Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

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, ,

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, , , ,

Missing Landlord: an alternative solution

Many of you will be aware that when a long residential Leaseholder of a flat has a missing Landlord the Leasehold Reform Housing and Urban Development Act 1993 provides a remedy. The process involved requires a Court application and then a determination of the price by the Leasehold Valuation Tribunal using the valuation principles under the 1993 Act, as amended. This means that if the Leaseholders hold leases with less than 80 years remaining then they will have to pay an element of marriage value.

Under the Landlord and Tenant Act 1987 Part III there is an alternative method which may be used. This may be a better route due to the valuation formula used which is believed to be more favourable to Leaseholders in that generally they will not have to pay marriage value.

Under the 1987 Act if there is a building consisting of 2 or more flats held by qualifying Leaseholders (i.e. long leases) and they amount to more than 2/3rds of the total number of flats then the Act may apply (section 25). The commercial parts of the building must not exceed 50% of the total internal floor space ( so further reason why this method can be used rather than the 1993 Act). Subject to these then the 1987 Act will apply.

The starting point is then to look at Sections 27, 28 and 29 of the 1987 Act. Under Section 27(3) when the Landlord is missing an application to the Court can be made to dispense with the service of a Notice. The application can then be made for an Acquisition Order and under Section 29 if the Landlord is not carrying out their management function, which includes repair, maintenance and insurance of the property, as required by the lease (and almost by definition if there is a missing landlord and no intermediate Management Company they will not be) then the Court may make an Acquisition Order. The Order may be on such terms as the Court thinks fit but they will refer the question of price to the Leasehold Valuation Tribunal.

Under S. 33 where the Landlord is missing then the Senior President of the Tribunal shall select a surveyor to determine the price payable. This will be on terms that the interest may realise if sold on the open market and that the assumption that none of the Leaseholders were seeking to buy. Generally it is believed that in instances where marriage value would be payable under the 1993 Act this may be a more favourable valuation method.

The LVT will then make appropriate directions as to the price and other terms. The court may then execute the transfer and subject to paying the monies into Court the acquisition can be created.

Whilst all routes involving missing Landlords are perhaps cumbersome it is worth thinking which route is best. Discussion with the professional advisers is best at an early stage to consider fully the best valuation method. From a time perspective given the actual processes are similar then little can be gained. It is also worth bearing in mind that in instances where a Manager has been appointed under the 1987 Act then provided the Manager has been appointed for not less than 2 years then this method can also be available.

If you have such a situation then we would be happy to advise.

Filed under: England & Wales, , ,

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, , ,

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, , , , , ,

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.

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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 ….

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Gas Safety

A landlord has been fined £2000 for failing to obtain a Gas Safety Certificate.

In January 2011 the gas boiler broke down, upon the landlord failing to repair it the tenant and her partner complained to HSE. Following an initial investigation the HSE served the landlord with an improvement notice requiring him to produce the gas safety certificate by May 2011. The landlord did not comply.

In October 2011 the landlord finally replaced the boiler but while the gas engineer was at the property he found the cooker to be dangerous and isolated it. The gas safety certificate was produced in October 2011.

Mr Hussain, pleaded guilty yesterday to breaching Section 33(1)(g) of the Health and Safety at Work etc Act 1974 and Regulation 36(3)(a) of the Gas Safety (Installation and Use) Regulations 1998 and was fined £2,000 and ordered to pay £3,000 costs.

The HSE’s comments on the case can be read here.

We still get asked by landlords and agent when and if gas safety certificates are required when residential properties are let out. This is of some concern given the age of the legislation and we hope that whilst there was no fatality in this case that those in the letting business will take this obligation more seriously.

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What duty does a Landlord have if the tenant leaves their belongings in the property once they have vacated?

The above question is one which we get frequently asked by agents on the PainSmith helpline. It is often the case that tenants will vacate a property and leave their personal possessions behind which can pose a real problem for landlords.

