Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Energy Performance Consultations and Next Steps

The DCLG has published summaries of responses to a series of consultations on Energy Performance Certificates and has indicated how it will be taking the matter forward.

The main proposals of interest to the PRS being consulted on were:

  1. Wider publication of EPC data
  2. Requiring EPCs where individual rooms in HMOs were rented
  3. Requiring EPCs for holiday lets
  4. Publication of EPC figures in all property advertising

The first proposal was to create new powers for EPC data including address data and EPC recommendations to be published. The government intends to take this forward and will implement new legislation to allow for this. The legislation will deal with any data protection issues that may arise. Naturally this means that prospective tenants and third parties will have unfettered access to EPC reports and will be able to tie them to properties.

Currently where an HMO is rented out as a single property an EPC is required but where HMO property is rented out on a room by room basis then an EPC is not required. The government is not planning to fix this discrepancy as it is not required to by the relevant EU directive.

The EU directive which required EPCs actually demands that holiday lets for more than 4 months include an EPC. The legislation implementing it here did not cover the point but Government guidance said that all holiday lets were excluded. The Government will fix this by amending the guidance to make clear that EPCs are required for holiday lettings in excess of 4 months. Arguably they should actually fix the regulations to make this issue clearer and to define what is meant by a holiday letting.

The latest version of the underlying EU directive requires that all property advertising carry the EPC rating by July 2013. Currently this information is only required where written information is made available to a prospective buyer or tenant. Arguably, of course, advertising is written information and so an EPC should be provided with adverts already. However, one supposes that the reference is more to the sort of small adverts found in newspapers and magazines which typically supply very limited information. At the moment the Government does not intend to implement this proposal for the simple reason that they do not have to until 2013. However, agents should be aware that this is on its way and they will need to adjust procedures accordingly.

The overall message seems to be that the Government will only do what it absolutely has to do to service its EU requirements.

Filed under: England & Wales, FLW Article, Northern Ireland, Scotland, ,

Drying Flooded Buildings

The DCLG has published an interesting summary of guidance on dealing with flooded properties which may well prove valuable in the face of global warming and the uncertain climate!

This is not formal advice in itself so much as a signpost to the various pieces of advice out there and the areas which still need work. However there are some useful flowcharts and an overview of different methods of drying and moisture testing. It is not a publication for the faint-hearted though and assumes a fair degree of technical knowledge.

Filed under: England & Wales, FLW Article, Northern Ireland, Scotland, ,

Cold Weather and Tenant’s Obligations

Given the current weather conditions it seemed appropriate to do a post on what happens if a property is left by the tenant and the pipes freeze and burst.

The short answer to the question is to consider how unreasonable the tenant’s conduct has been. If the tenant has only been away for a short period and during that time there has been an unexpected cold snap then the tenant will not be liable for burst pipes (Wycombe Health Authority v Barnett). If however, the weather is well-forecast or the tenant goes away fro an excessive period with no reasonable precautions taken then the Scottish case of Mickel v McCoard would be relevant. In this case it was held that the tenant was liable for burst pipes.

So, in each case, the tenants behaviour and its reasonableness in relation to the foreseeable danger is the key factor. Given that the current spell of cold weather has been well advertised any tenant who fails to take proper precautions is likely to be liable for any damage caused.

It should be noted that, separately to this, there is a responsibility for landlords under the HHSRS to make sure that homes do not suffer from excess cold. Local authorities will be keen to ensure that properties are properly insulated, have sufficient heating, and do not suffer form drafts and have the right to serve enforcement notices to ensure that this is the case.

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

Possession Proceedings and Human Rights

The Supreme Court has recently handed down its decision in Manchester City Council v Pinnock.

This case concerns whether it is appropriate for a Court to consider Article 8 of the European Convention on Human Rights when making a possession order.

Article 8 guarantees respect for private and family life (including respect for the home) and prevents interference with this by the state except in accordance with the law and only as “necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”

While Article 8 cannot apply to private landlords as they are not organs of the state the Courts most certainly are and they are therefore bound by it. Accordingly the decision in Pinnock may be relevant to the private sector even though the Supreme Court took care to state that nothing in their decision “is intended to bear on cases where the person seeking the order for possession is a private landowner”.

