Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Attention all Landlords!

We draw your attention to this recent decision of the Upper Tribunal which has caused a stir amongst leasehold lawyers in relation to service charges.

Section 47 of the Landlord and Tenant Act 1987 (LTA1987) provides that where any written demand is given to a tenant of residential leasehold property, then that demand must contain:

a) the name and address of the landlord and
b) if that address is not in England and Wales, an address for service.

Section 47 goes on to provide in subsection 2 that any part of the amount demanded that consists of a service charge will not be treated as being due until such information is furnished by notice given by the landlord to the tenant.

In Beitov Properties Ltd v Elliston Martin it has been decided that the wording of section 47 LTA 1987 means that where any written demand is given to the tenant the Landlord must put his or her actual address on the demand, not a care of address or agent’s address. A demand for service charges will be invalid without.

According to the Tribunal “The purpose of the requirement in section 47 to include in any demand the name and address of the landlord, in my judgment, is to enable a tenant to know who his landlord is, and a name alone may not be sufficient for this purpose. To provide an address at which the landlord can be found assists in the process of identification”.

It is noted however that the sanction for failing to give the actual landlords address in section 47 of the LTA 1987 is that service charges are not due. Nothing is said about rent and as such we are of the opinion that where you have an AST landlords and agents can continue to use care of addresses. If the position changes we will of course let you know.

Most people are aware also aware of section 48 LTA 1987. Therefore to complete this article we should mention subsection (1) which requires a landlord to furnish the tenant with an address for service, which can be a care of address or agent’s address but must be an address in England and Wales. Unless and until the landlord gives an address for service in England and Wales then rent will not be treated as falling due.

Filed under: England & Wales, FLW Article, ,

Recovery of Leaseholder’s Legal Costs

Most commercial and long residential leases contain provisions which enable the landlord to recover any legal costs that may be incurred, however due to the vast amount of case law surrounding this issue there is considerable uncertainty as to whether or not the landlord can recover these costs if they proceed through the Leasehold Valuation Tribunal (LVT).

In the case of Freeholders of 69 Marina v Oram & Ghoorun the freeholders of a block of flats undertook work on the common parts and sought to recover the service charges from the tenants. However two tenants disputed the amount and the freeholder applied to the LVT to recover the service charges and the costs of taking the matter before the LVT. No monies were received from the two tenants despite the LVT decision so the freeholders served notice under section 146 of the Law Property Act 1925 demanding payment and issued a claim at the county court. The tenants then made payment. The issue to then be decided was whether the tenants should be equally liable for the costs of enforcement of the legal costs or whether the costs should be applied to all the tenants collectively. The Court of Appeal interpreted the terms of the lease and it was held that the costs were to be recovered from the two tenants only.

The above decision of the Court of Appeal is one that courts will have to consider in future cases. It should be noted that this decision was made because the costs clause in the lease was unambiguous. The decision clearly indicates that each particular lease needs to be carefully considered and whilst many leases contain covenants with the wider wording such as Freeholders of 69 Marina, many other leases contain the narrower wording.

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

First Picture of the PROPERTYdrum conference.

Hope to see you there!

Filed under: England & Wales, FLW Article,

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, , , ,

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

Disrepair…..

We often get asked by Landlords whether the council can inspect their houses and force them to carry out works. Therefore the answer is below:

The Building Act 1984 ss77 and ss78 allows local councils to take action where they believe a property is dangerous. Under s77 they can apply to the Magistrates Court for an order that the owner of the building repair and under s78 the council can do the work itself and claim the money back from the owner of the property, but only if it is not reasonable to proceed under s77.

Swindon BC v Forefront Estates Ltd concerned a Grade II listed building called the Institute which had originally been designed to provide recreation and education for railway employees but at the time planning permission had been granted to turn it into flats and Forefront owned it. It came to the attention of Swindon Council that the Institute, and particularly its roof, may be dangerous. It carried out various inspections to the property and deemed that this was indeed the case and the roof was in imminent danger of collapse. It carried out the work needed to make it safe and sought to claim the sums expended back from Forefront. When Forefront did not pay, the Council issued a claim against it and Forefront put in a defence that the works might reasonably have been carried out under s77.

The High Court found that the Council could not reasonably have proceeded under s77, largely based on two grounds. The first was that the roof of the property had been found to contain asbestos and lead paint and there was a real danger that this could be dispersed into the air in a busy area used by members of the public and some 450 people would have to be advised to keep doors and windows closed and stay inside their houses. The second point was that there was a real risk that falling masonry could land on a passer by or someone seeking shelter in the building. The Council was awarded the sum of £331,242.69 and costs of over £60,000.