The Torts (Interference with Goods) Act 1977 requires a landlord to take care of the tenant’s possessions and states that they have a duty to ensure that they undertake all reasonable efforts to trace the tenant to return their possessions. It is only when the tenant cannot be traced and a reasonable period of time has lapsed, can the landlord under the Torts (Interference with Goods) Act 1977 sell the possessions. Part II of Schedule 1 states that the tenant should be given at least 3 months notice of the landlord’s intention to sell. However a clause in the tenancy agreement is enough to vary this 3 months to for example, 14 days.

Usually the landlord will hold a forwarding address for the tenant and so will be able to trace the tenant this way however if the tenants whereabouts are unknown then reasonable steps should be taken to trace the tenant including placing an advertisement in the local newspaper and notices on local community boards.

If the landlord manages to trace the tenant the Act goes on to state that a written notice must be served by the landlord on the tenant stating their intention to dispose of the possessions, how to arrange collection and that disposal of the possessions will occur only once the notice has expired. The notice should go on to further state that if the possessions are not collected by the expiry of the notice then the possessions will be sold. If a landlord and tenant are in dispute as to the possessions (such as ownership) then the they cannot be sold until the dispute has been resolved. Where the possessions are sold without confirming who the actual owner of the possessions is, the landlord takes the risk of having the actual owner turning up at his door to make good on this sale without consent, which could mean paying double the actual value of the possessions.

When it comes to selling the possessions the landlord must account for all proceeds of sale, less any reasonable costs (such as storage) and should use the best method of sale which is usually by auction. Any proceeds left over will belong to the tenant up until six years after the sale.

It is often the case that some items that may have been abandoned by a tenant are of little or no value. If this is indeed the case then steps should be taken to determine that the possessions are of little value, for example a letter confirming this by the auctioneer before a landlord or agent on their behalf, disposes of them by any other means.

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

It’s not the lawyers! It really isn’t!

Delays in possession hearings are not common in our experience but they can happen. In the case of Benesco Charity Ltd v Kanj and Unknown Persons the occupiers of a property were granted permission to appeal a possession order thus delaying the execution of the bailiff warrant for possession.

Benesco granted Speedway Tyres a 10 year lease. Mr Kanj set up the company but it was his wife that was the director of the company. Speedway and an associated company, Speedway Autocare Ltd (Autocare) was placed into a creditors voluntary liquidation.

The liquidator appointed for both companies disclaimed the lease. This meant that Speedways obligations under the lease were at an end. However this did not put at an end any lease that Speedway may have granted to third parties for the property. Mr Kanj received notification of the disclaimer.

Benesco then issued possession proceedings on the basis that Mr Kanj and the other unknown persons were trespassers. Mr Kanj defended on the basis that at some point he was granted a sub tenancy by Speedway or Autocare. However at the hearing Mr Kanj then changed his position and stated that he did not have a personal tenancy but that a tenancy had been granted to Autocare by Speedway.

There were other issues too but dealing with the delay aspect, the court decided that upon reading the witness statements it did appear as though the issue over the sub tenancy needed to be dealt with and as such the witness statements could not be rejected at a possession hearing which is summary in nature.

A person is entitled where there are matters raised in the witness statement to take the matter to trial. The court found that on the evidence there was an arguable case that at least Autocare had a sub tenancy. The court accepted that it was not clear what the true position was but stated that Mr Kanj and his wife could be cross examined in court and should not have been dismissed out of hand.

The moral of the story…….delays are possible even when the tenants/occupiers case appears to be groundless.

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

HMO

Painsmith draws your attention to this news item published by Bristol City Council which has prosecuted some of its landlords for serious breaches of the Housing Act 2004. The landlords of one Bristol property have been fined more than £30,000 and ordered to pay over £5,000 in costs after being found guilty of serious breaches of the Housing Act 2004.

Interestingly the prosecutions were brought as a last resort only after attempts to work with the landlords to “turn the management of the property around” failed. Bristol City Council maintains that it is committed to working with private landlords to maintain and improve the quality of housing in the city.

