ensure the safety of the tenant.

Filed under: England only

I predict a riot – Anti-social behaviour Crime and Policing Act 2014

The Anti-Social Behaviour Crime and Policing Act 2014 (the Act) was given royal assent in March 2014. It amends the Housing Act 1988 to include a new mandatory grounds for possession based on anti-social behaviour. Sections 97 to 100 ( in Part 5) of the Act deal with the new grounds for possession relating to Assured Tenancies ( of which Assured Shorthold Tenancy is a subset). These provisions are not yet in force, and will come in via a Commencement Order sometime in the future.

New ground 7A

In summary ground 7A of schedule 2 of the Housing Act 1988 will provide that the court must give possession if any one of 5 conditions are met:

1. the tenant and/or another occupier or visitor has been convicted of a serious offence and that offence took place in or near the property; or elsewhere but against a tenant/occupier of the property; or against the landlord or agent
2. the tenant/occupier or visitor has breached an injunction to prevent nuisance and annoyance( which is a new injunction to be introduced under this act)
3. the tenant/occupier or visitor has breached a criminal behaviour order ( also new order under this act) and that breach was in or near the property, or caused or was likely to cause harassment to a tenant/occupier or landlord/agent, wherever it took place.
4. the property has been closed down under s73 of the Act. The court has a power to prohibit entry to a property where the use of the premises has resulted in or likely to result in serious nuisance to members of the public.
5. the tenant is in breach of an abatement notice relating to statutory nuisance ( breach of Environmental Protection Act 1990 or noise nuisance

The grounds will not be made out if the conviction is in the process of appeal, or has been overturned.

There are time limits: for example for 1,3 and 5 the notice must be served within 12 months of the conviction; for 2 within 12 months of the court making its finding; and for 4 within 3 months of the closure order. The date that the notice expires and after which the landlord could bring proceedings will be one month from the date of service during a fixed term tenancy, or for periodic tenancies, the earliest date that the tenancy could be brought to an end by a notice to quit. Interestingly the reference to the common law principal of notice to quit suggests that in a periodic tenancy, where a landlord can give only two months’ notice at any time, a notice given under 7a will need to expire at the end of a period of the tenancy.

Why ground 7A? Because the mandatory grounds for possession go from 1-8 so this ground has been shoe-horned in at no 7A and is not related to ground 7.

Will it ever be used? In a fixed term then possibly, especially if the fixed term is for a relatively long period with no break clause. In a periodic tenancy arising after the end of a fixed term, unless and until the use of section 21 is limited, why use ground 7a, which would require a hearing and expire at the end of a period, when you could simply serve two months’ notice under the ruling in Spencer v Taylor and the accelerated procedure.

The discretionary ground 14 is also to be amended to make it a ground if the tenant or occupier “has been guilty of conduct causing or likely to cause a nuisance or annoyance to the landlord of the dwelling-house, or a person employed (whether or not by the landlord) in connection with the exercise of the landlord’s housing management functions, and that is directly or indirectly related to or affects those functions”. There is no need for the conduct to take place at the rented property.

Controversially, ground 14ZA is added to include that the tenant/occupier has been
convicted of an offence which took place during, and at the scene of,
a riot in the United Kingdom.

Filed under: England only, , , , , ,

Council Tax

We have been getting a number of queries regarding council tax liability on our helpline recently so we thought it was about time that we revisit some past cases and the relevant legislation and answer a few of our frequently asked questions.

Who is liable to pay council tax?

As a starting point, Section 6(2) of the Local Government Finance Act 1992 sets this out thus:

Persons liable to pay council tax.

(1)The person who is liable to pay council tax in respect of any chargeable dwelling and any day is the person who falls within the first paragraph of subsection (2) below to apply, taking paragraph (a) of that subsection first, paragraph (b) next, and so on.

(2)A person falls within this subsection in relation to any chargeable dwelling and any day if, on that day—
(a)he is a resident of the dwelling and has a freehold interest in the whole or any part of it;
(b)he is such a resident and has a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such resident;
(c)he is both such a resident and a statutory , secure or introductory tenant of the whole or any part of the dwelling;
(d)he is such a resident and has a contractual licence to occupy the whole or any part of the dwelling;
(e)he is such a resident; or
(f)he is the owner of the dwelling.

Local authorities will therefore first see if there is someone who falls into para (a), and if not will move onto para (b) and so on.

Following this list, it is clear that where the owner of the freehold interest (the Landlord) is no longer a resident of the property and has entered into a tenancy or created a licence with another party who is resident of the property i.e. there is someone who falls into one of categories a-e above, he will no longer be responsible for the payment of council tax. However if there is no-one liable under a-e, council tax liability falls on the owner.

Who is the “owner” for the purposes of section 2(e)?

In Section 6(5) ‘owner’ is defined as a person having a material interest in the whole or any part of the premises. Section 6(6) further defines ‘material interest’ as being either a freehold interest or a leasehold interest which is granted for six months or more.

Therefore the “owner” for the purpose of this section can mean not only the owner of the freehold interest ( i.e. Landlord), but also in some cases the tenant ( owner of leasehold interest).