So the decision of the Supreme Court is that Article 8 should be taken into account by Courts when dealing with possession actions by local authorities although they stress that it is only in the most exceptional cases where Article 8 would actually have the effect of preventing possession where the domestic law allowed for it. They have not ruled in relation to private landlords and are conscious of the impact of Article 1 of the First Protocol (which prevents deprivation of a person’s possessions except in accordance with law designed to protect the general interest) but this does not mean that they would not rule that Article 8 applied to private landlords if the matter came before them.

This is a worrying development for private landlords. It is undoubtedly the case that consideration will be given by some tenants to advancing an article 8 defence. More particularly it opens up questions about the use of the Accelerated Possession process for section 21 notices and their equivalents in Scotland and Northern Ireland and particularly about the use of section 21 notices in a ‘retaliatory’ manner where the tenant has complained about disrepair etc.

The battleground for 2011 may just have been set out.

Filed under: England & Wales, FLW Article, Northern Ireland, Scotland, ,

Quango Cuts

The final list of the public bodies to be culled in the widely trailed cuts in quango’s put forward by the Coalition Government has been announced today. The full (28 page) list is available here.

Notable losses include the Office of Fair Trading on which a consultation is to be launched in the New Year and the Tenant Services Authority. Both of these are to be merged into other bodies and some of their powers are to be abolished altogether.

The Valuation Tribunal, Residential Property Tribunals, Rent Assessment Committee, Leasehold Valuation Tribunal and possibly the Agricultural Land Tribunal will join other tribunals as part of the Tribunals Service.

The Land Registry is to be retained but with increased private sector funding (presumably this is code for a partial sell-off).

The Leasehold Advisory Service (LEASE) remains under threat and the National Tenant Voice is to be abolished.

The Independent Housing Ombudsman is to be retained.

Interestingly the Legal Services Ombudsman, which only opened its doors on 1 October is to be closed again almost immediately.

Filed under: England & Wales, FLW Article, Northern Ireland, Scotland,

Tenancy Deposit Protection Heads North of the Border

The Scottish Executive has published a consultation, including draft regulations, for the operation of tenancy deposit protection schemes in Scotland.

Unlike in England & Wales the protection scheme in Scotland is intended to apply to all residential tenancies, not just Short Assured Tenancies under the Housing (Scotland) Act 1988.  This means that the protection regime will also include lettings to companies.  However, the scheme only applies to monetary deposits so where a company offers (and the landlord will accept) a guarantee the scheme will not apply.  There is no maximum rent threshold under the Housing (Scotland) Act 1988 so there will be no exception for high value tenancies either.  Holiday lettings will fall outside the legislation and there may be a raft of further litigation as to what constitutes a holiday for this purpose.

The proposals look to have benefited from experience in England & Wales.  The draft regulations are detailed and consideration has clearly been given to closing loopholes. One issue remains somewhat unclear however. The consultation and the draft scheme rules both make reference to the deposit being lodged within 30 days. However, the regulations as drafted appear to allow the tenant to begin Court action immediately. This is probably something that needs to be addressed.

Implementation will occur 6 months after the regulations come into force and all new tenancies created after that point or tenancies which are renewed (either explicitly or by way of tacit relocation) will have to comply with the new procedures.

Penalties for non-compliance are similar. On application the Court can order the deposit to be protected or returned. The Court is also empowered to award a sum not exceeding three times the sum of the deposit to be paid to the tenant. This means that the Court has a discretion in relation to the actual size of the award which will negate the charge unfairness which has been laid against the mandatory penalty south of the border.

The regulations appear to envisage the existence of both custodial and insured schemes. This is a bit of a problem as we are not aware of any party who is interested in running a deposit scheme in Scotland. None of the three organisation operating in England & Wales have been especially keen to expand their operations up north. In addition the size of the private rental sector in Scotland is far smaller and it is debatable whether it is large enough to support more than one scheme, particularly if that scheme is only operating in Scotland. There appears to be a recognition of this issue implicit in the regulations as they state that they cannot come into force until a scheme has been approved by the Scottish Executive. This may be a recognition of the difficulty that the Executive may have in persuading an organisation to operate such a scheme.

The consultation contains a series of questions and is open for comments until 3 October 2010.