If you are an HMO landlord the advice is – work with your local authority: respond to their letters within the specified time limits. If you believe that they are demanding measures not required by law, then raise this with them. If you are not sure of your rights then as always make sure you seek independent legal advice as soon as you can.

You can read the full article here.

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Setting the record straight….

It has come to our attention that some companies claiming to be experts in the field of Landlord and Tenant law are advising agents not to serve section 8 notices until tenants are into their third month of arrears because some judges insist that to serve a notice during the second month is “no longer acceptable”. The companies go on to suggest that certain firms deliberately issue notices prematurely in order to ensure adjournments and thus increase their own fees.

Leaving aside the accuracy of the statements and without joining in any mudslinging, Painsmith comments as follows:

1. Under ground 8 of schedule 2 of the Housing Act 1988, if rent is payable monthly and at least two months’ rent is unpaid the grounds for possession are made out. Rent means rent lawfully due from the tenant. This is spelled out in the Housing Act. Where rent is payable in advance but the tenant does not pay the rent on the payment date, then from the day after the rent payment date that months’ rent is lawfully due but unpaid, and ground 8 is made out.
2. Painsmith deals with hundreds of section 8 notices a certain number of which lead to possession proceedings for rent arrears. Painsmith has never experienced a judge adjourning a hearing on the basis that the section 8 notice should have been served in the third month.
3. Where the tenants pay quarterly then ground 8 is made out if “at least one quarters’ rent is more than three months in arrears”. In this case then you would need to wait until the tenant was three clear months in arrears.

Of course there is no compulsion to serve a section 8 notice on ground 8 immediately that the ground is made out. However the law is clear: where a tenant pays monthly in advance ground 8 is made out the day after the second unpaid rental due date has passed. As the leading landlord and tenant legal practitioners in this field Painsmith has a duty to set the record straight.

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What should I think about before I buy my freehold? The Cons.

For many Leaseholders getting together with fellow Leaseholders to buy the freehold of the building they occupy is seen as the end of problems with freeholders and controlling their own destiny. Whilst this is of course true before going down this major step leaseholders should consider if and why this is the right route for them.

The motivation for many is to rid themselves of a freeholder who they perceive is not offering good value for money and service and often the fact that all the leaseholders need to act to extend their leases. Undertaking a collective enfranchisement can often be achieved at a similar cost to that of all extending their leases particularly when legal and valuation costs are thrown into the mix. All seems simple and many groups at this stage press on with the purchase.

The issues generally arise sometime down the line when the glow of having purchased has worn off. Simply because you have bought your freehold does not mean that all problems go away. In our experience freehold purchases tend to be driven by a small group of leaseholders who put in enormous amounts of time and effort. Sometimes after the initial euphoria they find that they do not wish to (or can’t) give as much time to the freehold as before. As a freeholder you remain bound by the terms of the leases particularly with regards to service charges and repairs. Whilst often on completion the leaseholders will all have extended their leases (typically to 999 years) the service charge and repairing covenants usually remain the same. The freeholder is still governed by the statutory rules governing residential leases and must comply with all of these obligations including in relation to consultation. This year we have seen a number of LVT decisions reiterating this and making clear that there will be no let off for leaseholder owned companies.

As a result some of the imagined costs savings cannot be achieved as often a managing agent for practicality will still be required as well as having to go through all the processes. Certainly we would always recommend to any group considering enfranchisement that they should look to appoint managing agents to ensure that the day to day running complies fully with all of the legal requirements. We have seen over the past decade the increase in rules and regulations to ensure that individual leaseholders are protected but this has driven up costs as the work involved has increased.

Increasingly we are also being asked to advise both individual leaseholders and freeholds where the parties find themselves in dispute. This can be as simple as someone not having the money to pay the service charge and fellow neighbours having to take Court action to recover monies. The other extreme is in small blocks where the freehold is owned by named individuals and one is looking to sell and one or more of the other Owners will not sign the necessary transfer paperwork causing a sale to fail. Consideration needs to be given as to how you feel you will get on as a collective group and not just with your current leaseholders but potentially with subsequent Owners.