In short, yes the council can even where the property is not Let!

Filed under: England & Wales, FLW Article, ,

LEASEHOLDERS RIGHT OF FIRST REFUSAL

As many of you will no doubt be aware in relation to long leasehold property there is generally a right of first refusal to the freehold title when it comes to be sold. The purpose of this blog post is to give a brief overview of the framework.

Part 1 of the Landlord and Tenant Act 1987 contains the statutory provisions governing when Leaseholders have this right, the process to be adopted and the penalties for non-compliance. Certainly any freeholder and their advisers before dealing with the freehold title need to consider whether the provisions will apply.

So what is required?

For the Act to apply the premises must contain 2 or more qualifying flats ( ie residential flats with lease terms originally of more than 21 years) and the number of such flats must be more than 50% of the total number of flats and there is not more than 50% of the floor area of the building occupied by commercial parts.

Next consideration needs to be given as to whether the disposal is “relevant”. Generally an outright transfer of the freehold title would be covered as would any other estate/disposal save for certain specific exceptions. The most relevant examples of exceptions are: any lease of an individual flat, disposal by a liquidator or trustee in bankruptcy, disposal to an associated company or disposal under the Leasehold Reform Housing and Urban Development Act 1993. Full details of relevant disposals are set out in section 4 of the 1987 Act.

If the Landlord is intending to make a disposal he then needs to serve a Notice. Often these are simply referred to as Section 5 Notices being the section of the 1987 Act detailing the requirements. The Act lists various types of Notice which need to be served dependant upon the circumstances of the disposal e.g by auction or private treaty. In general terms the Notice tells the Leaseholders what the Landlord intends to do. If then the Leaseholders want to purchase, not less than 50% of the Leaseholders collectively, must serve a response notice by a date given in the Landlords original Notice. They can then force the Landlord to sell the interest to them on the same terms as the intended disposal. The time limits are strict and if no notice is served by the Leaseholders the Landlord can proceed with their intended disposal provided they do so within 12 months of the date by which the tenants should have replied.

As can be seen Landlords have been known to serve a section 5 Notice even when they have no intention of selling to try and draw out of Leaseholders whether they can be persuaded to buy and often to pay a higher price than perhaps a collective enfranchisement would achieve. For this reason Leaseholders are certainly advised to take professional advice on any Notice served to consider whether a purchase is the best way to proceed for them.

If a Leaseholder does become aware that a disposal has taken place without Notice being served then there are various courses of action open. Firstly this may be a matter which could be reported to the local Tenancy Relations Officer as the Landlord will have committed an offence for which they could be prosecuted and if found guilty fined. Secondly the Leaseholders can (assuming there is the requisite majority) in effect require the Purchaser to dispose of the interest they acquired to the Leaseholders on the same terms as per their contract with the Landlord. Once again there are strict time limits and so as soon as the Leaseholders become aware of a disposal they should urgently take advice as generally they will only have 6 months to enforce their rights under the 1987 Act.

As with many aspects of long residential Leasehold Law the process is relatively complicated and full of pitfalls for the unwary. Both Landlords and Leaseholders should look to take advice at the earliest opportunity to ensure that their respective positions are properly protected.

Filed under: England & Wales, FLW Article, ,

Data Protection

A letting agent has been found guilty under section 55 of the Data Protection Act and the Criminal Attempts Act.

The agent was fined £200 and ordered to pay a £15 victim surcharge and £728.60 prosecution costs by Highbury Magistrates Court.

The offence was uncovered in June 2011 when the Department for Works and Pensions (DWP) received a call from the agent who was fraudulently trying to access the account of a tenant on benefits. The DWP investigated before reporting the matter to the Information Commissioners Office (ICO).

The agent had no authority to access the tenants’ information held by the DWP and it was only when the agent could not recall the tenant’s middle name that the DWP became suspicion.

Unlawfully obtaining or accessing personal data is a criminal offence under section 55 of the Data Protection Act 1998. The offence is punishable by way of a financial penalty of up to £5,000 in a Magistrates Court or an unlimited fine in a Crown Court.

So what should you do if you want to check the details given to you by a tenant or potential tenant?

A signed letter of authority should be obtained from the tenant and then the DWP contacted to obtain the information you need. The DWP will want sight of the letter of authority which could be faxed before any telephone call.