What happens if the tenant is no longer resident?

Where the tenant leaves the property before the end of a fixed term of six months or more (without giving notice in line with a break clause or agreeing a surrender with the landlord), the tenant would be the “owner” for the purposes of Council Tax liability and therefore the tenant would continue to be liable for council tax. This liability would only continue until either the tenant’s valid notice has expired or the landlord accepts to implied surrender and takes back possession.

However, what about when fixed term has ended and a statutory periodic tenancy has arisen. This situation was considered in the case of MacAttram v London Borough of Camden [2012] EWHC 1033. This case concerned a three year fixed term contract with Camden who used the property to house homeless applicants. After an initial fixed term the tenancy became a statutory periodic tenancy and Camden continued to pay the monthly rent although there were no longer any occupiers residing in the property. Camden had then stopped paying rent and tried to surrender the tenancy. To add insult to injury, they then presented the landlord with a council tax bill for the time that the tenancy was a periodic tenancy.

As neither the landlord nor tenant was a resident during this time, the court explored the definition of ‘owner’.

The Landlord, Mrs MacAttram tried to argue that as the original tenancy had been granted for three years, Camden continued to have a material interest in the property when the tenancy went periodic. However, it was held that the periodic tenancy was a new tenancy and not a continuation of the original fixed term. As the tenancy ran from month to month, Camden was not considered to have a material interest as it had not been granted for six months or more.

It is worth noting that whilst this would mean that the local authority can require a landlord to pay the council tax from the date that the tenant vacates, this does not affect the contractual relationship between the landlord and tenant. As such, you should ensure that your tenancy agreement contains a clause that states that the tenant is responsible for council tax until the end of the tenancy (and most well drafted agreements will define the tenancy to include any holdings over or statutory periodic tenancies etc) so that the landlord in turn can recover this money from the tenant.

Who is responsible for council tax where the property is an HMO?

It is important to note that the definition of an HMO for the purposes of council tax liability is different to the definition provided in the Housing Act 2004. We have already posted a blog on this case, Goremsandu R (on the application of) v London Borough of Harrow [2010] EWHC 1873 (Admin), but for those of you that missed it the case can be summarised as follows:
A group of tenants occupying the property on a single AST, each paying a ‘share’ of the rent direct to the landlord. The conservatory at the property was unusable because the tenants had placed all of the landlord’s furniture in it (by agreement) as they had no use for it. As the tenants were jointly and severally liable and the tenants did have access to the conservatory should they have wished, liability fell to the tenants.
However where a property is an HMO for Council Tax purposes then the landlord has the primary liability for Council Tax. If part of the demise is excluded from the tenancy ( e.g. a locked room) so that there is no liability to pay rent on the dwelling “as a whole”, or the tenants have a licence to occupy only part of the dwelling, then the landlord will remain liable for Council Tax.
The tenants left owing in excess of £11,000 in Council Tax. Harrow tried to make the landlord pay it.
The full post can be found here.

What if the landlord is storing items or restricting access to parts of the premises?

Landlords should be careful where they are storing possessions at the property or restricting the tenant’s access to parts of the premises. A common example is where the tenancy agreement specifically excludes the loft from the tenancy. In these situations the owner can be pursued by the local authority for the council tax. Again, the landlord would be able to pursue the tenant for any council tax he has paid if the tenancy agreement states that the tenant is liable to pay it.

Who is entitled to any council tax discounts when the property is vacant?

Local authorities now have the discretion to charge full council tax on empty properties, but can choose to offer a discount. You will need to contact your local authority to find out if they have an exemption period of offer any discounts.

We receive a lot of calls from the agents and landlords whose tenants have vacated the property a month early and later find the council tax exemption period has already been used by their former tenants. Unfortunately for landlords hoping to use any discount themselves to bridge the gap between tenants, tenants are able to make use of any empty house exemptions. Of course this is only if they are no
longer living in the property and have taken all their belongings with them.

Filed under: England only, ,

Lettings Fees in the news

Shelter has stepped up its campaign to make it unlawful for lettings agents to charge any fees at all to tenants. You can read their report here. The average compulsory lettings fee that renters pay to a landlord’s agent in setting up a tenancy is £355.00. The charity would like to see tenants’ costs limited to the protected deposit and rent in advance as it is in Scotland.

Painsmith receives frequent queries about agents’ fees, and what can and cannnot be charged. The position currently is that agencies must be transparent about their fees, which should be an accurate reflection of their actual reasonable costs rather than an unsubstantiated sum. We have blogged on this before .

The Advertising Standards Authority recently ruled that agents must publicise their fees and charges in their quoted prices, or at least provided enough information for potential renters to calculate what they will be charged.

There is already a great deal of consumer protection legislation, e.g CPR Consumer Protection from Unfair Trading Regulations 2008, UTCCR, as well as regulatory bodies such as the Property Ombudsman. Regulation 6 of the Consumer Protection Regulations prohibits misleading omissions, which includes the providing of material information in a manner that is unclear, unintelligible, ambiguous or untimely. To charge extortionate fees is already either unlawful or unenforceable.