We have seen instances where the repercussions are so great that fresh collective enfranchisement claims have been made. Now with the lower qualifying majority of 50% it is possible that buildings can enfranchise and re-enfranchise again and again. We have seen a situation where the leaseholders of a small block has enfranchised on 3 occasions! The fees spent on such an exercise must be immense for little real gain to the leaseholders individually.

Whilst none of the above should necessarily put anyone off buying their freehold it is important that everyone enters this with their eyes wide open. Under the legislation there are various other routes that can often be adopted such as Right to Manage and undertaking bulk lease extensions either by the statutory route or negotiation. Commercial freeholders are alive to these issues and many will negotiate over items. There can be a benefit in having a completely separate (and we deliberately do not say independent!) freeholder. Whilst for most groups who enfranchise the process is an unqualified success story with many real and perceived benefits as with most transactions there are risks and it is important that all participants understand these.

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

Can the freeholder recover costs incurred in pursuing me at the LVT as service charge?

The above question is one which frequently arises when a claim has been made by a freeholder to the LVT to determine the reasonableness of service charges.

Obviously it is always open to the tenant to request that the LVT in determining the application will exercise it’s discretion and make an order under Section 20c Landlord and Tenant Act 1985. If such an order is made the LVT can order that no costs will be added to the service charge accounts or limit the amount/proportion that may be recovered. If the freeholder is generally successful in their application often the LVT will not make such an order and so then the costs may be recoverable.

As various articles have said it is then important to look at the terms of the lease. Unless the lease allows recovery the freeholder will not be allowed to recover these costs.

Recently the Court of Appeal had to consider the interpretation of the lease in Freeholders of 69 Marina, St. Leonards-on-Sea –Robinson, Simpson and Palmer v John Oram and Mohammed Goorun [2011] EWCA Civ 1258 .

In this case the freeholder had brought proceedings in the LVT to determine the reasonableness of the service charge and subsequently looked to recover the costs. Proceedings were issued in the County Court who determined at first instance that the costs were recoverable under clause 3(12) of the lease which said:

“pay all expenses including solicitors’ costs and surveyors’ fees incurred by the landlord incidental to the preparation and service of a notice under section 146 of the Law of Property Act 1925 or incurred in or in contemplation of proceedings under section 146 or 147 of the Act…. and to pay all expenses including solicitors’ costs and surveyors’ fees incurred by the landlord of and incidental to the service of all notices and schedules relating to wants of repair of the premises…..”

The District Judges findings were upheld at first instance by the Circuit Judge but the leaseholders appealed to the Court of Appeal. The appeal was dismissed as the Court of Appeal determined that clearly the Landlord had incurred costs in undertaking repairs etc and under section 81 of the Housing Act 1996 an application to the LVT is a necessary pre condition of the forfeiture process.

An interesting decision making clear that the Court will give a broad interpretation to these clauses to allow Landlords to recover costs

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

“Why Do I Need Court Proceedings? And What Do These Involve?

Many of our readers will know why there is a need to obtain a Court Order to evict residential tenants however for those that do not we hope the below helps.

If someone is occupying a residential property whether lawfully or not then an Order of the Court is required (a Possession Order) which generally can only be enforced by County Court bailiffs or Sheriffs Officers. This is true of squatters and tenants but this blog post is limited to tenants. If you evict a Residential Tenant from their home without a Court Order you can find yourself as Landlord (or others who assist in this such as an agent) liable to both civil action for damages and a right of re-entry from the tenant and also possibly criminal prosecution under the Protection from Eviction Act 1977 which can render you liable for a fine or in severe cases a custodial sentence. For these reasons alone it is vital that the correct procedure is adopted to avoid such penalties.

If therefore the Landlord wants to get his or her tenant out he should make sure he follows the correct process. The starting point will be the tenancy agreement itself to see on what basis the tenant can be evicted. If the Landlord simply wants the property back and there are no major breaches then generally the fixed term will need to be ending or for the agreement to have a break clause which the landlord can rely upon. Most types of residential tenancy require some form of notice most usually a s.21 notice and for others some form of Notice to Quit.