Whilst the fine was small the agent and the company are no doubt having to deal with the publicity that this case has attracted. It simply is not worth it in such a competitive market and guidance can be sought on the ICO website.

Finally the Data Protection Act is likely to be replaced by the new General Date Protection Regulation which is likely to be introduced next year. Agents should take this seriously and should consider implementing changes if they are aware that staff is not adhering to the law as ‘strictly as they should’.

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

The Property I let / manage is an HMO.

What do I need to do?

1. Comply with the Regulations (see below)
2. Check whether your HMO needs planning permission (see next blog)
3. Check the council tax requirements (see next blog)
4. Check whether needs licensing (see blog on licensing)

1. Comply with the Regulations
ALL HMOs need to comply with the HMO management regulations [SI 2006/372 in England and SI 2006/1713 Wales] , which apply regardless of licensing status.

The person managing* [ i.e normally the agent] and the person having control [normally the landlord] for the property must:

• Ensure that the name, address and contact number of the person managing are made available to each household, and the same must be displayed clearly in a prominent position in the HMO (Reg 3)

• Take the following general safety measures:
o Keep fire escapes free from obstruction and in good order and repair
o Ensure that any fire fighting equipment are maintained in good working order (Note: no stated requirement as yet to have alarms installed, but these are usually demanded on the basis that it is a reasonable measure to keep an occupier safe from injury).
o Take all reasonable measures to keep the occupiers safe from injury, having regard to the design, structural conditions and number of occupiers (Note that this means that even where under normal L&T principals the Landlord is not required to remedy a design defect, the Landlord/agent may have to attend to the same in HMO).
o Make safe, or prevent access to unsafe roofs or balconies
o Make sure low level windows are barred, or made safe from “accidents which may be caused in connection with such windows”, which we interpret to include falling out of them.

• Keep water supply and drainage in good, clean and working condition, including preventing frost damage and must not unreasonably cause or permit interruption to the supply (Reg 5)

• Provide a gas safety certificate to the local authority within 7 days of them requesting it (Reg6)

• Obtain an electrical fixed wiring certificate every 5 years ( at least), and supply to the local authority within 7 days of them requesting it (also reg 6)

• Not unreasonable cause or permit interruption to the supply of gas or electricity ( also reg6)

• Ensure the common parts are in good decorative repair, clean and free from obstruction, and in safe working condition including:
o All handrails and banisters in good repair
o Provision of handrails and banisters as are necessary for the safety of the occupiers
o Stair coverings ( i.e. carpets) safely fixed and in good repair
o Windows in common parts in good repair
o Light fittings in common parts to be available for use at all times to occupiers
o Shared Fixtures, fittings and appliances ( i.e. used by two or more households) to be in good and safe repair and working order, except where the occupier is entitled to remove it and/or beyond the control of the manager
o Shared outbuildings ( i.e. used by two or more households) in repair, clean condition and good order
o Garden to be kept in safe and tidy condition

• With regards to the entire HMO, to keep the internal structure in good repair, fixtures and fittings and appliances in good repair and clean working order, and all windows in good repair –unless repair is required as a result of the occupier failing to treat the property as she should do under the terms of the lease/licence ( i.e. fails to act in a tenant-like manner)

• Provide bins or arrange for the local authority to provide bins.

NB where the property is an HMO because it is a conversion ( an HMO under s257) , the manager is not expected to go into individual flats, but the above will apply to the common areas.

What if I don’t comply?

Failure to comply with the HMO management regulations is an offence. The maximum fine is £5,000.00 for each offence, although the average fine is considerably less, unless the landlord has refused to cooperate with the local authority. An example of the latter can be seen here.

To be continued…….

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

Update on EPCs.

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2011 will come into force on the 6th April 2012 and amend the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.

A lettings agent will now need to be satisfied that an EPC has been commissioned prior to marketing a property for rental. Obviously this will not pose a problem where the agent obtains it him or herself. The previous regulations required a seller to obtain a EPC upon marketing but where this was not possible then the seller or a person acting for him had up to 28 days from the date the property was placed on the market to use reasonable efforts to obtain it. The amended regulations have now reduced the 28 days to 7 and apply not only to sales but also to rental properties. There is also however an additional allowance of up to 21 days immediately upon the expiry of the 7 days during which the EPC must be obtained. It may see a bit odd to reduce the requirement from 28 to 7 days and then immediately add back on 21 days to get back to 28 days. However, the spare 21 days being given back is only available if an EPC has not been obtained “despite using all reasonable efforts” so a failure to obtain an EPC in 7 days will lead to hard questions being asked. From a lettings point of view, though this does represent a liberalisation as previously the requirement was to have the EPC prior to the offering of the property with any written particulars.