Filed under: FLW Article, Scotland,

Understanding ‘Subject to Contract’

We are often asked whether or not an agreement for a tenancy has come into effect when only one of the parties has signed it or some other variation on this theme has occurred. It is commonly thought that if only one party has signed then the party that has not signed is not bound by the agreement. If the parties have clearly agreed to a tenancy and that has been reduced to writing then the fact of a signature is irrelevant. The verbal agreement is sufficient to create a tenancy.

To avoid this occurring it is common to use a phrase such as “Subject to contract” or “Subject to lease”. This also means that any other discussions or offers made are subject to their incorporation in the final lease agreement. However, there some other consequences of the use of this phrase which are not so favourable and it may not always be the best course of action.

First it is worth examining precisely what the Courts understand the situation to be when the “Subject to Contract” formula is used. The Courts construe the formula in accordance with the conveyancers understanding of the phrase. This is that a negotiation for a conveyance of land which is expressed to be ‘subject to contract’ is not complete until there is an exchange of contracts. There is an entire set of procedures for such exchange which are set out and agreed between solicitors. It is this position that allows for such situations as ‘gazumping’ where the seller suddenly pulls out of a deal because they have had a higher offer. In the case of Salomon v Akiens, the Court of Appeal had to consider whether this formulation should also be applied to a lease agreement. The Court was clear that there was practically no circumstances in which a negotiation for a lease should be seen as any different from that for a sale and therefore the ‘subject to contract’ formula should apply equally to both.

Practical Consequences
What does this mean in practice? In the case of Longman v Viscount Chelsea the Court made clear that this means that the “relationship does not become binding … until there is an exchange of lease and counterpart, before which either party can withdraw”. In other words, until both the landlord and tenant have signed the agreement, the agreement has been executed, and the signed agreement has been passed to the other side then either party is free to withdraw without any penalty whatsoever.

Ending the Formula
Of course, there are other ways in which the ‘subject to contract’ formula can be dealt with. The parties could agree that the formula should no longer apply which is a common device in commercial or high-value leases where the parties will enter into an agreement to make an agreement. Alternatively, the parties can perform an action which sets the formula to one side. The most obvious of these is provision of the keys and the acceptance of rent and deposit payments. The formula comes into force once either party expresses an offer or acceptance of an offer as being ‘subject to contract’ and will remain in force even if following correspondence does not bear the same formulation until it is specifically brought to an end as described above.

Recovery of Expenses
The use of the formula also has implications for the recovery of costs and expenses. Where a party expends monies on the basis of an agreement which is subject to the formula it will be very hard to recover any monies expended on the basis of that agreement. As the High Court made clear in Regalian Properties v
London Dockland Development Corpn
each party must accept that any monies spent are a calculated risk and there will be no recompense if no contract results. This is not to say that agents cannot take steps to ameliorate this risk and a well- drawn up holding deposit agreement is a great help in this regard. Despite the fact that costs cannot be recovered in respect of actions taken under a belief that a contract that is subject to the formula was to be entered into there is no reason why a separate agreement taking a holding deposit from an applicant cannot be enforced. Such an agreement would typically cover the costs of referencing, preparing the agreement and would therefore protect the landlord from incurring agents costs with no prospect of recovering them. Such an agreement has the added benefit of ensuring that the agent will be paid for their time as well!

Other Formulas
There are other, more limited, formulas of a similar nature which may also be of value. The most commonly seen of these is probably ‘subject to references’ or some such phrase. This will have an effect similar to the ‘subject to contract’ formula but will be more limited and will effectively expire once satisfactory references have been received or the parties make clear that they have moved beyond that stage. By choosing to ignore them and agreeing a finalised contract, for example. The exact point at which these more limited formulas cease to be effective is not as certain due to the lack of Court decisions on the topic. In each case it will have to be decided at what point it was intended that the formula should come to an end and whether actions were taken to make it clear that it should no longer be effective.

Overuse
Some agents use the ‘subject to contract’ formula everywhere. This is bad practice and quite dangerous. In Shirlcar Properties Ltd v Heinitz the landlord sought to give notice to trigger a rent review contained in a tenancy agreement but used the phrase ‘subject to contract’ in the letter giving the notice. The review notice was held to be invalid because the tenant could not know if the landlord was bound to accept the higher rent proposed in the notice. Therefore the use of this formula where it throws doubt on the contents of the communication is very dangerous.