If it becomes unlawful to charge tenants any fees at all it has been argued that the cost will have to be picked up by tenants later on down the line through higher rents ( although in its report Shelter says that since Scottish law was clarified there has been no significant rise in rents). That said, if Shelter succeeds in effecting a ban on lettings fees, agencies will no doubt adapt. It may even cause a demise in the number of rogue agencies that are currently operating.

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

A survey of tenants experience……

A survey of tenants experience……

Resolution Foundation, an organisation that works to highlight the experiences of low-to-middle earners (LMEs) through its research has published a report on its survey of tenants experience in the private rented sector.

Resolution Foundation conducted I mystery shopping exercise of 25 letting agents and also spoke to tenants about their experience in the lettings market where a letting agent was involved. The main cause for concern appears to be that the lettings agents are unregulated and that there is a lack of transparency with agents charging arrangements.

The survey found that many agents do not confirm what these fees are in the initial paperwork which can cause some financial difficulty even before the tenancy has begun. PainSmith Solicitors has for many years stressed the importance of confirming these fees at the outset so these results are alarming especially given that in some cases they may not be recoverable under the Consumer Protection from Unfair Trading Regulations.

The report has therefore made the following recommendations:

-letting agents to be brought under the Estate Agents Act (1979), thereby giving the Office of Fair Trading powers to ban agents who act improperly;

-all letting agents to become members of an ombudsman service, giving tenants the opportunity to pursue redress in cases of poor practice;

-an amendment to the code of practice of the ombudsman service to make it a requirement for agents to present landlord and tenant fees on their websites, in adverts and in all paperwork in a way that is easily comparable across agents;

-government to make use of the 2012 retendering process for the tenancy deposit protection schemes to find ways to make it easier for tenants to use their old deposits when moving in the private rented sector;

-local authorities to extend rent deposit schemes to members of the low-to-middle income group.

Whether or not you agree with the recommendations it is important that tenants understand what they are expected to pay and when. These fees should therefore be confirmed in writing before any agreements are concluded to ensure that the fees are recoverable.

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

Consultation process…

The Leasehold Valuation Tribunal (the LVT) in Southall Court v Tiwari reduced a landlord’s claim for service charge contributions from 48 leaseholders from £2,053.42 to £482.50 per flat. The Landlord was granted permission to appeal to the Upper Tribunal.

The landlord had fulfilled its obligations under Section 20 of the Landlord and Tenant Act 1985, the leaseholders’ however failed to comment in response to the consultation process for substantial works to the roof. The leaseholders’ claimed that the reason for failing to reply was because it was obvious that the matter would be referred to the LVT. The reason for this we assume is because in the report it is stated that “Southall Court has probably been the subject of more applications to the Tribunal than any other property in the country”. On appeal the Upper Tribunal held that where the leaseholders have failed to comment then the landlord is entitled to assume that there are no objections to the works. This is the case even where it is obvious that the matter would be referred to the LVT. The Upper Tribunal held that it was the duty of the leaseholders’ to respond during the consultation process and that in this case where no comments were made the landlord had acted reasonably throughout.

At the LVT the landlord’s expert gave evidence and confirmed that there were no current leaks in the roof and that it could have staggered on for a few more years. The LVT inspected the property and agreed with the expert’s oral evidence. However the Upper Tribunal held that the landlord had a wide discretion as to the programme of works it adopted and applying that principal to this case came to the conclusion that the LVT was not entitled to find that the landlord’s works were unreasonable. This was especially so given the expert findings that the roof had only a further 12-18 months useful life.

The leaseholders’ attempted to argue that the existence of a sinking fund was irrelevant in this matter. However, the Upper Tribunal disagreed with this and dismissed the leaseholders’ attempt to argue that given the small sinking fund it was unreasonable to carry out the works. The Upper Tribunal found instead that the fund made very little difference between the reasonableness of a decision to re-cover the roof now or in 12-18 months time.

The landlords appeal was accordingly allowed and the leaseholders’ were ordered to pay £2,053.42 each.

We have had many agents undertaking block management contact us about the consultation process and we hope that this blog emphasises how important it is for agents to advise leaseholders’ to take part and comment in time.

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

Back Again….

Some of you will note that we have blogged on the Localism Bill previously and the expected changes to the Housing Act 2004 specifically the sections on the registration of deposit. The amendments were not supported by the Commons and it was assumed that alternatives would be proposed. However, no such alternatives have been proposed and Lord Best has therefore introduced the original amendments into the Lords.

The Bill started its committee stage on 20 June and given that in the House of Lords committees are always ‘committees of the whole House’, i.e. every peer is able to contribute a huge number of amendments are expected.

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

Hashemi v Gladehurst

We believe the decision will be handed down on Thursday.

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

Fire Safety in Wales

On the 7 April the Domestic Fire Safety (Wales) Measure 2011 became law.

The legislation requires the installation of a fire suppression system (sprinkler system to you and I) in all new or converted residential properties. Landlords will be required to ensure that the system is operating effectively prior to the start of the tenancy.