All of you will have seen the asset chart of the EPC on marketing material when properties are advertised to let. Unfortunately the placing of the asset chart will no longer be permitted on its own. Any ‘written particulars’ will now need to include the first page of the EPC. That is the asset chart and the various calculations that underpin it. Page 2, which contains recommendations for improvements, can be handed to the tenant at a later stage but before signature of the relevant tenancy agreement.

‘Written particulars’ include electronic communications (emails) and are defined in the new regulations as containing at least two of the following:
• a photograph of the building or any room in the building,
• a floor plan of the building,
• the size of the rooms in the building,
• the measured area of the building, or,
• in relation to a building being rented out, the proposed rent.

Any advertisement (whether print or electronic) or window display, which includes at least 2 of the above conditions, should therefore include the first page of the EPC. As almost all adverts include a photo and the price or a size and price it will be hard to avoid this. Theoretically, one could bypass this by giving a description without specific sizing along with a price or an artist’s impression plus price.

The penalty for failing to adhere to the regulations remains the same. This is £200 for dwellings and will still be enforced by trading standard officers.

There is no doubt that the reason for these amendments was to clear up what the obligations are and when they apply and this appears to have been achieved. However the requirement to use ‘reasonable efforts’ will no doubt cause problems when people attempt to circumvent what is in essence an effort to achieve a greener attitude to housing.

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

SUBJECT TO CONTRACT: WHAT DOES IT MEAN?

Many people dealing with short term residential tenancy agreements will have seen the term “subject to contract” used but what does this actually mean?

The basics are that in English law a contact does not have to be in writing (and in this context we are talking about usual residential tenancy agreements). For a contract to be made one part has to offer to do something, e.g.. let a house, on the basis they will receive something in return, e.g.. Rent, and this offer is then accepted by the other party telling the person who made the offer. This could simply be a conversation.

To avoid contracts being unintentionally created most agents make clear that all negotiations are “subject to contract”. In practice many agents have a standard form of words on emails or letterhead setting this out. This mans that the parties are free to have negotiations and in principle reach an agreement. It is usually at this point that an actual tenancy agreement will be sent out. Provided the initial negotiations are “subject to contract” even at this point no contract will have been created. This means that the parties are not yet bound by the terms.

For the contract to bind all the parties both sides need to physically complete the document. What this usually means is that the Landlord (or his agent when so authorised) and the Tenant will each sign their part of the agreement. Usually these agreements will then be returned to the agent who will then oversee completing the transaction by exchanging and completing the documents by dating the same. It is at this point that the contract is completed and the parties are then bound by the terms.

The system can seem cumbersome but provides safeguards for both sides. Usually both sides want to have the opportunity to have negotiations. In particular Landlords will often wish to check references and ensure monies etc are paid before the agreement is actually completed. Tenants may be looking at more than one property. It is vital then that parties understand that once they sign (or Landlords give the agent authority to sign), exchange and date the agreement they will be contractually bound. If a party does not want to become bound until some condition or additional authority is given they should either withhold the signed agreement or make clear the terms upon which they agree to the agreement being completed. Once completed either side can then require the other to comply with their obligations.

Subject to contract is a useful device to protect all parties but you should be clear as to when completion has taken place and only allow completion of an agreement if you actually want to be bound by the contract! Once completed there may be no way back.

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

Owner Managed Freeholds

Another case involving Owner Managed Freeholds has recently been decided by the Court of Appeal in Newman v. Framewood Manor Management Co Ltd.

In this case the Various leaseholders were in a typical way shareholders in a Company which managed the development. It would appear that this was a smart development which had various communal leisure facilities which had given rise to various problems. The various leases had covenants governing the provision of the various leisure facilities by the Management Company. As all too often can be the case various problems arose concerning the leisure facilities and repairs and replacement. The costs involved looked as though they would be considerable and many leaseholders seem to have had little appetite to incur these costs.

The Company then after various meetings at which a majority of Leaseholders agreed with the Companies proposals made various changes. Sadly Mrs. Newman, as Leaseholder, did not agree and proceedings were bought for specific performance and damages.

The lease contained a provision which appeared to exonerate the Company from damages claims if these were not covered by Insurance. The Court of Appeal found firmly that in there view this clause did not prevent a leaseholder bringing a claim for loss of amenity under the lease.