Practice Points
Agents should consider in every case what is best for their client. In higher value properties where the landlord is unlikely to wish to pull out of the deal unexpectedly it may be best to avoid use of the ‘subject to contract’ formula to ensure that the tenant is tied into the contract as early as possible. In other circumstances, where the landlord is uncertain of the tenant or may want to pull out of the deal it may be wise to use the formula in order to preserve the landlord’s position. Alternatively, it might be best to start negotiations ‘subject to contract’ but then agree at a later stage that the deal is finalised and that the formula should no longer apply, although this may be difficult where a deal is moving fast. As always, agents should take great care in the representations they make and how they are made to avoid invoking or rescinding the formula unintentionally. Equally, agents should not use the formula across the board by including it in all emails or letters by default.

Points to note

  • Once the Subject to Contract formula has been invoked it will stay in force until it is specifically rescinded or the lease or tenancy has been signed and exchanged.
  • Either party can withdraw from the contract without penalty while the formula is in force.
  • Agents holding deposit agreements are not affected and therefore recovery can be made from this for expenses such as referencing etc.
  • The formula should not be used automatically in every case and should be tailored to the specific requirements of each letting.
  • Make sure you have a solid holding deposit agreement setting out what charges the tenant is liable to pay.
  • Don’t use the formula where it is not appropriate

Scotland

The position regarding the use of ‘subject to contract’ in Scotland is rather different. Scots law tends to allow contracts to be created rather more easily than is the norm south of the border. It is also rather less enamoured of the ‘subject to contract’ formulation. In Erskine v Glendinning it was held that an acceptance of a deal which was qualified “subject to lease drawn out in due form” was entered into notwithstanding this phrase. Therefore, the use of ‘subject to contract’ remains a phenomenon which applies south of the border only.

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

County Court Judgement on Renewal Fees

We have just been made aware of a case in Lambeth County Court in relation to lettings agent’s renewal fees which has gone poorly for the agent concerned.

Chestertons Global Ltd v The Waterfront Partnership & Nicholas H Finney, heard in March 2010 before DJ Wakem, Chestertons sought to recover the sum of £3,807.20 in unpaid renewal commissions. Mr Finney counter-claimed for renewal commissions already paid in the sum of £3667.83.

Initially it was accepted that the proceedings against Waterfront were improperly brought and these were dismissed.

Chestertons first sought to argue that Finney was not a consumer based on the fact that he had purchased the property as an investment. However, Finney only owned one such property and, as we have suggested in a previous post, this is not sufficient to prevent a landlord being a consumer. Accordingly, the Court found against Chestertons on this issue.

Chestertons conceded in Court that the renewal provisions were not a core term of the agreement and were therefore susceptible to a test of their fairness. Given the comments of the Supreme Court in OFT v Abbey National & Others this may have been unwise.

At this stage the Court reviewed the clauses themselves. The Court found that the clauses were not particularly hidden in the manner that was criticised in the Foxtons case. However, they remained insufficiently clear in that they were not specifically flagged to the consumer, they were not expressed in strong enough language, and their effect was not given significant clarity despite their long-term impact on the relationship between agent and landlord and the onerous monetary obligations that they created.

Chestertons were further damaged by the fact that the tenancy agreement they had drawn up contained an option to renew which would leave the landlord tied to a renewal at the tenant’s whim at a rental to be fixed by Chesterton’s themselves and therefore paying a commission on the basis of decisions made by the tenant and Chestertons.

Interestingly the Court also made an order for the agent to return monies already paid by the landlord by way of renewal fees. This was ordered following the House of Lords decision in Kleinwort Benson v Lincoln City Council. The Court asserted that this case found that “where payment was lawfully due under a binding contract but it subsequently became apparent that was not the case the paying party was entitled to return of the payment”. This would appear to be a misunderstanding of the decision in Kleinwort and of the UTCCR itself. In Kleinwort the Lords decided that money paid under the basis of a mistaken that the contract was binding should be returned. However, the UTCCR does not operate in this manner. In Kleinwort the contracts involved were in themselves void. Th UTCCR does not make a contract, or any part of it, void but rather makes certain clauses unenforceable. We have previously posted on the issue recoverability of monies paid under an unenforceable contract.

However, agents would be well advised to take careful note of this case. Irrespective of the merits of all parts of the decision it seems clear that lower Courts have taken note of the decision of the high Court in OFT v Foxtons and are increasingly unhappy with renewal commission clauses that create an indefinite liability. Foxtons settled the case against them by changing their terms of business to limit the time during which they could seek renewal commission. It may be sensible for other agents to do the same.