With any new or converted build when applying for building consent this legislation will also need to be complied with. This means that along with the standard drawings for the build there must be paperwork about the fire suppression system. If these details are incomplete or insufficient this will delay the building works altogether.

Failure to comply with the legislation will result in a maximum fine of £5,000 and will be enforced by the local council.

Filed under: England & Wales, England only, ,

Carbon Monoxide

In December 2010 the Health and Safety Executive released a Safety Notice to raise awareness of the potential dangers from certain types of flues connected to gas-fired central heating installations in some properties.

Unfortunately the Notice was released following the death of a person in a property earlier that year but there is now an obligation on Landlords to take action before the 31 December 2012.

Where boilers are located away from external walls, flues are more likely to run through ceiling (or wall) voids. In such cases when the gas appliance is serviced or maintained it can be difficult, if not impossible, to determine whether the flue has been installed correctly or whether it is still in good condition.

Unless the gas engineer can make these checks they cannot ensure that the flue from the boiler is safe in order to comply with their legal duties. The engineer will therefore only be able to comply with his legal obligation if appropriate inspection hatches have been installed. Landlords are advised that after the 31 December 2012 if the hatches have not been installed the gas engineer will not carry out the inspection.

If the flue is not inspected and a fault overlooked, dangerous levels of carbon monoxide (CO) could be released into the living accommodation. CO is a colourless, odourless, tasteless, poisonous gas produced by incomplete burning of carbon-based fuels. It stops the blood from bringing oxygen to cells, tissues, and organs and can kill quickly, without warning.

We have blogged on the dangers of CO poisoning here and whilst landlords will note they have approximately 2 years to install the hatches, action should be taken sooner rather than later.

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

The Position of the Stakeholder

After the introduction of Tenancy Deposit Protection agents are required, where they are holding deposits, to do so as a stakeholder. We have noticed that on the Helpline there is still some confusion about what this actually means.

The case of Manzanilla Limited v. Corton Property and Investments Limited; John Maciver (Southport) Limited; Rootbrights Limited and Halliwell Landau (a firm) [1996] EWCA Civ 942, sets out the position of a stakeholder very clearly:

Where a stakeholder is involved, there are normally two separate contracts to be considered. There is first the bilateral contract between the two principals, the landlord and tenant in our case, which contemplates two possible alternative future events and by which the parties agree to pay a sum of money to a stakeholder to abide the happening of one or other of them. In the case of a tenancy agreement, the relevant event would be the failure to maintain the Premises for the duration of the agreement or to pay any costs associated with the occupation of the Premises, such as utility bills. The second contract is the tripartite contract which results from the deposit of the money with the agent as stakeholder on terms that he is to keep it until one or other of the relevant events happens and then pay it to one or other of the parties accordingly. The agent as stakeholder is a party to the second contract but not the first. The agent’s rights and obligations are not normally expressly spelled out. They are implicit in the transaction itself, and must be discovered, not by implying terms, but by analysing the relationship of the parties which arises from the deposit of the money.

The following propositions emerge from the authorities:

  1. The relationship between the stakeholder and the landlord and tenant is a contractual one. The relationship is that of debtor and creditor, and is similar to that between a banker and his customer.
  2. An agent is normally entitled to retain the interest on the money. This is usually described as his reward for holding the money. This right may be excluded by special arrangement, usually within the tenancy agreement
  3. Until the event which the stakeholder holds the money against happens, the agent holds the money to the order of both the landlord and tenant and is bound to pay it (strictly speaking an equivalent sum) to them or as they may jointly direct.
  4. Subject to the above, the agent is bound to await the happening of the event and then to pay the money to one or other of the parties according to the event. For a lettings agent this event will usually be the end of the tenancy and an agreement between the parties as to what should happen to the money, the decision of a Court, or a request from an approved TDPS to pay the money to them to await dispute resolution. The money is payable to the party entitled on demand, and if the agent fails to pay in accordance with a proper demand he is liable for interest from the date of the demand.
  5. If the occurrence of the event is disputed, the agent cannot safely pay either party, for if he mistakenly pays the party not entitled the payment will not discharge his liability to the other. In these circumstances he may (i) interplead and pay the money into Court; (ii) retain the money pending the resolution of the dispute; or (iii) take the risk of paying one party. The choice is entirely his.
  6. If he takes the second course, he may notify the parties that he is content to await the outcome of the dispute. There is then no need to join him in any proceedings which are taken to resolve it. If he is not joined, the Court cannot order the money to be paid to the successful party. All it can do is to declare that the successful party is entitled to give a good receipt for the money. In practice this is now unnecessary as the agent will normally be required to pay the money to an approved TDPS who will hold it pending the outcome of any Court action.
  7. If the agent is not content to wait for the outcome of the proceedings, he may be joined in to those proceedings in order to compel him.

Whilst the position seems clear in light of the above it is strongly recommended that the agent advises both the landlord and the tenant what the stakeholder principle entails and assures them that no action will be taken until the dispute between them is resolved.