If there are breaches of the agreement itself such as none payment of rent then different notices may need to be served such as a s.8 notice for assured tenancies (including Assured Shorthold Tenancies).

Once the notice has expired an application can be made to the Court. Usually this will be the County Court local to the tenanted property. Whilst you can apply for possession through the accelerated (a misnomer!) process where you have a expired s.21 in the case of a s.8 or where you wish to seek costs, rent arrears and interest as well as possession pursuant to the expired s.21 then you will be listed for a first hearing. This should be within 8 weeks of issue but we have experienced recently delays which we have posted about. At the hearing if the Judge is satisfied that you have complied with the rules then unless your tenants have a Defence you should obtain a Possession Order. This will usually be for either 14 or 28 days but the Court can extend the time up to a maximum of 42 days.

Once you have this Order the tenants should vacate by the date given, if they do not then you will have to apply to the Court for a bailiff appointment. This will then be listed and again usually within about 4-6 weeks. Whilst the bailiff does not have power to use force to evict the Tenants in our experience we have found that the bailiffs are very effective at doing their job and persuading tenants to leave.

It is perhaps worth highlighting a point we have made in previous blogs given the current state of the economy. We are seeing more and more tenants who are approaching the Local Authority to be rehoused once given notice by their Landlord. Sadly most Local Authorities will not properly consider the tenants request for re-housing until a date has been fixed for the bailiffs appointment and the tenants themselves will be advised that if they vacate before-hand then they will have made themselves voluntarily homeless and the Local Authority will not assist.

So once the bailiff has executed the warrant the landlord will hopefully gain possession to relet his or her property to another.

It is important that all the way through you get the process right. If not then the whole procedure can be delayed substantially and the costs for the Landlord can escalate. This blog assumes no defence has been lodged and only gives a brief overview.

We appreciate that Landlords often at the time of evicting a tenant wish to limit their financial exposure and hence we offer a capped price eviction service but it can often be a false economy to not take advice on the whole process at the outset!

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

Enfranchisement: can you bring multiple claims?

Recently the High Court has ruled on the case of Westbrook Dolphin Square Limited v. Friends Provident Life and Pensions Limited.

The Leasehold Reform Housing and Urban Development Act 1993 expressly considers the position which may arise when a Notice (whether for enfranchisement or a lease extension) has been validly served but is not proceeded with whether by way of an express withdrawal or a deemed withdrawal when a party does not comply with the time limits under the Act. In those circumstances the Leaseholders are then barred from issuing a fresh Notice for a period of 12 months from the date of withdrawal. The participants will also be liable to pay the Freeholders costs. Thus the Act envisages that multiple Notices may be served.

In The Westbrook case a Notice was originally served and a negative counter notice was served and proceedings issued which had reached the stage of being a couple of weeks form the date fixed for hearing when Westbrook withdrew the Notice and the claim supposedly due to the fall in property values. Westbrook made clear when serving Notice that they would take further steps to acquire the freehold on what they felt would be more advantageous terms. Friends Provident indicated at this stage that they felt if Westbrook did this under the Civil Procedure Rules they would need the Courts permission. Westbrook duly paid Friends Provident the costs of the Court proceedings.

A new Notice was duly served (after the 12 month moratorium period had expired). This Notice contained a different purchase price, date and manner of signature of the participating tenants. Friends Prov served a counter notice and proceedings were issued by Westbrook without permission of the Court being sought in advance. Five out of the six grounds raised by Friends were the same as the earlier proceedings. Friends submitted that the second claim was an abuse of process in that there was a public interest in the finality of litigation and that no party should be vexed by the same cause of action twice. Westbrook submitted that it did not require permission and if they did they should be granted permission as the possibility of successive claims was a feature of the Act.

Mr. Justice Arnold struck out the claim. He decided that the principle of finality of litigation and that a person should not be vexed twice should inform the courts approach. The claim amounted to an abuse of process. The facts were substantially the same. Whilst withdrawing the Notice was acceptable they should not have discontinued the claim and then looked to in effect bring a second claim on substantially the same facts. They should have pursued the Court claim and had that adjudicated upon and at that stage, if they had been successful, they could have withdrawn the Notice.