PainSmith Solicitors supply terms of business for lettings agents and the current version of those terms includes a clause allowing for the length of time that renewal commission is to be recoverable to be limited in the manner adopted by Foxtons. These terms can be purchased online from our document shop.

Filed under: England & Wales, Northern Ireland, Scotland, ,

Recoverability of Money Paid in Relation to Unfair Terms

There is a certain amount of interest recently in the ability to recover monies paid in respect of terms in agreements, which have later been found to be unfair. This has been a live issue in respect of the aftermath of the case of Office of Fair Trading v Foxtons as well as the Office of Fair Trading v Abbey National & Others.

Given the decision of the High Court in OFT v Foxtons, there has been understandable interest in the ability of landlords to recover money in respect of agents’ renewal commission charges where those charges might be unfair.

The first thing to point out is that a finding of unfairness does not make a contract void. Under regulation 8(1) of he Unfair Terms in Consumer Contract Regulations 1999 a term that is unfair is deemed to be unenforceable. Regulation 8(2) clarifies that the making of a single clause unenforceable does not make the contract non-binding provided it can still operate shorn of the unfair clause.

It is accepted law that where a whole contract is void due to a mistake or other problem then there is a total failure of consideration and therefore all payments made can be recovered. Where a contract is rendered void by statute then it will depend on the actual statute whether there is a right to recover monies paid. However, none of this has any relevance to unfair terms matters as nothing in the regulations renders a contract void but merely makes certain clauses within it unenforceable.

Where a contract is unenforceable, and presumably where it contains unenforceable terms, there is no right to recover monies paid unless a total failure of consideration can be shown. Where a degree of service has been provided this is unlikely to be the case.

Therefore a declaration of unfairness, while it will make a clause unenforceable and will certainly therefore prevent further monies being claimed in reliance on it will not necessarily give rise to a right to recover money. It would be necessary to show that the entire contract was unfair and therefore that there had been a total failure of consideration to achieve this.

Filed under: England & Wales, Northern Ireland, Scotland,

Long Leases in Scotland

Those who know about Scottish law will be aware that it is not now practically possible to create a lease in excess of 20 years in Scotland. Additionally, feus were prohibited in 2000 and most were converted into an ownership for the vassal. A similar arrangement is now being proposed for certain long leases which have survived previous reforms.

The Land Tenure (Reform) Act 1974 acted to prevent longer leases occurring because it allowed landlords to terminate the lease at any point after 20 years. This meant that no tenant would normally be prepared to enter into any such arrangement and longer leases accordingly dropped away. However, some leases, created prior to that Act, are still in existence and were not removed by the various legislation in 2000 and 2003 which aimed at removing feudal tenures. Some of these leases are ludicrously long (one million years in the case of several in Paisley). In 2006 the Scottish Law Commission produced a report suggesting a further ‘clean up’ of these anomalous leases by converting what it called ‘ultra-long’ leases into a right of ownership.

The Scottish Executive has responded to this report by producing a consultation supplemented by a draft bill in which it proposes converting any lease for more than 175 years which has more than 100 years left to run into a right of ownership for the tenant.

The proposed bill contains mechanisms for sporting rights to be preserved for landlords. This is unsurprising as one of the reasons for the creation of such leases was to preserve these rights for landlords whose primary interest in the land was for its leisure facilities. They are also of substantial value in some cases and there would be difficulty in compensating landlords for their loss. The bill also proposes to compensate landlords for the loss of their title in the land to be based on the rent level and calculated in a similar manner as was carried out during the abolition of feus. There are also provisions for higher levels of compensation to be payable in certain limited circumstances if the landlord serves an appropriate notice on the tenant. It is intended that higher levels of compensation will be payable by way of instalments.

The consultation continues until 30 June 2010.