We find more often than not that agents become embroiled in dilapidation disputes at the end of a tenancy and to the frustration of landlords fail to refer the matter to either the appropriate TDPS in the correct time period or advise the parties to seek legal advice. Whilst some agents perseverance is commendable sometimes walking away and allowing the landlord and tenant to talk to each other is the better option.

Filed under: England & Wales, England only, ,

Fire Safety Update.

Many of our readers will recall that we previously blogged on the Fire Safety (Protection of Tenants) Bill 2010-11. Although we stated in this article that the Bill was unlikely to be made law, we thought it may interest some to note that the second reading of the Bill is now scheduled for some time in October this year.

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

Census in England

I am sure that many of you are looking forward to completing the Census form over the weekend, what else would you do on a spring weekend!? However we understand that there is some concern over whether landlords or agents are required to do so for unoccupied properties.

It is the householders of a property that are compelled by law to complete the census questionnaire. Landlords have no such legal obligation but they are encouraged to do so.

The census is used to understand the population and to plan for the future for such things as healthcare therefore it is the landlords choice to complete one form or two.

Filed under: England & Wales, England only, ,

Article 8, the Tenant’s Human Rights.

We have been asked a few questions recently about a tenants right to remain in a property when there are rent arrears. We understand that some landlords and agents are concerned that tenants are defeating possession claims pursuant to Article 8 of the European Convention on Human Rights.
>
> The reason for this concern is probably due to the recent cases in the Supreme Court. In Hounslow LBC v Powell, Leeds CC v Hall and Birmingham CC v Frisby the Supreme Court held that where a local authority brings possession proceedings relying on mandatory grounds for possession any defence to the claim, can include the tenants entitlement to have the proportionality of his eviction assessed under Article 8.
>
> Given that these cases are concerned with social landlords as opposed to the private market, I will briefly explain the facts of the Powell case.
>
> Mrs Powell fell into arrears and upon serving her with a notice to quit, Hounslow County Council issued possession proceedings. Mrs Powell admitted that there were rent arrears but then also averred that the reason for the arrears was due to the delays and errors made by Hounslow in processing the benefit claim.
>
> Hounslow has since offered Powell suitable accommodation.
>
> The reason for this article is to reassure those landlords that believe that tenants who are on benefits have rights to the property beyond that provided for in the Housing Act 1988.
>
> The cases have one thing in common that is local councils who are subject to the test of proportionality when they apply for possession. This test of proportionality is not expected to be relevant in the private sector as that would prevent landlords from managing their own property in the manner they see fit within the parameters of the Housing Act 1988.

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

Consultation on Planning Application Fees

A consultation on changing the fees for planning applications has been published by the DCLG. This consultation only applies to planning application fees in England.

The proposal is to decentralise the fee structure for planning applications and allow local authorities to set their own fees. There will also be the option for local authorities to charge for items which are currently free. The objective is that the planning system is more directly funded by application fees and less by taxation which, in the current environment, is not surprising.

This consultation is potentially very important to landlord’s of HMOs. As we have previously reported, a number of local authorities have made, or suggested that they will make, article 4 directions to opt-out of the general permitted development rights for a change in use from a private dwelling to an HMO (ie from the C3 to the C4 use class). The changes fee structure is intended to come into force in October 2011, at exactly the same time as the article 4 directions made by Manchester and Portsmouth Councils will also come into force.

Obviously there remains an argument as to whether planning consent is needed for a change to use as an HMO at all, as we have discussed here. However, for those who seek to apply for that permission the costs of doing so are likely to increase.

The consultation is open for responses until 7 January 2011.

Filed under: England only, FLW Article

Manchester Makes Article 4 Direction

We have been informed that Manchester City Council has made an Article 4 direction in relation to HMO properties. This direction will come into force on 8 October 2011. More details can be found here.

This means that from the date the direction comes into force (8 October 2011) the amendments introduced in October (which we wrote about here) will no longer apply and landlords may need to seek planning permission to let their properties as an HMO.

Full details of the new planning categories and their effects can be found in this post.

However, there is some doubt as to whether the making of the direction actually matters. Even if an article 4 direction is made that does not mean that use as an HMO requires planning permission. This is because, contrary to popular belief, movement between planning classes does not require planning permission. What does require planing permission is a material change in use and it is by no means clear that a change of use to an HMO represents such a change. We have written more about this issue in this post.

At this stage any Manchester landlord who either is now or is considering renting a property in such a way that it will fall into the C4 planning category should consider applying for a certificate of lawful use as it will be hard for the Council to refuse it.

After October next year any Manchester landlord who is starting to use a property as an HMO or who proposes to do so will need to consider whether they should seek planning consent. If consent is sought and refused for the three months after the making of the direction (ie before 8 January 2012) the landlord may be able to seek compensation from the Council.

Naturally, if such consent is refused the landlord may also wish to appeal the decision of the Council.

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

Oxford HMO Licensing

Further to our recent posts on the subject of additional HMO licensing in Oxford the Executive Board and the Full Council met today to reconsider the proposed HMO licensing scheme.

A new report was placed before the Board which made alternative recommendations as regards the additional HMO licensing scheme. We are not currently sure as to whether this report was approved but it is likely that it was.

