FLW Article « Painsmith Landlord and Tenant Blog

6 February, 2012 • 10:18 0

LEASE INTERPRETATION: WHAT DO COURTS AND TRIBUNALS LOOK AT?

We have over the past few months referred in our articles to the fact that the starting point for LVTs and Courts in leasehold disputes is the lease itself.

Often residential leases were drafted many years ago and are in a format which even to professionals can be difficult to assess but what are the steps that the Court and LVT go through to determine the terms?

Initially they will go through the document. For a long residential lease all of the terms must be in writing. Some terms will be very clear and easily interpreted. This will often be the case in respect of terms over payment of ground rent and insurance. Certainly for any lease which has changed hands over recent years it should be in a format covering all the major areas such as rent, insurance, service charge, repairs etc as conveyancing solicitors should be checking that the lease complies with Council of Mortgage Lenders (CML) requirements. These requirements require these fundamental terms to be covered in a clear and satisfactory manner.

What is often more complicated is the extent of a clause. This can be particularly true of service charge clauses. Many of these clauses are written in a very general manner with some kind of “sweeping up” clause whose function is meant to be to cover everything not expressly stated. Be warned they do not always work!

The general principle is that clauses are given a meaning which a reasonable person would understand and words are given there ordinary meaning. Courts will not tie themselves in knots in carrying out an interpretation even if the natural meaning gives a strange result. If this is the case other remedies may be open to the parties such as rectification if they can fulfil the grounds. The Courts and LVT will not imply terms into an agreement and will expect all the terms to be present in the document relied upon.

If then a clause is still unclear and or could be interpreted in a number of ways generally it will be decided in a way most beneficial to the person not seeking to rely upon that clause. This is due to the fact that the burden of proof will be upon the person relying upon the clause to prove that meaning. It is for this reason that “sweeping up” clauses often do not achieve the desired effect.

Usually the terms are clear but it is vital that proper consideration is given to the terms. Anyone buying a lease (or a freehold) should understand what the rights and responsibilities under the lease are. Certainly as can be seen in the published LVT decisions often in service charges Freeholders and their Agents try and argue that it would be perverse to not allow them to recover management fees, accountancy fees etc and whilst a Panel may have sympathy if the lease does not cover this the hands of the LVT are bound.

Again early consideration of the contractual terms can prevent disputes and if in doubt parties would be well advised to take specialist advice to avoid costly Court or LVT cases.

Filed under: England & Wales, FLW Article, comment, litigation, long lease, procedure

3 February, 2012 • 10:55 0

How to prepare for an LVT Hearing in respect of service charges

For many people having an LVT hearing can be a daunting prospect and there first experience of dealing with a Court or Tribunal particularly in an unrepresented capacity.

For the purpose of this blog post we are specifically referring to applications made under Section 27A of the Landlord and Tenant act 1985 although the principles apply to all LVT cases.

These applications can be made by either the Freeholder or a Leaseholder and the purpose is to determine whether a charge is payable and the reasonableness of the same. In making its determination the LVT will have regard to the terms of the lease and then whether the statutory processes have been complied with.

Whoever makes the application is required to complete an application form. Copies of the forms and guidance notes may be obtained from the Justice department website.

As part of the application you should specify exactly what it is you are seeking. It is important to make this clear so that the LVT is clear what is being sort. Often if the Freeholder this will be the whole of particular years and if the Leaseholder they may wish to object to specific charges. This should be set out clearly and specify which service charge years are being referred to.

The application should have attached to it a copy of any relevant lease and other relevant documents. If it is the Freeholder we would recommend this should include:

• Any and all service charge demands with summaries of tenants rights etc as appropriate
• Copy of relevant lease
• Copy of any Consultation documents etc

If it is the Leaseholder then they should attach:

• Copies of demands received
• Copy lease
• Copy of any consultation notices you have received
• Copies of any correspondence disputing the sums

Remember that the LVT when they first look at the application will want to understand what the claim is about. This will assist the LVT in issuing Directions or listing for a Pre Trial Review (PTR).

If there is an oral pre trial review the LVT will want to use this to identify the issues and then issue clear guidance as to what should happen. It is crucial that both sides consider the case from this point of view. The LVT will not be deciding the case then but making sure all is in order for a hearing.

It is vital that parties follow the Directions given. The time scales are there to help all parties. You should read the Directions carefully and make sure you understand what is required. In particular the fact that you need to supply copies of all documents you will look to rely upon for proving your case. Often the Directions are detailed and very specific for the matters in dispute particularly if there has been an oral PTR.

Generally the LVT cannot refuse to admit documents (even if late) but must give everyone ample opportunity to consider. This could result in a hearing being adjourned if there is a late submission and possibly an application being made that such behaviour should result in a costs penalty (the LVT can order costs of up to £500 a party). If a party attends at a hearing and tries to submit late documents the LVT will consider whether it can give a short adjournment for the other party to consider the documents but the hearing itself could be adjourned. The LVT will not be happy with submissions on the day unless there is a very good reason given the effect this can have on the LVT being able to decide the matter.