The Court then went on to consider the various individual claims. Whilst it did not award specific performance (although certain works had been undertaken or undertakings were given by the Company) damages were awarded. What is clear from the decision is that Owner Managed Freeholds as with any Freehold/Leasehold relationship are bound by the terms of the lease. In practice it is vital that all Freeholders have regard to the lease terms. If services are to be provided under the lease simply because a majority is happy with a change that of itself will not be sufficient to just proceed as the Freeholder will be open to claims as in this case.

That is not to say that the situation cannot be resolved. It is always open to parties to mutually agree variations (if all agree) or in certain circumstances can an application be made to the LVT to vary the terms of the lease.

As we have flagged before in various articles it is vital that Freeholders and their advisers consider the Lease terms and check exactly what they allow or provide. A failure to do so can be expensive for all and whilst it seems in the case referred to there is a separate costs appeal undoubtedly all sides will have spent large sums given the matter has got as far as the Court of Appeal. PainSmith Solicitors are happy to advise Freeholders or Leaseholders on the obligations under a lease and generally with regards to this complicated area of law.

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

Common Questions- “Olympic Lets”

1. Are the tenancies ASTs?
Most of you will be aware that for an AST the conditions are that the property is let to an individual who will use it as their principle home. Many Olympic visitors will be here in the UK on holiday therefore it is safe to assume that they will not be residing here and so will not have ASTs but “holiday lets”. These are simply common law tenancies. However some visitors maybe visiting contractors or employees and they will be working either at or during the Games. In those cases the property that you let could actually be let under an AST and the tenant could potentially remain there for 6 months provided they pay the rent as you will not be able to remove them using a section 21 notice. You are therefore strongly advised to find out the purpose behind the visit in order to safeguard the landlord’s position.

2. Do I have to protect the deposit?
Where a tenancy is not an AST then the deposit protection provisions of the Housing Act 2004 do not apply. However the risks described above should be borne in mind and there is no harm in registering a deposit if you are unsure.

3. Do I have to grant a tenancy at all?
It will be seen as a tenancy unless a landlord is living in the property and sharing basic amenities with an Olympic visitor. If you are concerned that the visitor could be eligible for an AST then you could adopt a serviced apartment arrangement whereby you provide services which are so extensive that they are incompatible with the tenants presumed right to exclusive possession. This will prevent the occupancy being a tenancy at all and so the protection granted by the Housing Act 1988 will not apply. However, this can be very hard to do in practice.

4. What about HMOs and licensing?
Whether the property is considered an HMO will depend on how many occupiers there are and whether they are occupying as their only and main residence. It is assumed that migrant workers occupy the property as their only or main residence. However, anyone here for a holiday will not be doing so. As always, the advice is to consult your local authority in cases of doubt.

5. I have heard there is some issue with short lets.
Lettings under 90 days inside London can be controlled by local authorities. A number of them will do so during the Olympic period. However, the control is by way of planning and requires a planning permission to be obtained for a short letting. However, a breach of planning is not a criminal offence. The local authority will have to identify the breach and then serve an enforcement notice. It is only once this notice has expired that an offence is committed. Normally these notices give a period of time to put the planning breach right and by the time this is up the Olympics will be over and the short let will have ended. However if you want to be cautious you should be able to obtain the permission for a modest fee.

6. What if the tenants do not leave at the end of the term?
The usual common law principles apply to a holiday let. That is that the tenant must vacate at the end of the tenancy. If they do not then landlords may apply for possession to the Courts the day after the term ends.

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

Is my property an HMO?

For a full definition go to s254 & 257 Housing Act 2004. For those who want a translations, read on.

This area is not straight forward so we have tried to make sense of the legislation and hope that you find this helpful! Basically, there are two definitions of HMO.

1. Whether your property is a house, or a flat, if you rent it out, and the property has 3*** or more occupiers ( note you need to count the occupiers not just the tenant, including children) and these occupiers make up more than one household*, sharing basic amenities ( e.g. kitchen, bathroom), then the property is likely to be an HMO for the purposes of the Housing Act 2004. There are other criteria, for example, the property must be the principal home of at least one of the occupiers. A Student house is considered the occupiers’ principal home thanks to s259 (2)(b). There are exceptions, including owner occupiers, prisons, care homes, student halls of residence, convents.

*For the purposes of the legislation a household includes members of the same family. Family members include partners** and relatives , partner’s relatives, partner’s relatives’ partners.