In short, the Council is proposing to withdraw the original HMO licensing designation it made in July and to make 2 new licensing designations. The first of these will come into force on 24 January 2011 and will require licensing of three storey properties containing three or more occupiers and all two storey properties containing five or more occupiers. The second designation will come into force on 30 January 2012 and will require licensing of all other HMOs as well as some s257 HMOs (properties converted into flats not in accordance with the Building Regulation 1991). While the Council denies that it ever intended to phase in licensing the report asserts that the new designations will avoid ‘confusion and uncertainty’.

The report recognises the need to ensure that the fees charged for the scheme are not more than those required to run the scheme and that any extra must be returned by future fee reductions.

The report also accepts that it is not lawful to impose blanket licensing conditions on all properties and that a ‘one size fits all’ approach is unacceptable. Therefore the original plans to impose standard licence conditions on all properties are to be scrapped.

It is interesting to note that there is also now a recognition that the licensing scheme has been promoted as solving all HMO-related problems and that it simply cannot achieve the high level of expectation that has now been built up. The Council has not made clear how it intends to deal with this issue.

While some Oxford landlords will, no doubt, be disappointed that the licensing process will be going ahead the changes give far more time for landlords to make changes in the manner in which they let their properties if they wish to avoid licensing and also reduce some of the more onerous burdens on landlords who do elect to licence their properties. PainSmith Solicitors are pleased that Oxford has recognised the limitations of HMO licensing and the limitations on its powers and hope that other local authorities will give very serious consideration to the appropriateness of these schemes and their method of implementation.

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

HMOs and Planning- Judicial Review

We have just been informed (thanks, Chris) that Milton Keynes Council has launched a judicial review of the decision by the new Coalition Government to make a further amendment to the General Permitted Development Order (GPDO).

As most of our readers will know the previous government introduced a new C3 planning use class which was designed to deal with HMOs. Movement from the C3 use class (for ordinary residential dwellings) potentially required planning consent while movement the other way did not require consent as it was permitted under the GPDO. This was an unpopular move and therefore the new coalition government has made a further change to the GPDO to permit movement from the C4 to the C3 use class. Accordingly, the announcement of the publication of the amendments to the GPDO came was made on 8 September and came into force on 1 October. All our posts on this topic can be found by following this link.

Milton Keynes Council is unhappy about the change which prevents them from regulating HMOs in their area through the planning process. At a meeting on 8 September they resolved to challenge the change on the basis that there was insufficient consultation and that the consultation was based on a decision that had, in effect, already been made. This has been done and, according to the Council’s press release consent has been given and the Government has until 8 October to file a defence.

One of the things the Council is seeking is an injunction suspending the operation of the order and they are also ultimately seeking that the change be quashed. This would of course mean that planning permission would potentially then be needed for changes from the C3 to C4 use class. The Council is also seeking a change in the legislation to allow them to opt-out of the permitted development order (called an article 4 direction) without the risk of having to pay compensation. Therefore it seems likely that, even if they were to lose the judicial review application, the Council will seek to make an article 4 direction in their area so requiring Milton Keynes landlords to seek planning permission for C4 use.

At this stage it might be wise for landlords who are letting under the C4 use class to seek a certificate of lawful use from the relevant planning authority which will legalise their actions.

Filed under: England only, FLW Article, ,

Oxford HMO Licensing- Update

We have received a letter from Oxford City Council.

It appears that they are considering the licensing scheme further. New recommendations will be put to the Executive Board and from them to the full Council in meetings on 18 October. It may be that these recommendations will include the withdrawal of the current licensing designation (due to come into force on 22 October) and the making of some alternative designations to introduce HMO licensing over time.

PainSmith Solicitors welcome any reconsideration by the Council of its HMO licensing scheme.

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

Oxford Challenged Over HMO Licensing

PainSmith Solicitors along with Jonathan Manning and Justin Bates of Arden Chambers have been instructed by a group of Oxford landlords, lettings agents, and other interested parties to pursue an action for judicial review of Oxford City Council’s decision to make an additional licensing designation for the whole of Oxford.

We have previously posted on this issue and as a result of discussions that sprang from that post we have been instructed to send a pre-action protocol letter to Oxford. A (slightly edited for client confidentiality) copy of that letter can be seen here.

Both we and our clients take this action with some regret. As a firm PainSmith Solicitors (and our clients) wholly support the licensing of HMOs provided it is carried out with proper consultation and in accordance with the law in a reasonable and proportionate manner. Unfortunately, the scheme proposed by Oxford does not do this.

The scheme, if carried forward as currently planned, would leave many landlords with their properties designated as HMOs but because Oxford intends to “phase” licence applications over the next 3-4 years these landlords would not be able to apply for a licence. This would, as a consequence, place these landlords in breach of the law and further make them unable to serve a valid notice under section 21 of the Housing Act 1988 on their tenants. This situation cannot be what the Council intends and is simply irrational.

We hope that Oxford uses this opportunity to rethink its policy on additional HMO licensing.

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

Deposit Variation Deeds for 1 October

The PainSmith webshop now has deeds of variation available for all three tenancy deposit schemes.