It is vital that when preparing for a hearing that a proper bundle is prepared. This should include an Index and the documents should all be paginated in order and placed in a folder. These bundles must be supplied in good time to the LVT office so that the Panel has a reasonable opportunity to consider before the hearing. This will assist the LVT in considering the matter and whilst the panel should not draw any adverse inferences from a late submission they are only human. Late submissions and badly prepared bundles will not assist your case! It is worth asking someone to consider your bundle and submissions to see if a person who knows nothing about your case can properly understand the points you are making and can follow clearly the documents and submissions you want the LVT to understand.

Remember that at the hearing often the LVT will raise there own questions and points and so even if the other side has not raised something the LVT may still do so itself. This is particularly true of making sure that demands comply with the various statutory requirements and or consultation when required.

The LVT panel will usually not have met until the day of the hearing but will have been sent out the bundles etc. If they have received these in good time they will be better prepared for dealing with the case. The LVT will normally be proactive in managing the case in front of them and this is assisted by timely receipt of documents in good order. The panel is there to decide the matter and a case is always helped by good preparation on the part of the parties.

If in doubt about anything then you should refer to the Clerk at the LVT dealing with your case. Whilst they cannot give you legal advice they can help with understanding what is required or that you need to do.

LVTs are used to having parties appear in front of them unrepresented and pride themselves on being user friendly. For both Freeholders and Leaseholders they can effectively deal with matters in a timely way particularly with a well presented case.

We are always happy to advise and if necessary represent Freeholders and Leaseholders with all such applications.

Filed under: England & Wales, FLW Article, comment, litigation, long lease, procedure

31 January, 2012 • 18:04 0

Getting it wrong can be expensive….

When a landlord wants to begin work on a building it is important to follow the full section 20 consultation process, as shown by a recent decision from the Upper Tribunal of the LVT; Stenau Properties Limited and Karin Leek, Klaus Reckling and others.

Stenau Properties Ltd had written to the leaseholders informing them of the consultation requirements and had subsequently held a meeting with the leaseholders. However, the impression formed by the leaseholders was that their views would not be considered in the selection process.

Stenau Properties argued that there had been very little if any prejudice to the leaseholders and therefore the fact that the consultation process had not been followed to the letter was not important. However, although the LVT found that the service charges were reasonable, it held that the leaseholders, being the people who would ultimately be paying, must have confidence that they had some influence in the decision making process. It also held where there is a significant breach of the consultation requirements, there is likely to have been genuine prejudice whether or not the final choice of contractor would have been the same.

The Lands Tribunal confirmed this view and went on to say that even if the failure to properly consult was due to a misunderstanding of the process or incompetence that could not excuse a breach of the requirements. As a result of this decision, Stenau Properties will only be able to recover £250 from each leaseholder.

Filed under: England & Wales, FLW Article, comment, long lease

31 January, 2012 • 17:26 2

oooooooooooooh more options!

A short blog to highlight to readers that TDS and the Residential Landlords Association have created a fourth tenancy deposit scheme with price structures that are targeted at private landlords. The scheme is called Deposit Guard and the scheme will not charge an annual subscription fee or joining fee. For more information click here.

Filed under: England & Wales, FLW Article, comment, deposits, Housing Act 2004

27 January, 2012 • 11:42 0

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.

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

23 January, 2012 • 09:59 6

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, comment, legislation, possession, tenancy agreements

18 January, 2012 • 21:30 10

All very frustrating, but what are the options?!

Painsmith has recently encountered the Kafkaesque world of the tenancy deposit protection schemes, specifically the DPS and its new rules relating to the release of the deposit following a court hearing.

DPS is currently refusing to release deposits where the courts have not specifically ordered it and they have changed their rules to reflect the same. Under rule 29 (a) DPS will only release the Deposit if the Court Order specifically refers to the Deposit and how much to be paid out to the tenant.

Several of our landlord clients have obtained a possession order on the grounds of rental arrears and are finding it impossible (or very nearly impossible….or just very expensive) to get the deposit released, even where the contract specifically allows for the deposit to be applied against rental arrears.

Of course it is always open for the tenant to agree the release of the deposit to the landlord, but once possession is obtained many tenants lose interest in co-operating with their former landlord.

In the absence of an agreement from the former tenant the landlord is left to apply to the scheme to ask for the release of the deposit. We believe this should simply be a matter of drawing the scheme’s attention to the court order for possession and rent arrears and the clause in the contract, which allows the deposit to be used against rental arrears, where applicable.

However on more than one occasion recently a landlord’s application to the DPS for the release of the deposit has been refused and the applicant referred to clause 29 of the terms and condition ( see above) and informed that if they want DPS to release the deposit to them they must either arrange for the Court Order to be amended or a Third Party Debt Order to be obtained.