Filed under: Scotland, ,

OFT v Foxtons- The Final Order

The final sealed order in the OFT v Foxtons case has been made available on the OFT website. A copy can be found here. This order gives effect to the judgement of the High Court and is now the final word on the matter as Foxtons have withdrawn their appeal.
There are some interesting points to note:

  1. Nothing in the order prevents Foxtons from defending claims against them based on monies already paid under clauses that have now been found to be unfair;
  2. Foxtons are entitled to keep using the original renewal commission clauses in full management agreements;
  3. The wording of the offending clauses used by Foxtons is quite extreme in terms of their ability to charge commission on a long-term basis even where the tenant has been changed. The new terms (in the last Schedule) are much less severe
  4. The approved terms are still charging a renewal commission even though Foxtons has no involvement in the negotiation of a renewal but it is limited to 2 years after the initial tenancy and is clearly stated at the start of the terms of business
  5. Fxotns have removed their ability to take a fee where the landlord has sold the property to another landlords with the tenant in place and where the landlord has sold the property to the tenant

The OFT has made clear in its press releases that it intends to use this decision to put pressure on other agents. How far this will go is unclear and whether the OFT will seek to impose a limitation on other agents as to how long they can continue to collect a renewal commission for.

Unfortunately this will probably lead to another raft of ill-informed letters from landlords stating that the renewal fees they have been charged are unfair. However, agents should consider how they wish to move forward and take advice as to their fee structures to avoid a visit from the OFT.

Filed under: England & Wales, Northern Ireland, Scotland, , , ,

Foxtons Withdraws Appeal

It is being reported today that Foxtons has withdrawn their appeal to the Court of Appeal to the decision made against them by Mr Justice Mann in their dispute with the OFT.

According to the statement Foxtons have changed their terms of business and these new terms have been approved by the OFT and the Court and so they see no need to carry on.

It is debatable, for the same reasons we have set out here, whether this is a matter that will concern other agents.

Filed under: England & Wales, Northern Ireland, Scotland, ,

Draft Scottish Housing Bill

On 13 January a draft of the Housing (Scotland) Bill was published. It is intended to become law in 2010. Much of the bill is about housing associations and a new regulator for social housing but there are some matters which impinge on the private sector too.

Part 12 contains some amendments to Part 8 of the Antisocial Behaviour etc (Scotland) Act 2004 which deals with registration of private landlords. Possibly the most important change is a substantial increase in the penalty for failing to register, from £5,000 to £20,000. There is also a new power for local authorities to seek information to assist with exercising powers under the act and a refusal to provide information is a criminal offence with a maximum fine of £500. There is also provision for a new fee to be paid when an agent is appointed except where that agent is already on the register.

There are also amendments to the Housing (Scotland) Act 2006. The HMO licensing system has been altered, most notably to allow refusal of a licence on the grounds that the use would breach planning restrictions. The inability to refuse a licence for this reason has been a source of local authority complaint both north and south of the border and England and Wales would also do well to adopt this change.

Finally, the new bill also makes provision to permit Scottish ministers to make further provisions to protect tenants whose landlords have not got permission from lenders to let their property and have defaulted on the terms of the loan. Again it would be good to see something similar being applied south of the border.

Filed under: Scotland, ,

New Regulations and Agent’s Terms of Business

The Provision of Services Regulations 2009 came into force on 28 December 2009 and apply to all United Kingdom jurisdictions. These were brought into force to comply with the EU Service Directive which required compliance by (strangely) 28 December 2009.

The main effect of these regulations is to require that certain information is made available to users of services in the UK. A large number of services are covered by the regulations including lettings and estate agency and solicitors. While there are a number of ways that this information can be provided it is probably easiest for it to be put into the Terms of Business.

Key information that is required is:

  1. Business name and the status of the business (eg. partnership, limited company, sole trader etc.)
  2. A business address and full contact details (this is partly to deal with internet businesses who wilfully make their business details obscure)
  3. Registration details of any entry in a trade or public register and any statutorily required registrations (for agents this will mean details of their OEA and OFT registrations)
  4. There is also a general requirement to make clear your charges and the other terms on which services are provided.

Some information must also be made available on request. This includes:

  1. The price being charged for the services provided or where that price is not available the method of calculation
  2. Information on any code of conduct to which the supplier is held

Information required under the regulations must be provided in a clear and unambiguous manner and must be available before the contract is concluded.

There is no direct offence of failure to comply with the regulations. However, the Office of Fair Trading, local Trading Standards officers, and the Department of Enterprise, Trade and Investment (in Northern Ireland) have the power to take action for a breach of the regulations.

The Department for Business Information and Skills has provided guidance on the regulations.