These deeds are designed to vary the terms of existing common law tenancies which will become ASTs on 1 October to incorporate mention of the relevant deposit protection scheme and any clauses required by that scheme.

Deeds for the three schemes can be found here.

Filed under: England only, ,

Rent Arrears on Common Law Tenancies- Last Chances to Act

Landlords who have common law tenancies which will become ASTs on 1 October and whose tenants are in arrears of rent should act now.

Once those tenancies become ASTs the tenant will need to be in 2 months of arrears before the landlord stands a good chance of securing possession in Court. If proceedings are issued before the tenancy converts then it will not become an AST, even if the Court hearing is after 1 October, and the landlord will be able to seek possession under the common law rules of forfeiture. These require the Court to award possession however small the level of rent arrears. While the tenant has the option of paying the outstanding rent and staying in the property he will also be obliged to pay the landlord full interest and their legal costs so the tenant has an incentive to pay up and the landlord does not lose out.

By contrast if the landlord waits until after 1 October he will need to wait for a full two months worth of rent arrears to accrue, give 14 days notice under section 8 of the Housing Act 1988 and then start proceedings. In Court he will get an order for the arrears, interest, but probably less than his total legal costs but the tenant has no right to stay if they pay the landlord. Therefore the incentive on the part of the tenant to pay the debt is much reduced.

However, proceedings must be issued by the Court before 1 October. In practice this means they will need to have been sent to the Court by 27 September at the very latest.

Filed under: England only, , ,

DCLG FAQs Regarding ASTs after 1 October

The DCLG have decided the final version of their FAQs regarding the Housing Act 1988 rent increase threshold to be placed on their website. We have seen an advance copy and are pleased to note that some changes have been made as a result of representations made to the DCLG by this firm, among others.

Most notably the DCLG has now resiled from their earlier position that all tenancy deposits for tenancies that have converted to ASTs must immediately be protected on 1 October. This is a view that we have previously criticised. The DCLG have listened on this point and the FAQ now states:

We do not consider that deposits taken before 1 October will need to be protected as these were not taken in connection with a shorthold tenancy and therefore do not meet the criteria for protection specified in the Housing Act 2004.

However, agents and landlords should be aware that this is a matter for the Courts to decide and it would be wise to protect deposits on 1 October and certainly on any renewal of the tenancy.

DCLG has, however, maintained their position that a section 21 notice issued in respect of a tenancy which becomes an AST on 1 October cannot expire until 6 months after that date, ie. not before 1 April 2011. This is a view that we do not agree with and have previously criticised. We are pleased to note that the DCLG has watered this position down in the light of our representations and now says that it will be for the Courts to make a final decision on this issue. Doubtless such a case will appear in the Courts in short order.

You can view all of our blog posts on the Housing Act 1988 rent threshold increase by following this link.

Filed under: England only, ,

HMO Planning Permitted Development Order Published

Yesterday, Grant Shapps announced that the promised further amendments to the General Permitted Development Order (GPDO) designed to undo the creation of the C4 planning class had been laid before Parliament.

We have previously posted on the creation of the new C4 planning class and you can find all our posts on this topic by following this link.

Essentially the new amendments mean that movement between the C3 and C4 use classes in either direction is permitted without the need to apply for permission. Larger HMOs which have more than 6 occupiers will not be able to take advantage of the new Order as these properties do not fall into the C3 or C4 category and they will probably still need to seek planning consent.

Irrespective of the changes there is still significant doubt as to whether planning consent is actually required for all HMOs as it is debatable as to whether a change to HMO use (of any size) necessarily constitutes a material change of use.

Individual local authorities will still have the ability to make a direction (known as an article 4 direction) to dis-apply this part of the GPDO for parts of their district if they can present a reasonable case for doing so. They will need to conduct a suitable consultation in advance of making such a direction. Further, for 12 months after the direction has been made there is the possibility of claiming compensation if financial loss is suffered by the local authority refusing to grant planning consent in respect of a matter which would have been exempt from the need to seek planning consent but for the direction. Given the squeeze on budgets it is doubtful that many local authorities will want to incur the costs necessary to make a direction.

Finally it should be remembered that none of this applies in Wales.

The full Town and Country Planning (General Permitted Development) (Amendment) (No.2) (England) Order 2010 can be seen here.

Filed under: England only, FLW Article, ,

Where to see us in September

This month members of PainSmith are speaking in a number of locations where it may be possible for agents or landlords to see them:

Marveen Smith is speaking for:
ARLA Region 18 Meeting, Maidenhead, 9 September
Association of Relocation Professionals, London, 22 September
ARLA Residential Lettings and Management Level 4, London, 28 September
ARLA Region Meeting, Chiswick, 30 September

David Smith is speaking for:
ARLA Seminar on HMOs, Birmingham, 20 September
ARLA Repossession and Court Procedures Course, Birmingham, 21 September
Harrow Borough Council Landlord’s Forum, London, 22 September
ARLA Seminars on the Housing Act threshold change and section 21 notices, London, 23 September and 24 September (NB. 24 September provisional)

Please note this is not a definitive statement of the diaries of the individuals named who also have other meetings and speaking engagements for private clients.