It seems that if you receive a negative Counter Notice before issuing proceedings you need to consider whether you wish to go through with them. Once proceedings are started if you then withdraw serving a Notice again on the same basis will be difficult without permission of the Court which it seems may not be given. If therefore you have a block where there may be issues over the right to enfranchise tenants need to be committed to going all the way through with proceedings and if in doubt need to be prepared to withdraw the Notice at an early stage. In practice this probably applies to a minority of claims and seems to be the Court expressing annoyance at corporate participating tenants looking to exploit the system as the judge saw it. Yet more case law deriving form LRHUDA 1993!

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Right to Manage: Make sure you get the process right!

September saw 2 interesting decisions made by the Upper Chamber (Lands Tribunal) concerning Right to Manage (RTM) applications.

In the first case re 15 Yonge Park a claim notice under section 80 of the Commonhold and Leasehold Reform Act 2002 was served by the RTM company set up for the purpose of exercising the right to manage. Sadly on the Notice the wrong address was given for the Company in that it did not give the Registered Office address of the RTM Company but some other address. At first instance the LVT appears to have accepted that there was an error but that this was not fatal. Unfortunately the Upper Tribunal disagreed.

On appeal it was determined that the requirements set out in Section 80 of the 2002 Act are mandatory. The registered office should have been set out. If there had been some sort of minor error in this address such as a typo this could have been corrected under Section 81 of the 2002 Act but as complete failure to provide the registered office address (although some other address was provided) meant that the Notice as served was defective and invalid. Back to the drawing board for this RTM and almost inevitably a sizeable bill of costs.

The second case was re 6-10 Montrose Gardens. Reading between the lines of this decision it would appear that this was a hard fought RTM with this appeal not relating to the first notice served but the third! One can only guess why earlier notices had been withdrawn or deemed withdrawn.

On this occasion Notice was served which was disputed by the Landlord. The Landlord objected on the basis that an Invitation to Participate had not been given to those Qualifying Tenants who were not members of the RTM Company. Subsequently a couple of days before the 2 month time limit for applying to the LVT expired an application was faxed to the LVT but without any of the supporting documentation which was not received until after the 2 month period had expired.

The questions for the appeal were whether the application had been made properly and if so was the Landlord’s ground for refusal correct.

To deal with the second point it appears to have been agreed that no invitation to participate was served prior to the service of this notice but an invitation had been served prior to an earlier invalid notice. The terms in effect of this notice were the same as those following the Invitation to Participate. Also those persons who were originally served with the Invitation Notice had remained the same. The Tribunal found that there was no need to serve a further Invitation Notice simply because other RTM Notices had been withdrawn or deemed withdrawn. Care should be taken particuarly to make sure that those who should be served the invitation Notice have not changed and good practice must say that it would be better (and safer!) to reserve the Invitation Notice to prevent any argument on this point.

With regards to the application to the LVT the Upper Tribunal was not so generous. Whilst the Upper Tribunal accepted that the LVT may have a discretion they must have received sufficient documents to allow them to deal with the claim and here they had only received an application form. As a result the Upper Tribunal determined that the right of discretion had not even arisen. As a result the application was said to be out of time and there was therefore a deemed withdrawal. It appears therefore they are now on to RTM Notice number 4!

In practice these cases provide a clear lesson that you must make sure you comply with the procedure as set out in the Act fully and you are unlikely to be able to correct mistakes. Further evidence of the need to take care in respect of all Notices but particularly leasehold reform matters as the decisions are clear that strict adherence to the statutory process is required.

Consider yourselves warned!

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

Back to basics 2: Notice to Quit

A second opportunity to delve into the basics of Landlord and Tenant law has arrived. This time I am looking at Notices to Quit and the common pitfalls that are easily made but fatal to the effectiveness of the Notice.