Concurrently, courts are refusing to make orders that would satisfy the DPS rules with many judges refusing to address the issue of the deposit on the grounds that it is a matter for the scheme and they do not want to usurp the jurisdiction of the Adjudicator.

You will recall that part of the point of these schemes was to take the matter of deposit handling away from the courts and instead use an alternative dispute resolution, that is the Adjudicator. However landlords find themselves facing courts that refuse to deal with the deposit because it is a matter for the scheme, and the scheme refusing to release the deposit without a court order so the whole thing becomes farcical.

Painsmith has historically been involved in deposit protection reform and we would suggest that between the schemes and the courts there needs to be some clarification.

Filed under: England & Wales, FLW Article, comment, consultations, deposits, Housing Act 2004, litigation, possession

17 January, 2012 • 19:23 0

Appointment of a Manager instead of RTM

The Commonhold and Leasehold Reform Act 2002 introduced the new none fault Right to Manage legislation.

The idea was that if you had not less than 50% of the Qualifying Tenants interested they could form an RTM company and then take over the day to day management. This was seen as an alternative to enfranchisement or even a stepping stone to the same.

However as with enfranchisement whilst at first this can seem a good idea it is worth thinking about what in practice this will mean. In particular since RTMs involve leaseholders working together this is not always appropriate for reasons similar to those given in our earlier blog post on the Cons attached to enfranchisement. In particular you may all need to work together and make difficult decisions about the management of the building.

Sometimes the leaseholders find themselves in a position where they all agree that the current management of the building is not working. Often this can be down to neglect or actual mismanagement. Whilst there may be differing opinions as to the way to move forward it may be possible to use the Landlord and Tenant Act 1987 (“The Act”) to impose some control.

The starting point is for one or more leaseholders to serve a Notice (section 22 of the Act) upon the Landlord and any Managing Agent appointed. This should set out the defaults complained of and invite them to set out how they intend to remedy the same. A reasonable period must be allowed.

Once that has expired the Leaseholders can then apply to the LVT under section 24 of the Act for the appointment of the manager. It will be for the Leaseholders to propose a professional managing agent who is prepared to accept an instruction. Generally the LVT will issue Directions and these will require the proposed agent to confirm that they agree to being appointed and ask them to confirm the terms upon which they would be appointed, provide a CV and other information. There will also be Directions requiring the Leaseholders to file evidence of the breaches complained of and for the Landlord/Current agent to reply. We pause at this point to highlight that this is a fault based procedure and the LVT must be satisfied that there are breaches and it is just and convenient to make an order.

There will then be a hearing (note generally the LVT has no powers to deal with matters summarailly) and the LVT will hear evidence. Usually they will require the proposed manager to attend and give evidence so that the LVT is satisfied that they are a proper person and able to adequately manage. The Manager is an appointee of the LVT and will operate pursuant to the terms of their Order.

Once appointed it will then be for the Manager to manage. They must ensure compliance with all terms of the lease and of course statute and will normally be expected to manage in accordance with one of the recommended codes of good practice for management.

The manager should act independently to pursue his or her duties. This often can be useful as the obligation to make decisions etc as to the management will be down to the manager and not the Leaseholders (or Freeholder). This means that sometimes difficulties can arise and the Manager is unsure what to do. If the terms of the appointment under the Order appointing do not make clear they are entitled to make application to the LVT to seek further Directions.

As can be seen whilst RTM provides a useful tool for leaseholders it is not suitable for all circumstances particularly today in some blocks which have many absentee leaseholders. Appointment of a manager can ensure that a building is properly managed particularly when the leaseholders (or some) are satisfied that it is not being done properly but they themselves do not want to become involved in the management or cannot agree on exactly how the building should be managed.

As with all things relating to residential Landlord and Tenant we at PainSmith are happy to advise Landlords or Tenants about such applications or the options open to them.

Filed under: England & Wales, FLW Article, comment, long lease, procedure

10 January, 2012 • 12:58 0

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, comment, Housing Act 1988, legislation, possession, procedure, tenancy agreements

6 January, 2012 • 10:00 0

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.

Filed under: England & Wales, FLW Article, comment, HMOs, Housing Act 2004, legislation

5 January, 2012 • 17:12 1

Happy New Year….

To all our readers and followers.

Well the Christmas break is now over and we look ahead to another year. We expect there to be changes in the rules governing Tenants Deposits both statutory and the rules of the individual schemes. This year may also see the Energy Act secondary provisions being enacted but we will wait and see…!

In other areas of law we are aware that the long awaited decision in the case of Hosebay v. Day as to what is a flat is likely to receive Judgment in the Supreme Court this Summer. Further we expect more decisions relating to service charges and recoverability particularly where there has been issues over consultation.