**Partner = husband, wife, civil partner (i.e. the other half of the couple)

*** Strictly speaking section 254 of the legislation states that 2 occupiers making up more than one household i.e. 2 non-related sharers, is an HMO but schedule 14 contains a series of exceptions which cannnot be HMOs’ and one of these is 2 person properties. Therefore these properties are not HMOs’.

2. A house that has been converted into flats may also be an HMO for the purposes of the Housing Act 2004. If it was converted not in accordance with the Building Regulations 1991, and one-third or more of the flats are let on leases of less than 21 years then the building may qualify as an HMO.

Scenario 1:
• Do you rent out your property?
• Is the property a house or a self contained flat?
• Is it occupied by more than 2 households* who share at least one basic amenity ( e.g. kitchen, bathroom)?
• Do you ( as landlord) live elsewhere ( i.e. you are NOT one of the households)?

If you answered YES to ALL the above questions then your property is most likely an HMO.

Scenario 2:
• Do you rent out your property?
• Is the property a house or self contained flat?
• Is it occupied by more than 2 households who share at least one basic amenity ( e.g. kitchen, bathroom)?
• Do you as landlord live in the property ( i.e. you make up one of the households?)
• Do you have 3 or more unrelated people living in the property with you?

If you answered yes to ALL the above questions then your property is most likely an HMO.

Scenario 3:
• Do you rent out your property?
• Is the property a converted block?
• Does it comprise only self-contained flats?
• Are one third or less of the flats owner occupied [ an owner occupier is someone with a lease of at least 21 years]?
• Was the conversion done before 1991, and therefore not compliant with 1991 Building Regulations?

If you answered yes to all the above questions then your property is most likely an HMO.
NB a purpose built block of flats, built after 1991 will not be an HMO, but its individual self-contained flats may well be.

If you are not sure as to the status of your property, then do look in the legislation here.
Next: The property that I let/manage is an HMO. What does that mean for me?

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

The Localism Act

Most landlords and agents are aware of the current provisions relating to tenancy deposit protection under the Housing Act 2004. Many will also be aware of the damage that has been done to the provisions by the many, many, many, many court decisions. As a reminder two of the Court of Appeal decisions:

Tiensia v Vision Enterprises Ltd (t/a Universal Estates) – a landlord can protect the deposit at any stage, even if more than 14 days have elapsed since it was received, without penalty as long as they do so before the case comes before a court.

Gladehurst Properties Ltd v Hashemi – a tenant could not bring a claim for an unprotected deposit at all once the tenancy was over.

The government has therefore resolved the problems posed by these cases by radically amending the legislation. This is being done by way of the Localism Act, which should come into force on or around the 6th April.

The New TDP Legislation
The changed legislation has three components:
1. Alteration of the current 14 day timescale for protecting the deposit;
2. The closing of current loopholes exposed by the courts;
3. Change to the current regime of penalties.

1. Under the old current provisions the landlord is obliged to protect the deposit and provide the prescribed information to the tenant and any relevant person within 14 days of receipt, however this 14 days will be changed to 30 days from the date of receipt.

2. The decisions in Tiensia and Hashemi will no longer assist landlords who have failed to register the deposit within the 14 days. Therefore, a landlord will be obliged to protect the deposit within 30 days and if he fails to do so he is in breach of the legislation and the tenant can immediately issue proceedings against him or his agent. Protection after 30 days, or after issue of proceedings, is not sufficient to cure the landlord’s failure. Landlords will not be able to argue the Hashemi point once the tenancy is over either as tenants are also going to be entitled to issue proceedings once the tenancy has ended. The so-called ‘must also’ loophole, which allowed landlords to return the deposit to a tenant before a hearing and then assert that the court could not return that money to the tenant and therefore it could not ‘also’ make an award of the three times penalty, has also been closed by the simple expedient of removing the word ‘also’ from the text of the legislation.

3. The draconian three times the value of the deposit penalty will also cease. The court will have a discretionary power to award a penalty of between one and three times the value of the deposit. Therefore, a landlord who has protected the deposit as soon as they became aware of the problem and acted reasonably will be penalised at the lower end of the scale while landlords who have been less cooperative will find themselves penalised at the top end of the scale. If a landlord has however failed to protect they will be liable for not less than a penalty of one times the deposit.

What has changed?
This all means that the Tiensia and Hashemi decisions will not have any force after the 6th April. However, many parts of the legislation are wholly unchanged. There is no change in the definition of a deposit, or the restriction on taking property as a deposit instead of money. So, court decisions which interpret these unchanged parts of the legislation are not affected.