PainSmith Solicitors are able to supply updated terms of business which are fully compliant with the regulations.

Filed under: England & Wales, Northern Ireland, Scotland, , ,

2010- What’s to Come

Welcome to 2010! At this time of the year speculation inevitably turns to how things will shape up in the next 12 months. Therefore we have decided to take give a brief run-down of expected events in the residential landlord and tenant sector this year.

Legislation-wise it is likely to be a quiet beginning to the year. The election expected in early May or June means that little or no primary legislation is likely to be enacted and anything that is put before Parliament is only likely to carry on past June is Labour wins the election. Speculation on what other parties will introduce if they win is largely pointless.
However, there are some changes that can be made without the introduction of primary legislation and, following the now established pattern we can expect some new Statutory Instruments to be introduced in early April.
Already on the cards is an increase in the maximum rent threshold of Housiung Act 1988 tenancies from the current £25,000 per annum to a figure in teh region of £100,000. A change of this nature was suggested in the Rugg review and was flagged in the Government’s response.
This change will have a significant impact on the residential lettings sector in central London, where a number of properties exceed this threshold as well as on some student areas as many student HMO properties also exceed this limit. The key change will be that many more of these properties will fall within the realms of the Tenancy Deposit Protection regime introduced by the Housing Act 2004. This will undoubtedly lead to a further surge in litigation in respect of unprotected deposits as well as an increased workload for the three protection schemes.
Also expected is a change in the Mobile Homes Act 1983 which will remove some fact-finding aspects from the Courts and transfer them to the Residential Property Tribunal Service. We highlighted and commented on this just before Christmas.
Elsewhere in the UK, the Scottish assembly has made clear its desire to intorduce a Scottish equivalent to Tenancy Deposit Protection and the regulations to make this happen will no doubt appear before the year is out. In Northern Ireland, a draft Housing Bill has been put forward for further consultation following a an earlier consultation in the latter part of 2009 and this will probably see further activity before year’s end.

In the Courts, the OFT v Foxtons case will rumble on, with Foxtons having now appealed the original decision. More on that here.
Tenancy Deposit Protection will also continue to see the County Courts and there are at least two appeals headed for Courts of record as well. PainSmith has a case in the High Court near the end of January and another case is listed for the Court of Appeal in the spring.

In other areas it is likely that there will be a continued drive by Local Housing Authorities toward extending the licensing of HMOs and other properties under their powers in the Housing Act 2004 and this will, doubtless, keep the Residential Property Tribunal busy.

So there it is. Some small but significant changes in England and Wales. Potentially large upheavals in Scotland and Northern Ireland and some important issues for the Courts to contend with. It will be interesting at the end of the year to see what happened that we did not expect!

Filed under: England & Wales, Northern Ireland, Scotland, ,

Foxtons to Appeal in OFT case

Well, as we suggested might happen here, Foxtons is going to appeal the decision of the High Court in the light of the Supreme Court ruling in the Bank Charges case. The Times has reported this (slightly badly) here.

However, it is questionable whether the implications are as important for other agents as the Times suggests given that the Foxtons decision arguably had little impact on agents whose clauses were drafted in plain and intelligible language.

Filed under: England & Wales, Northern Ireland, Scotland, ,

OFT loses in Bank Charges- Implications for Foxtons

The Supreme Court has handed down their judgement in the case of OFT v Abbey National & Others (the ‘Bank Charges’ case). A copy of the judgement and a press summary can be found here.

The Court was not ruling on the fairness of bank charges themselves but on whether the OFT could investigate them at all. The banks were contending that their charges were part of the, so-called, “core bargain” between them and their customers and were therefore exempt from investigation for unfairness under the terms of Regulation 6(2)(b) of the Unfair Terms in Consumer Contract Regulations 1999. This regulations states that so long as a term is in plain and intelligible language terms are exempt from an assessment of their fairness if they relate “to the adequacy of the price or remuneration, as against the goods or services supplied in exchange”. This, “core bargain” term, was claimed by the banks to exempt their charges for unauthorised overdrafts and other similar charges from consideration. This argument was rejected both by the High Court and the Court of Appeal who in effect carried out a process of dividing charges into “core terms” which were exempt from consideration and “ancillary terms” which were not.