We will continue to try and keep you aware of any developments that we think might be relevant but if ever any areas you would like us to blog on or any questions please let us know.

Here’s to a prosperous New Year for one and all.

Filed under: England & Wales, FLW Article, comment

29 December, 2011 • 10:30 0

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.

Filed under: England & Wales, FLW Article, comment, Housing Act 1988, legislation, possession

28 December, 2011 • 11:12 3

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, comment, legislation, litigation, long lease

27 December, 2011 • 10:53 0

Common sense prevailing in contracts

The Supreme Court has confirmed in Rainy Sky SA and others v Kookmin Bank that they are prepared to ignore large parts of the original contract wording that can sometimes seem ambiguous and inconsistent in order to take a more commercial approach and apply common sense. This case demonstrates the continuous move away from a strict and literal approach to contractual constructions by applying common sense in order to eliminate the ambiguous wording of contracts which can cause disagreements amongst the parties with the wording often having more than one meaning.

In Rainy Sky SA and others v Kookmin Bank the Supreme Court unanimously overturned the previous decision of the Court of Appeal. The facts of the case are complicated because it’s a Maritime case and outside the remit of this blog. Therefore, briefly, the drafting of the guarantee agreement was the main cause of disagreement between the parties, as the drafting did not match that as stated in the shipbuilding contracts. Where the shipbuilding contracts had stated that should one party enter into insolvency then the buyers would have a right to rescind the contract and therefore obtain a refund for payments made pursuant to the contract, the guarantee agreement did not. Paragraph 2 of the guarantee stated that the buyers would be entitled to a refund if they exercised their right to “termination, cancellation or recission” their contracts and paragraph 3 provided the guarantee obligation that the defendant would pay the buyers “all such sums due to you under the contract”. But when one party began having financial difficulties and entered into a form of insolvency the defendant refused to give them a refund on the guarantee paid pursuant to the contract because the defendant argued that the insolvency was not “termination, cancellation or rescission”. The claimants argued that this literal interpretation made no business sense and that there was no good reason why insolvency should be excluded.

The courts decided to approach the contractual wording with what a reasonable person would have understood the parties to have meant, keeping in line with the consistency of the commercial purpose of the bonds. This approach to construction has been used in previous case law, notably Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd where it was held that the ultimate aim of interpreting a provision in a contract is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. However in Rainy Sky SA and others v Kookmin Bank [2001] UKSC 50 they were faced with the question of what happens if the reasonable person is capable of reaching two different interpretations from the same words? The court found it necessary to use the construction in a manner consistent with business common sense, as a language capable of producing an absurd or irrational result was held not to prevail over the commercial purpose of the agreement. The court therefore held that insolvency would be included in the list of grounds on which the parties could rely on in order to terminate the agreement and have the bond returned.

So why did the court allow common sense to prevail and what does it mean for the future? Language can be deemed as flexible in the sense that what might seem reasonable to one, isn’t deemed reasonable to the other. Thus meaning that although the presumption of a reasonable person can be used in most situations, it cannot be used in every situation that arises.

What does this mean to landlords and letting agents?
This case means that contracts, and particularly guarantee agreements, will be looked at by the Courts with an eye to giving them the force that the parties reasonably intended. They will not normally allow a guarantor to escape their obligations by reading a piece of ambiguous wording in an overly restrictive manner.

However, this should not be seen as a licence not to take care with documents. No landlord or agent would wish to undergo the expense of the multiple appeals that this case required.

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

19 December, 2011 • 11:36 0

Mediation: what is it all about?

Mediation and Alternative Dispute Resolution (ADR) have become buzz words used by litigators over the past few years. Sadly however many people have simply paid lip service to these concepts and not properly engaged with them to make the best use of the opportunities which they provide for settling disputes.

Mediation itself comes in two forms. Evaluative Mediation which is where the mediator looks to advise the parties as to the merits and strengths of their case. This is similar to arbitration. More prevalent is Facilitative Mediation. This will be the focus of this blog post.

This type of mediation is a process whereby an independent party tries to assist the parties in reaching some form of agreement. The mediators role is to listen and adapt the process according to the requirements of the parties given it is their process.

Generally prior to the mediation the parties will have chosen the mediator and agreed a mediation agreement and then provided a mediation bundle. The mediators job is not then to rule on the merits or otherwise of the parties position but obviously it is useful for them to have an overview of the respective positions.

Mediation is a completely confidential process. This means that whatever is said should remain at the mediation and it is exceedingly rare for mediators to give evidence at a trial. Also it is not the mediators job to advise upon the settlement or to write the same up. All of this is the job of the parties jointly and they must satisfy themselves as to what they are doing. Usually the mediator will start the process by explaining all of this and then inviting the parties to each have a say.

This process of itself can often be very useful as it allows the parties to explain their position and often to vent emotions they feel. Whilst this can be a difficult process doing this in a controlled environment can of itself help to move the matter forward. Once initial statements have been made the mediator will then consider whether the parties should break into individual sessions. That being said there is no right or wrong as it must dependant upon the wishes of the parties.