There is no change in the requirement to protect the deposit within a set time after it has been received in connection with an AST. So money that the landlord or agent has obtained which is intended to be used in relation to an AST agreement falls within the legislation.

Therefore, the county court guidance that states that taking the last months rent in advance at the start of the tenancy is probably a deposit remains valid, as does the Court of Appeal decision which holds that a promise to pay money at some future date does not qualify as a deposit, as this requires money to be paid by the tenant with the intent that it will be returned. Likewise, the obligation to serve the prescribed information properly and in full also remains unchanged. It also remains the case that a lettings agent is liable for a failure to protect the deposit and can be sued in preference to the landlord. However, the advent of the new variable penalty would now allow a court to make an order against the agent with the penalty fixed at the lower end of the scale if they were not responsible for registering the deposit.

One component of the Hashemi decision also remains valid that is that any claim for an unprotected deposit must be taken by all the tenants together and not by one acting unilaterally without the consent of the others.

Section 21
Where the deposit has not been registered and the prescribed information not sent to the tenant within 30 days the landlord only really has one option if he seeks vacant possession. That is to hand the deposit back to the tenant and the serve the notice. Landlords will of course not be happy about this as many like the security of being able to call for that money when there are dilapidations, so this is all the more reason for getting it right.

What do you need to do now?
It is not clear whether the new provisions will apply to tenancies that began before the 6th April 2012 however we advise that agents and landlords should begin to check agreements now and register deposits and provide prescribed information if they discover they have not done so to avoid the new scale penalties.

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

Reminder of HMOs’

Local authorities are gaining confidence in using their powers to introduce compulsory additional licensing of HMO landlords.

For example Oxford County Council is celebrating its “groundbreaking new powers” for licensing HMOs. From Monday 30th January every HMO in Oxford City Council’s area must be licensed and “every landlord who owns a property where three or more unrelated tenants live and share facilities such as the kitchen and bathroom will be required to get a HMO licence”.

Cardiff has announced a consultation period to consider extending its HMO licensing to two further wards.

Brighton and Hove City Council is consultation additional HMO licensing.

Nottingham City Council took the step in March 2011 to make an article 4 direction. providing that “from 11th March 2012, it will become necessary to obtain planning permission to convert a family dwelling (Use Class C3) to a HMO with between 3 and 6 unrelated people sharing (Use Class C4) throughout the whole of the Nottingham City Council area. Planning permission is already required for properties shared by more than 6 unrelated people”

The above is but a sample. Many other local authorities are looking to make Article 4 directions. Agents and Landlords are advised that if the property is an HMO, check with the local authority as to their current (and future) licensing requirements.

Given how complex this area is we will blog on HMOs’ further with:
1. Is my property an HMO?
2. My property is an HMO what do I need to do about that (ie the regulations for ALL)?
3. Local Authority says my property needs a licence – what do I need to do and penalties?
4. Council tax and other issues.

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

The Misuse of Drugs Act 1971 – What it means to Managing Agents

We have received quite a few helpline queries about the above Act and whether or not agents can refuse to supply tenant’s personal information to the police.

The key obligations provided to an agent are covered by Section 8 of the Misuse of Drugs Act 1971. Essentially an agent is not responsible for drug activity in a property where a reasonable person in position of the same information would not have been aware of the drug use. Agents are not expected to be an expert in the detection of drug paraphernalia but if a property has items within it which are well known to be used in association with drugs it would be no defence to say that they were not aware of the drug activity. Therefore if an agent genuinely believes that there is drug use at a property the safest course of action is to simply report it to the police. However agents should also be careful not to simply accuse tenants of drug use because the tenant possesses cultural items that the agent does not understand.

An important associated question is whether agents have to release information requested by the police when they are not aware of any illegal activity. This is where the Data Protection Act 1988 plays an important part. The Data Protection Act does not prevent you from disclosing information to the police. There is a partial exemption that allows you to provide personal information in order to prevent or detect a crime, or catch and prosecute a criminal. The agent is unlikely to hold much personal information about the tenant which will assist in a police investigation. However the exemption only applies if a failure to disclose the information would hinder the police investigation. In addition, the exemption only permits disclosure of information that is genuinely needed by the police for their investigation. It is not acceptable to give the police unfettered access to files.

On a practical level a decision to disclose to the police should be taken at a level which is senior enough that it is clear that the issue is being given appropriate weight by the organisation. The police should be asked to be specific about what they require and an attendance note kept of precisely what information is disclosed and to whom.