Filed under: England only,

Housing Act Threshold Changes Coming Soon

It is now less than a month to the change in the maximum rent threshold of £25,000 found in the Housing Act 1988 in England.

We have written a large number of posts on this topic which can be found by following this link.

Filed under: England only, ,

Short Lets After 1 October

We have recently come across another unanticipated issue which may become a problem after 1 October. A number of properties in London are let on ‘short lets’ to individuals working or holidaying in London. In the past the high rents charged on these properties meant that they were excluded from the Housing Act 1988. However, with the increased rent threshold this exception will apply to far fewer of these properties.

Premises being let for the purposes of a holiday in London will still fall outside the Housing Act 1988 and these will not present a problem. However, properties being let to individuals who are working in the UK for a short period and where the rent is below £100,000 per annum (pro rata) will now fall under the Housing Act 1988. This of course means that the tenant is entitled to 6 months security of tenure in the property.

To clarify, there is no requirement that a property which falls under the Housing Act 1988 is let for 6 months as is sometimes believed. It is perfectly possible to let such a property for a shorter term. However, a Court is simply not empowered to give possession on a section 21 notice any sooner than 6 months from the start of the initial tenancy. Therefore letting a property for a shorter period is a calculated risk on the part of the landlord as he is at risk of the tenant continuing to pay the rent and simply staying for 6 months with little or no recourse.

What options does the landlord have? If the landlord has resided in the property before as his main residence then he can give a notice before the tenancy begins under ground 1 of Schedule 2 to the Housing Act 1988. This would allow a section 8 notice to be given at any stage giving the tenant 2 months notice to vacate provided that the landlord wishes to reside in the property again as their main home. Otherwise the only option will be to avoid creating a tenancy at all. If a landlord wishes to do this then they will need to provide some services as a part of the agreement which will require access to the property. A landlord who was providing regular cleaning and fresh towels and linen as a part of the agreement should be able to argue that he has not created a tenancy at all but has only created a licence and so the provisions of the Housing Act 1988 will not apply at all. Of course, this will involve a lot more organisation on the part of the landlord but it may be worth it if it is necessary to be sure that vacant possession of the property can be obtained.

Filed under: England only, FLW Article, , ,

Additional HMO Licensing

As has already been reported elsewhere Oxford City Council has become the first local authority in England to take advantage of the previous government’s blanket consent for additional HMO licensing schemes. They have passed a scheme through executive council to licence all HMOs in Oxford.

We have been passed and reviewed the report of the Environmental Health department which the Council have relied on in making the decision. A copy of this report is available here. A number of aspects are questionable.

For example, the proposed scheme is one which involves annual licensing so landlords will have to reapply, and pay for, a new licence every year. The primary rationale is that the current 5-yearly licensing system has meant that the Council has already spent all the license fee money they derived when the scheme came into force and so have no money to staff the scheme going forward. This sounds a little like saying that the rationale for annual licensing is that the Council cannot manage a budget over the course of 5 years.

Another surprising rationale for the scheme is the belief that it will encourage landlords to deal with anti-social behaviour. Given that private landlords have no legal liability for the behaviour of their tenants and almost no powers to do anything about such behaviour it is hard to see what the council expects to achieve in this area.

We believe that this scheme has the potential to be challenged. However, the time line for such a challenge is tight as it must be started in Court within three months of the decision being made, ie. by late October.

Having spoken to counsel we are prepared to discuss the possibility of taking such a challenge forward on a no win, no fee basis if a group of interested landlords wished to come forward.

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

Uncertainty About Tenancy Agreements Approaching 1 October

We have been asked a lot of questions recently about how to draw up a tenancy agreement in the run up to 1 October.

The short answer is that it does not really matter. Tenancies that will become ASTs on 1 October will become ASTs on that date irrespective of what the actual agreement says. Equally, they will not be ASTs before that date irrespective of the wording on the agreement.

Therefore agents can draw up these tenancies on Common Law Agreements now and accept that the agreement will misdescribe itself from 1 October or they can draw them up as ASTs now and accept that the agreement will misdescribe itself until 1 October. Alternatively, the agreement can state that it will change to an AST on 1 October or a new agreement can be issued on that date. All of these are reasonable approaches and each agent and landlord should decide what works best for them. Anyone purporting to sell some form of agreement that will deal with the situation is really just taking money for old rope and this is the reason that this firm has chosen not to produce a special tenancy agreement to cover the transitional period.

What will be necessary for members of The Dispute Service will be to make sure that the prescribed clauses required by the scheme are incorporated into the Agreement after 1 October. This can easily be done by sending the tenant a letter setting out the clauses and stating that they will be incorporated into the agreement. It would be wise to ask the tenant to sign and return a copy for recording purposes.

Don’t forget that when the deposit is registered a copy of the registration certificate, the information required by the Housing (Tenancy Deposit) (Prescribed Information) Order and the appropriate scheme leaflet must also be sent as well.

Filed under: England only, ,

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