The mediator may then move backwards and forwards between the parties. Sometimes inviting them back to joint sessions to discuss matters and also in closed sessions sometimes helping the parties test their cases. The mediator is often best doing their job when they appear to be like a ghost and are saying little!

Hopefully some common ground can be found and the parties can agree something. This will generally be drafted by the parties and they will sign this. Remember this agreement can cover anything not just what a court could or might order. This of itself is one of the great benefits for commercial disputes. A confidential settlement can be reached and relationships maintained.

Mediation does not prevent disputes but it does offer parties a chance to resolve them speedily and effectively. For the process to really work all the participants including the lawyers need to understand the process and the benefits.

If you want advice on mediation or require a mediator we would be happy to help. We have trained mediators who can provide a fixed price service to help resolve disputes.

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

9 December, 2011 • 22:58 0

“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, comment, costs, Housing Act 1988, legislation, possession, procedure, tenancy agreements

4 December, 2011 • 16:01 4

Back to Basics 4: Section 21

A section 21 notice is not a notice to quit. Many people that call the helpline refer to a section 21 as a notice to quit even today and it’s not, so stop it!

A section 21 notice is used by the landlord when he wishes to gain back possession of the property at the end of an assured shorthold tenancy, pursuant to a break clause or even where the tenant is in the periodic period of the tenancy. There are two types of section 21 notices that a landlord can serve on a tenant. The section 21(1)(b) notice and the section 21(4)(a) notice.

Although both notices refer to section 21 they should not be confused with each other especially given that have very different notice requirements. If the wrong notice is served and relied upon then it can delay or hinder possession proceedings.

Depending on whether the tenancy is either of a fixed term or a statutory periodic will depend on which notice a landlord will need to serve.

The Section 21(1)(b) Notice – Fixed Term:

A section 21(1)(b) is served during the fixed term of a tenancy. A landlord serving this notice must give not less than two months notice stating that he requires possession. The notice should specify a date “on” which the landlord requires possession. The notice cannot expire before the end of the fixed term unless the landlord is relying on a break clause in the tenancy agreement. Therefore a notice should not be dated to expire before the last day of the tenancy as this would make the notice invalid and whilst it could be dated to expire on the last day of the fixed term there are many out there that believe that dating the notice to expire on the last day makes the notice invalid. We at PainSmith do not.

Other issues that need to be noted are that tenants have 6 months security of tenure and so a landlord can not issue court proceedings on a section 21 until the tenant has been in residence for 6 months. The other issue is that any notice served pursuant to a break clause should comply with the provisions of that break clause and then finally if the notice is served in the fixed term to expire in the periodic period it’s still a section 21 (1) (b) that needs to be served.

The Section 21(4)(a) Notice – Periodic Tenancies:

A section 21(4)(a) is served after the fixed term has expired when the tenancy is a statutory periodic tenancy. A landlord serving this notice must give two clear months notice stating that he requires possession and the day on which the notice expires must be at the end of a period of the tenancy. The section 21(4)(a) notice often causes the most confusion amongst landlords due to the fact that if the wrong date is specified on the notice then it becomes invalid. To avoid this pitfall it is vital that a landlord looks at the tenancy agreement to assess what the tenancy period is.

Some of you are aware that unlike a section 21(1)(b) a date need not be specified on the notice and instead the ‘saving provision’ can be used following the decision of Lower Street Properties Ltd v Jones however, rather oddly we still find some of you are dating the notice. Why complicate things?

Filed under: England & Wales, FLW Article, comment, guidance, Housing Act 1988, litigation, possession, procedure, tenancy agreements

30 November, 2011 • 15:02 2

How long do Court Proceedings for Possession take?

As many of our regular readers may be aware the time taken for Courts to process claims particularly in the London Region has extended dramatically.

We would normally say that an accelerated possession claim if no Court hearing was required would take about 2 to 3 months from issue of proceedings until bailiff appointment. For traditional proceedings normally we would have the first hearing date within 3 to 4 weeks of issue.

Sadly we are finding that these dates are taking much longer with dates for hearings under traditional hearings taking up to 4 months! Unbelievable but true in a recent case we issued in a London Court. Despite representations to the Court they said pressure of work meant nothing could be done.

With regards to accelerated possession claims where hearings have been listed by the Court or the Defendant has lodged a Defence form we have found that these may not be listed for up to 5 months! Again a recent example we faced where an Order had been made but the Defendant immediately made application to set aside and Defend.

Whilst some Courts are still sticking to the more usual times generally the hands of Landlords are tied as to which Court to issue in. The rules provide that generally such possession claims must be issued in the County Court and in particular the Court with jurisdiction for the area in which the rental property is situated.

Certainly a worrying development that all practitioners need to be aware of and the implications of the same!