The Information Commissioners Office has provided guidance on this issue.

Filed under: England & Wales, FLW Article, ,

TDS

We have blogged on the issues surrounding the release of Deposits following possession proceedings here. Many of you will be interested to note that the TDS have replied to this blog here.

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

Security for landlords

From the 1st of this month the Land Registry launched Form LL which allows landlords to register a restriction for free against the title of their home when they do not live at the property. The restriction is designed to help prevent forgery by requiring a solicitor or conveyancer to certify they are satisfied that the person selling or mortgaging the property is the true owner.

Property is usually the most valuable asset people own. It can be sold and mortgaged to raise money and is therefore an attractive target for fraudsters. The properties most vulnerable to fraud are usually empty, tenanted or mortgage-free. To help prevent forgery, absent owners can ask the Land Registry to enter a Form LL restriction on the title.

This is something that landlords that are abroad or far from the tenanted property should consider and agents are asked to consider mentioning this to their clients.

The cynics out there are probably thinking that there is another reason why the Land Registry has released this practise note and it is to do with the compensation they have to pay out when something like this happens however it’s easier to register a restriction than seek compensation when you are abroad.

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

Money Claims- Changes to the rules

From the 19th March 2012 all claims for money only started in the County Court and not already subject to special procedures under the CPR will now be known as “designated money claims”. All of these claims must now be sent to the County Court Money Claims Centre which is based in Salford. The claims will then technically be issued out of the Northampton County Court.

For these money claims the Business Centre in Salford will be the administrative office. When you issue your proceedings you will be required to specify which is your “preferred court” for dealing with matters if the claim gets transferred. The usual rules on transfer will still apply so the claim will if against an individual be transferred to his or her home court. This centre will deal with all matters up to and including the filing of allocation questionnaires. Only at that point will the claim be transferred out.

This is a significant change and reduction in the work which local County Courts will handle in the first instance. Generally for many people issuing money claims themselves it may be easier to simply use Money Claims Online to deal with making the claim rather than paper applications. We wait to see what if any further effects these changes may have on the Courts. You should be aware that if you are contemplating enforcing via the High Court (e.g. by Sheriffs Officers) you may be better advised to issue your claim out of the local High Court District Registry although the rules on financial limits still apply.

Filed under: England & Wales, FLW Article, ,

Can Freeholders charge for Consenting to Underletting?

Most long residential leases today contain some provision about underletting. Often the clause in the lease will require the Leaseholder to obtain the prior consent of the Freeholder or their managing agent. It is when this consent is sought that problems can arise.

As ever the starting point should be the lease. Many leases have a specific provision indicating something along the lines of ” not to underlet without the consent in writing of the Landlord such consent not to be unreasonably withheld”. In those circumstances an application should be made to the Landlord prior to each and every subletting. Recently the Lands Tribunal in the cases of Holding And Management (Solitaire) Ltd v Norton and Bradmoss Ltd, Re 10 Meadow Court considered whether Landlords were entitled to make a charge in such situations.

The LVT at first instance had determined that the Landlord could not recover costs. Consideration was given to Section 19(1) of the Landlord and Tenant Act 1927. The Lands Tribunal made clear that in their opinion Section 19(1) allowed a Landlord as a reasonable condition of granting Consent to require payment of their reasonable costs. Further the Lands Tribunal went on to confirm that in its opinion such a charge would then be a variable administration charge and the LVT had power under Schedule 11 of the Commonhold and Leasehold Reform Act 2002 to determine the reasonableness of the charge. The answer is therefore that the Landlord can recover these costs subject as ever to the lease terms.

At this stage the Lands Tribunal has requested submissions as to the reasonableness of the charges proposed in these various cases and we await further guidance. Clearly Freeholders will have to justify each and every charge they make and to be able to explain how the charge has been calculated both as to the particular development and their own organisation. Hopefully some further guidance will be offered as this is an area which many investor leaseholders often feel that Freeholders simply use as a mechanism to charge high fees to simply profit from the freehold rather than to cover any reasonable costs which they may have incurred. A case of watch this space ….

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

Survey of tenants in private rented sector.

The university of Winchester has launched a survey of tenants in a private rented sector. There is a real shortage of good information about the sector and Tenant’s experiences of it. Again, the government is in danger of making policy decisions in this information vacuum. PainSmith ask all readers of this blog to promote this survey to any tenants in a private rented sector they deal with.

The survey can be found at http://www.survey.winchester.ac.uk/prs

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

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