It is important first of all to nip in the bud a common misconception when it comes to Notices to quit. They and Section 21 notices are NOT one of the same thing. They indeed are used in completely different situations. Granted, the way they are applied can be seen as similar, however they should not be confused as it would result in a notice as useful as a chocolate teapot.

A notice to quit is a tool to be used to bring about the end of a common law/company let tenancy. Section 21 notices are used to end an assured shorthold tenancy. So if the tenancy agreement that is in place is an AST serve a Section 21 not a Notice to Quit.

A point of law that makes numerous Notices invalid is when the date of expiry should be and when it should or can be used. The date of expiry must be either at the end of a complete period of the tenancy or on the first day of the new period. If this is a little too vague, there is an alternative method. The case of Chez Auguste Ltd v Cottat stated that there was no need to give an exact date on the notice. This may appear harsh on the tenant but there was a caveat to this declaration. It just needs to be clearly identifiable to a reasonable tenant as to when the Notice will expire. As well as this, it cannot be used in the fixed term unless it is used in conjunction with a break clause.

There are certain other points that must be followed when the Notice has been served. Once the Notice has been served, rent cannot be demanded. Payment of mesne profits (equal to the rental sum) must be taken instead without prejudice to the effect of the notice to quit. It must be made clear to everyone who looks at the transactions that there is no intention to create a new tenancy found. Street v Mountford tells us that if there is no intention to create legal relations then no tenancy is created. This is particularly important because the last thing you want as a Landlord or Agent is to get to the point where the Notice to Quit has expired and possession is close, only to find that the tenancy will continue due to a few seemingly innocent statements.

These requirements must be strictly applied otherwise the notice will generally be found to be invalid. It may seem like a lot of effort but caution is the best approach. Make sure as many checks as possible take place and that will ensure that time is not wasted, particularly in a situation like possession matters where time is generally of the essence.

A number of you may well be signed up to our helpline. If you indeed are and wish to access a Notice to Quit, then it is available via the document vault which you have access to.

It is worth noting that if it is a common law tenancy and your sole ambition is to gain possession at the end the of the fixed term, a letter stating you require possession will suffice. A letter will also suffice if the tenancy has a break clause, again no Notice to Quit is required to exercise the right. A Notice to Quit is only required once the tenancy has become periodic.

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

The Tenants Bankrupt!

We have come across two decisions from earlier this Summer dealing with the problem of what to do when faced with a Tenant who is made bankrupt or enters into a Debt Relief Order.

Generally anyone who is made bankrupt or obtains a Debt Relief Order is subject to certain moratoriums on proceedings and the recovery of money which they owed prior to the Court Order making them bankrupt etc. This means that landlords can find themselves with a tenant who has run up arrears which they then cannot recover save for making a claim in the insolvency process under which it is likely they will only recover a small proportion of the monies.

In Sharples v. Places for People Homes Limited (bankruptcy) and Godfrey v. A2 Dominion Homes Limited (debt relief order) the Court of Appeal gave consideration as to whether a Landlord may bring Possession proceedings relying on arrears as a ground for possession not withstanding that the Tenant was subject to some form of insolvency procedure.

The Court determined that Landlords could bring proceedings relying on the rent arrears in the usual way if the ground could be made out then the insolvency of itself would not prevent the court making an Order for Possession in these circumstances. What the Court did say is that the Court could not make a monetary Judgment and nor could it suspend any Order on terms requiring the arrears to be paid.

Whilst often a Landlord may be best advised to rely on Section 21 if at all possible obviously this is not always available. Landlords will therefore still have the option of Section 8 proceedings.

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

Sentencing…

This not really a heading that one would expect on a Landlord and Tenant blog but with the country up in arms in many cases about the sentencing of the rioters and the recent Court of Appeal decisions we thought it prudent to mention the case of Premier Places.

Brandon Weston and David Christopher Williams ran Premier Places, a lettings agency with offices in Worcester and nearby Redditch. They were sentenced this week for a long-running fraud but the sentences were suspended.