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

25 November, 2011 • 10:19 0

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!

Filed under: England & Wales, FLW Article, comment, guidance, legislation, long lease, procedure, service charges

21 November, 2011 • 11:30 1

Its all in the Drafting!

The recent case of Estafnous v London and Leeds Business Centres Ltd (LLBC) showed what can happen where an agreement is drafted which does not cover the way the sale is finally concluded. In this case, LLBC wished to sell a property known as Regent House. In this regard, Mr Estafnous, an agent, introduced an interested purchaser, Mr Kapoor, to LLBC.

An agreement was drafted between Mr Estafnous and LLBC which set out that in consideration for introducing the buyer and seller and on completion of the purchase of the Property, the agent would be entitled to £2 million commission.

Following negotiations it was decided that Mr Kapoor would purchase the company that owned the leasehold interest in the property, rather than the property itself, in order to save on stamp duty. The purchase proceeded on a Share Sale Agreement between the purchaser and the seller.

When Mr Estafnous claimed his commission payment from LLBC it refused on the grounds that the property itself had not been sold and therefore the agreement did not apply. Unfortunately for Mr Estafnous, the Court of Appeal held in favour of LLBC.

The lesson to be learned from this is that agents should ensure commission agreements are drafted to cover all possible outcomes if they don’t want to be paid for the work undertaken.

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

18 November, 2011 • 13:49 1

Back to basics 3: Voluntary Surrender and Abandonment

It can be tricky to know the correct procedure to take when you believe that the tenant has vacated the property. The main issue you want to avoid like the plague is a claim for unlawful eviction. Claims of this nature can be troublesome to deal with, costly and will hinder your attempts for possession a great deal. It is therefore crucial to follow the relevant steps to make sure that vacant possession can be gained without undue delay.

Surrender is one of the more amicable ways to formally bring an end to a tenancy. The Landlord and tenant mutually agree that it is best for all concerned to end the tenancy. Signing a deed of surrender ties up all loose ends and ensures that parties are not unwittingly still involved in the tenancy. This is a situation that is best avoided to mitigate chances of a nasty surprise somewhere down the line.

All circumstances are easier to deal with when you have mutual agreement between the parties. As I am sure a number of you attest to, sometimes not all the boxes can be ticked off, and it is situations like these that you need to be careful about. This is where abandonment notices can be worth their weight in gold.

Abandonment notices are very simple concepts. It is simply a note on the door saying that if they are still in occupation can they let you know within 14 days. This time limit can be altered but in past experience, we as a firm believe that 14 days both allows sufficient time for the tenant to inform the landlord or agent of his presence, whilst at the same time ensures that the Landlord does not need to keep their property off the market for too long and therefore does not lose out on potential future rental payments.

I will add a cautionary note here. Although the notice needs to be visible i.e. not hidden in a bush, it should not be brought to the attention of everyone and their dog who is going to pass the property. Those that call the helpline have stressed that they are concerned about third parties noticing that properties are empty when they get sight of these notices and therefore it is advised that you simply use your common sense.

Back to the notice itself, if no contact has been made by the tenant in the time frame stipulated, then the day after it has expired that is the fifteenth day, the locks can be changed and the property put back on the market. There is obviously the issue of dealing with the tenant’s possessions if any have been left behind but that is a topic for another day.

For those on the helpline there is a draft Deed of Surrender and Abandonment Notice in the document vault.

Filed under: England & Wales, FLW Article, comment, possession, procedure

14 November, 2011 • 15:25 2

Is it reasonable to expect tenants to pay large service charges?

The Upper Chamber Lands Tribunal recently considered whether in determining if costs have been reasonably incurred account should be taken of the financial impact on tenants and whether major works should be phased (Garside and others v. RYFC Ltd and others [2011] UKUT 367). The case involved an estate of 5 blocks with 54 flats which as a result of historical neglect had a manager appointed by the LVT after an application by some of the leaseholders.

The Manager appointed set about arranging for outstanding works to be carried out. However a number of the leaseholders became concerned as to their ability to pay due to the significant increase in service charges these works would cause.

The leaseholders agreed that the scope of works was acceptable but queried whether it was necessary to carry out the bulk of the works at once. They suggested that the works should be phased to spread the costs over a longer period. The costs were likely to be in the year 2010 £7,600 or more and it was said that some Leaseholders would be forced to sell their flats.

The LVT rejected the argument that consideration should be given to the individual leaseholders ability to pay in determining the reasonableness of the costs. The LVT determined given there was no argument over the reasonableness of the costs, the specification or the ability of the Manager to recover the costs in advance and therefore in the LVTs opinion section 19 of the Landlord and Tenant Act 1985 only related to the reasonableness of the works and costs and not the ability of the leaseholders to pay.