However, the Supreme Court has overruled both of these decisions stating that the banks system of charges must be seen as an overall package for the provision of a banking service which is ‘free while in credit’ and this falls within the exemption provided by Regulation 6(2)(b). They were critical of the exercise of dividing charges up into core and ancillary charges and questioned whether such an exercise could realistically be accomplished.

The Supreme Court made brief reference to the OFT v Foxtons decision but pointed out that the core bargain issue was, while relevant in that case, not vital as Foxtons’ terms of business were ruled not to be in ‘plain and intelligible language’.

The Supreme Court has not made any ruling, or any substantial comment on whether a ruling on unfairness of terms should be pursued retroactively.

Turning to the case against Foxtons. It was ruled that the average landlord would not view a renewal commission as part of the “core bargain”:

That [Foxtons’ publicity material] is hardly likely to engender a realisation or acceptance that the renewal commission is part of the core bargain. As far as the landlord is concerned the core bargain will be getting the tenant in, in exchange for commission which would seem naturally to be associated with that activity, that is to say the commission payable on the first period’s rent.

However, this part of the ruling is now in doubt as a result of the Supreme Court decision. The Supreme Court were not prepared to accept the argument advanced by the OFT in the Bank Charges case that charges levied by the banks would not be acceptable from the consumers viewpoint. The Supreme Court felt that the matter should be viewed from the point of view of both sides and a balanced view adopted. It is not possible to simply state that one party would not have contemplated the charge and leave it at that. Allied to this is the view adopted by the Supreme Court that it is artificial to separate one charge levied as a part of a contract from other charges and deem some of those charges as “core” and some as “ancillary”. This would suggest that this exercise, as conducted in the Foxtons case, is inappropriate and that all the charges should be considered together as a part of an overall package.

It is quite likely that Foxtons will now seek to appeal the decision of Mr Justice Mann. Given that the banks’ charges must now be construed as a package they will no doubt seek to argue that their charging regime must be seen in a similar manner. They will still have the difficulty of their terms being held not to be in “plain and intelligible language” and this is an issue they will need to deal with. No doubt we will find out shortly if Foxtons are to renew their request for permission to appeal or withdraw it altogether.

For other agents, this decision provides substantial comfort. Provided that their terms of business and charges are expressed in “plain and intelligible language” it will be much easier for them to make the case that their charges are a part of an overall package and should be exempt from a consideration of unfairness. The importance of clear and well-constructed terms of business is magnified by this decision and the pressure is removed from many agent’s charging models.

PainSmith Solicitors has always maintained that the terms of business it supplies to agents do (and always have) express charges in a “plain and intelligible” manner. However, they have amended their terms of business as a result of the OFT v Foxtons case to make the charging structure even clearer.

Filed under: England & Wales, Northern Ireland, Scotland, ,

OFT v Foxtons Rides Again (Maybe)

At 9.45am on Wednesday 25 November the new Supreme Court will give judgement in OFT v Abbey National & Others. This case will be well known to most as it relates to the ability of banks to make charges to customers who overdraw their accounts and on the level of those charges. There should also be an indication as to whether banks will actually have to repay money they have previously collected in charges. Quite apart from the impact this case may have on the UK’s leading banks, possibly requiring them to repay hundreds of millions of pounds in charges, there will also be an impact on the ongoing matter of OFT v Foxtons. This is because Foxtons sought permission to appeal from the Court at the most recent hearing after the judgement criticising aspects of their fees had been handed down. However, they specifically requested that the Court refrain from considering their permission request until after the Supreme Court ruling in OFT v Abbey National. Therefore, depending on the judgement of the Supreme Court, Foxtons will either withdraw their request or will seek to appeal the matter to the Court of Appeal.
Additionally, there will be great interest as to whether the banks actually have to pay money back. If they do, this potentially opens the floodgates for previous Foxtons clients to claim return of fees paid to Foxtons which were paid on the strength of clauses deemed by the High Court to be unfair. This could end up costing Foxtons tens of millions of pounds. Naturally, an effort to make Foxtons return money will also have an impact on other agents who have already faced suggestions from landlords that their fees are unfair as well, notwithstanding the ruling against Foxtons being based entirely on the unusual wording used in their terms of business.
PainSmith will aim to post on Wednesday as soon as we have had time to digest the Supreme Court judgement. Watch this space!

Filed under: England & Wales, Northern Ireland, Scotland, , ,

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