Weston who ran the business pleaded guilty to four charges of fraud between 1 April 2007 and 28 February 2008 and was sentenced to 12 months in jail. But the sentence was suspended for two years and so he will not go to jail unless he is convicted of another offence within that time. He was also ordered to serve 250 hours of community service which is an alternative to custody. Williams, the book keeper, was sentenced to serve eight months, suspended for two years plus 150 hours of community service. He pleaded guilty to three charges of forgery of an accountant’s signature.

In sentencing, the Judge at Worcester Crown Court took into consideration the fact that Weston exhibited genuine remorse and was bankrupt with the events having had a devastating effect on his family.

According to prosecutors, Weston had interests in a restaurant, “The Glasshouse” in Worcester, a family home, a house in France and seven other houses in Worcester he was also allegedly taking £8,500 out of the business every month.

Daniel White of Counsel for Weston confirmed that he had signed over to the prosecution or sold all his assets and that his life had been turned upside down following his bankruptcy.

Premier places were a member of TDS (the Dispute Service) which has made good the losses suffered by both tenants and landlords at a cost of some £63,000. As most of you know the deposit should be held in a designated client account which is treated as a trust account and is therefore ring fenced from the assets of any company. However the deposits were not ring fenced despite the reassurances given to the tenants and landlords.

Steve Harriott, the Chief Executive of TDS, says that the sentences are “a kick in the teeth” for the tenants and landlords who were the victims of the scheme and that it “undermined the excellent work of properly self-regulated agents.”

Whatever your opinions maybe on the sentencing of these agents we at PainSmith Solicitors do agree that the industry needs to be regulated and that just like lawyers agents should undergo a minimum amount of training every year.

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

How long do I need to own my lease for to get an extension?

For a leaseholder to seek an extension under the Leasehold Reform Housing and Urban Development Act 1993 (“The 1993 Act”) it is still necessary to have owned the lease for a period of two years.

Whilst various amendments have been made to the 1993 Act (under the Commonhold and Leasehold Reform Act 2002) the requirement to have owned the lease for a continuous period of two years still remains. This is important particularly for people buying a lease where the term is getting close to only having 80 years remaining. You should remember that if the term falls to 80 years or less then the freeholder will be entitled to receive 50% of any marriage value which exists. In respect of many leases this means that the premium payable will be significantly higher than if a lease extension was obtained before the term fell to less than 80 years.

So the Leaseholder must have been a qualifying tenant for at least two years under section 39(2) of the 1993 Act. The period of ownership is calculated going backwards form the date of service of the Notice of Claim under section 42 of the 1993 Act. The period must be continuous but you can rely upon periods where the leaseholder has been a joint owner for calculating the 2 year period. Also it seems that provided you have owned the same flat it does not matter that you have been granted a new lease of that flat. It is the period of ownership of the premises which is crucial. This does mean that if a Leaseholder has acquired a new lease under the Act they would not need to wait a further 2 years before applying again for an extension (if you wanted to!).

It is however the case that the 2 year period will only start from the date of registration at the Land Registry as under section 22(1) of the Land Registration Act 1925 (and subsequent amendments) and various authorities it is believed that the Leaseholder only becomes the legal owner of the lease upon registration. Leaseholders and their conveyancers need to be aware of this point as sometimes registration can take some time and certainly should not be overlooked. In an unreported case in Central London County Court (Wellcome Trust Limited v. Baulackey 2009) the Court determined that the purchaser of a lease was not entitled to serve a Notice under section 42 of the 1993 Act until they had been registered as proprietor for at least 2 years.

As a result if you are looking at buying a lease with say only 83 years remaining consideration should be given to having the outgoing Leaseholder serve a Notice (assuming they have a 2 year qualification) which can then be assigned. Whilst incurring further costs at the time of purchase (which many Buyers wish to avoid) in the long run it can save substantial costs. It is also worth noting that some Freeholders will grant voluntary terms or agree an extension even if the criteria for qualification are not made out although often at a price!

Yet a further point which advisers serving Notices of Claim and those advising on receipt of the same need to be alive to. Yet a further example of the pitfalls within the 1993 Act!

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

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