The leaseholders appealed to the Upper Chamber Lands Tribunal. HHJ Robinson determined that the 1985 Act did not limit what is reasonable. In her opinion “reasonable” should be given a broad meaning in accordance with Ashworth Frazer v. Gloucester City Council [2001] 1 WLR 2180. Thus in her opinion the financial impact and whether works could and should be phased was a material consideration in determining whether costs have been reasonably incurred under section 19 of the 1985 Act.

The Judge said that a wide consideration had to be given of all the issues including the urgency of the works. These were all matters of fact and judgment for the LVT to determine. She did emphasis that the LVT could not alter a tenants contractual liability to pay whatever the hardship.

The lesson here is that if Leaseholders are faced with consultation over major works and they are concerned over the ability to pay they must raise this. This would be a legitimate matter to raise and for the person undertaking the works to have regard to and whether the works can be phased. Certainly something all property managers should be alive to particularly when drawing up specifications of works.

Filed under: England & Wales, FLW Article, comment, litigation, long lease, service charges

11 November, 2011 • 13:37 0

Happily ever after………

As shown in the previous blog, many issues can arise when couples purchase a property together. With this in mind, the Supreme Court’s recent decision in Jones v Kernott provides some clarification to the law where an unmarried couple purchase a house together in both names but later separate and claim different shares.

The facts of this case were as follows. Ms Jones and Mr Kernott bought 39 Badger Hall Avenue in joint names in 1985 with the proceeds of Ms Jones’ sale of her mobile home and an endowment mortgage. The two parties contributed fairly equally to the household expenses and lived there with their two children together until October 1993 when Mr Kernott moved out of the property. From this point onwards he made no further contributions either to the mortgage or upkeep of the property, or as maintenance and support for the children.

In 1995 they put 39 Badger Hall Avenue on the market for £69,995 but did not find a purchaser. They then cashed in a joint life insurance policy and Mr Kermott used his share as deposit on a property which he purchased in May 1996.

In 2006, Mr Kernott contacted Ms Jones to claim a share of 39 Badger Hall Avenue and subsequently proceedings were brought to determine their respective shares. As they had made no agreement as to what shares each should have in the property the courts were left to look at the parties’ conduct to see what conclusions could be made. It was agreed that when they purchased the property they intended it to belong to each of them in equal shares. The deliberations hinged on the question of whether the parties’ intentions in respect of the property had changed when Mr Kernott moved out after eight years. The court found that their intentions had changed and based this on the fact that from the point that Mr Kermott moved out, Ms Jones covered all payments relating to 39 Badger Hall Avenue. They also noted that this had enabled Mr Kermott to purchase his own property which it was agreed Ms Jones had no interest in. The court found that Ms Jones was entitled to 90% of the beneficial interest and Mr Kermott to 10%, which was calculated on the basis of each being entitled to half until 1995 and Ms Jones being entitled to the full benefit from that point onwards.

Following this case, in the absence of any agreement by the parties, the court will begin on the presumption that if they are joint owners of the property then they would be entitled to equal shares of the property. The next step will be to see what their intention was when they purchased the property and then to see whether this intention changed at any point subsequently. This will be done by looking objectively at their conduct and if their intentions cannot be inferred from their conduct the court will look to what would be considered fair in relation to their dealings with the property.

While in this case this seems to have led to a fair outcome by far the best course of action for couples buying a property together is to have a declaration of trust setting out what share each of them should have and to change this if their circumstances change. Whilst it has to be said that this is not the most romantic option, it could save a lot of expensive litigation in the future if the couple separate.

Filed under: England & Wales, FLW Article, comment

7 November, 2011 • 10:17 2

Joint Tenants: what does this mean?

Many of you will have read in the press about the case recently brought by Geoffrey Boycott for professional negligence against his advisers concerning the way in which he owned a property with his former partner and which made us think about the issues involved.

For many people embarking on property ownership is a huge step and often undertaken at a time when all is rosy in a relationship and often too little thought is given to the type of ownership. Generally under English law if you are looking to buy a property jointly there are two methods of ownership: joint tenancy or tenants in common. What do these mean? It is vital that people purchasing understand the differences and the effects each can have.

Joint tenancy is still the most common method and can often be described as the default position. If you purchase in this way you each own the property and generally are presumed to own the property in equal shares. This also means that on the death of one of the joint owners the share which they owned automatically passes to the other joint owner. This process is known as succeeding to the tenancy. Whilst initially a tenancy can be registered in this fashion one or other of the parties can sever the joint tenancy. To do this is straight forward and simply involves notice being given to all parties and ideally this being noted at the Land Registry. The property will then be owned as tenants in common and it will be presumed that each owns an equal share.

Tenants in common is where joint owners each own a defined share of the property. This method is often recommended to unmarried owners and those who are making unequal contributions and wish for these to be recognised in the ownership. When registered the transfer document will specify what percentage is owned by each party. On death of one party their share of the property then goes on to form part of their estate and does not automatically pass by the rule of survivorship described above in respect of joint tenancies. Often parties owning as tenants in common will also enter into a Deed specifying the particular contributions they have made and also dealing with how on sale the proceeds will be split etc. Generally a tenancy in common cannot become a joint tenancy without all the joint owners agreeing (different form the position relating to joint tenants).

As was discovered by Mr. Boycott a failure to have the correct method of ownership can lead to consequences which one or other party did not intend. For Mr. Boycott he believed that the property was registered as Joint Owners. However at some point before his partner passed away she acted to sever the joint tenancy thereby creating a tenancy in common. On her death rather than her share passing to Mr. Boycott it formed part of her estate and Mr. Boycott did not inherit! According to the reporting this case gave rise as one would expect from Mr. Boycott to some forthright views being expressed!

It is important that all home owners understand these principles and the consequences to make sure that the arrangements they have in place do fit their own circumstances and that they can and should review these when circumstances change. Sadly an area which all too often people in that first rush of ownership do not give sufficient thought to often leading to expensive litigation and dispute down the line.

Please note the purpose of this article is simply to give a broad outline and it is always vital that you look to take specific advice on individual circumstances

Filed under: England & Wales, FLW Article, comment

27 October, 2011 • 17:19 2

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, comment, legislation, long lease

26 October, 2011 • 10:02 5

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, comment, Housing Act 1988, legislation, possession

24 October, 2011 • 10:04 4

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, comment, legislation, litigation, possession, procedure, rent

20 October, 2011 • 10:01 0

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, comment, deposits, Housing Act 2004, legislation

17 October, 2011 • 11:44 0

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, comment, guidance, legislation, long lease

10 October, 2011 • 13:39 3

Ground 14

Most of you will have heard about the coalition governments crack down on anti social behaviour especially in light of the recent rioting and looting. However, the coalition government is taking it that one step too far, in our humble opinion, and suggesting that those that are convicted of anti social behaviour should be evicted from rented accommodation even where the anti social behaviour has nothing to do with the rented property.

In August 2011 the Department for Communities and Local Government released its consultation on “A new mandatory power of possession for anti-social behaviour.” The consultation is aimed at making Ground 14 of Schedule II of the Housing Act 1988 a mandatory ground for possession.

Looking at the consultation itself statements that should be noted are:

“It is clearly right that eviction for anti-social behaviour should remain exceptional: the loss of one’s home is a serious sanction and eviction may simply displace the problem elsewhere rather than providing a long term solution.”

“But where landlords turn to possession as a last resort in order to provide respite to communities and as a serious sanction against perpetrators that process can take too long”.

“Most importantly though lengthy possession proceedings mean that the suffering of victims is further extended”.

“….serious anti-social behaviour and criminality beyond the immediate neighbourhood of the property can clearly be taken into account”.

The consultation then asks those that wish to respond to consider the following questions:

1. Do you agree that we should extend the scope of the current discretionary ground for possession for anti-social behaviour and criminality in this way?
2. Do you agree that we should construct a new mandatory power of possession in this way?
3. Are these the right principles which should underpin a mandatory power of possession for anti-social behaviour?
4. Have we defined the basis for the new mandatory power correctly? If not, how could we improve the definition?
5. As a landlord would you anticipate seeking possession using the mandatory power in some or all of the instances where this would be available?
6. Are there other issues related the introduction of a mandatory power for possession for anti-social behaviour that we should consider?

So how to respond in a rational and clearly though out manner, difficult, but here goes.

If Ground 14 is made mandatory both social and private landlords will be allowed to issue possession proceedings not only where the tenant is convicted for anti-social or criminal behaviour but also if the occupier or a visitor of the tenant has such a conviction. So will this lead to problems with the convicted father visiting his children? Does this contradict one of the coalition government’s aims, to promote family life, I think so.

Its quite clear that this consultation is in response to the riots in August and that there was as much though put behind it as Teresa May’s statement about the Right to Family Life and the cat. But whilst the consultation appears to recognise that the court process is too long it makes no reference to why that is and no reference to how that should be improved. Even where landlords have mandatory grounds for rent arrears the process can take too long with agents and landlords taking their frustrations out on us poor, overworked lawyers (its true!).

One has to wonder however with the current housing shortage and the problems that were recognised with the younger generation following the rioting whether moving people on is really the best we can do. We live by the principle that “if you do the crime you must serve the time” but after that time people are entitled to get on with their lives because this justice system promotes the right to rehabilitation. It is obviously very difficult for some to accept this especially where they have been victims of a serious crime but this consultation is not promoting re-habilitation it is promoting ostracising certain sections of the community which can lead to an increase in crime and looting.

This cycle must end and housing, communities and the court system needs investing. Under Ground 14 it is possible to get possession where the tenants are a nuisance in our experience and this is simply going too far.

Filed under: England & Wales, FLW Article, comment, consultations, Housing Act 1988, possession, procedure

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