Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Not another Deposit case!

Taking six months’ rent up front is not a deposit, the Court of Appeal has ruled in Johnson & Ors v Old [2013] EWCA Civ 415.

The facts will strike chords with many agents and landlords: the rent was expressed to be £950.00 per month, payable in advance (standard AST practice), with the first six months’ rent to be paid “up front” (also common practice for example where a tenant might have failed a credit check). When the landlord brought possession proceedings the judge at first instance threw the case out on the basis that the six months’ rent up front was a security deposit, which had not been registered and that therefore the section 21 notice was not valid. The landlord appealed and won; the tenant then appealed to the Court of Appeal, which is where we are today.

The key issues included whether the rent paid six months up front was money held as security against future rent payment dates (the tenancy agreement made reference to the rent due date being the first of every month). If so, the tenant argued, it was a deposit as defined in S212(8) Housing Act 2004 and fell to be protected, which it had not been.

The Court of Appeal hearing the tenant’s appeal was unequivocal: the money paid was rent, and not “money intended to be held as security for the performance of any obligations of the tenant or the discharge of any liability of his, arising under or in connection with the tenancy”. The point was tested by “asking, rhetorically, how the tenant would have responded to a demand on 1 September 2010, for rent in respect of the month of September 2010……her answer would have been “why are you asking me for rent which I have already paid?”….”

The court also gave short shrift to the idea that, as the agent held onto the money and drip fed it in monthly payments to the Landlord, the money held by the agent was a deposit. The Court found that the rent was paid over by the tenant, and the arrangements between the agent and landlord about how the monies were transferred was neither here nor there.

So what are the implications of this decision? The position remains as we have been advising agents and landlords to date: rent in advance does not constitute a deposit in need of protection. With the above being said, it is always advisable to have clear and well drafted tenancy agreement that all parties can follow.

It is important to differentiate this case from another common scenario: where an extra payment (usually a month’s rent) is received and held in case the tenant defaults on a rental payment during the tenancy but would be paid back. This is a deposit. Rent taken at the beginning of a tenancy in respect of the last month of a tenancy is not a deposit but an amount taken at the beginning to be applied in the event that there is any default is.

Filed under: England & Wales, , , ,

HMO mandatory licensing- calculating storeys

London Borough of Islington v The Unite Group Plc [2013] EWHC 508 (Admin)

Thanks again to David Smith and our friends at Nearly Legal for drawing this recent case to our attention. NL has summarised the case comprehensively here so the below is a quick overview.

The High Court in this case has clarified the rules on calculating the number of storeys of a property in a block of flats. This is important in order to determine whether a particular property falls into the mandatory licensing category.
The building in the case in question contained a number of flats over more than 3 storeys. Each flat comprised of one storey with up to six student occupiers in each flat – what you might describe as a standard HMO. The ground floor of the building was used as business premises.

The Court was asked to determine whether these flats were HMOs that required licensing. The statutory requirements are that if an HMO or any part of it comprises three storeys or more and it is occupied by five or more persons and those persons form two or more single households, then the HMO must be licensed.

The high court found that “it is the HMO that must comprise the three storeys and not the building in which an HMO happens to be found”.

So, where living accommodation is in a part of a building above or below business premises you must take into account each storey comprising the business premises. Where a series of self-contained flats sit above commercial premises, you count the commercial premises in your calculation and the number of storeys in the flat itself, not the building.

The case should make it simpler to calculate whether an HMO falls into the mandatory licensing category and should release many landlords from the requirement to license self-contained single storey flats that sit in a block. However, since failure to have a licence when required has such severe consequences including prosecution, fine and rent repayment orders, if in doubt do seek guidance from the local authority (armed with a print out of the high court ruling to wave at them if necessary).

This ruling contrasts with the case of R v Roderick John Williams 2008 but as a High Court decision will take precedence. In Mr Williams’ case, he was successfully prosecuted for having an unlicensed HMO. This HMO actually covered two storeys but it sat on top of a basement flat and the court decided that under the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2006 [link] the two storey flat had to be calculated as having three storeys as it sat over a one storey flat.

Filed under: England & Wales, , , ,

Deposit News

1 April 2013 has seen more changes to deposit protection.

There are now four authorised schemes: TDS, DPS and mydeposits have been joined by Capita tenacy deposit protection scheme . This is an insurance based, rather than custodial scheme, meaning that the deposit is held by the agent or landlord.

It’s all change in the established schemes too. TDS have relaxed their rules and have summarised the main changes on their own blog here and in pdf form here.

DPS has introduced an insurance based scheme. You can read about it here.

Mydeposits scheme in Northern Ireland went live on 1 April 2013. See their press release here.

Filed under: England & Wales, , , , ,

Arla annual conference 2013

A big thank you to all those who came to chat to us at the Painsmith stand on Tuesday. It was great to see the old faces and put names to new ones. Please keep following our blog – we have some interesting ones coming up, including more on deposits ( oh yes), an HMO ruling to name just two. You can leave comments as well. Don’t forget to look at our website too for info.

Filed under: England & Wales,

Lettings Fees

The Advertising Standards Authority (ASA) has decided that all charges that will be imposed on a proposed Tenant must be made clear in all advertising of the property prior to the letting. In other words, no hidden fees.

This comes after a complaint was made against Your-move.co.uk Ltd ( Your Move) stating that an advert that had been placed on Rightmove did not contain details of compulsory charges such as administration fees. It is worth noting that the advert in question stated that fees would be payable and even then had a link to Your Move’s own website that did specifically detail the charges. The ASA decided that this in itself was insufficient and the exact fees needed to be stated on the advert itself. In addition to this, if there are fees the value of which are not known at the time of advertising then it will need to be explained how those charges would be calculated.

The fact that this issue has been addressed now is not surprising given the report that the OFT ( Office of Fair Trading) has recently published which criticised the disclosure of letting agent’s fees which are payable by Tenants. With these findings coming it would be prudent for Letting Agents to “get their houses in order” to quote Guy Parker, the Chief Executive of the ASA, and ensure that fees are transparent so that they are not the ones that fall foul of latest requirements.

Currently, Rightmove’s own policy is that fees are not included in any of their advertisements. Whether they will be looking to change this in light of the above is unclear but as this case shows the letting agent will not be free of the obligations simply by following Rightmove’s protocol and so it should be requested that the fees are included in any such advert taken out on their site.

It would appear that there will be a tough approach on this and as such until proper guidance has been given (we would expect a number of relevant authorities, Office of Fair Trading included, to be issuing guidance imminently) our advice is that all advertising or publicity material (including window cards, brochures and website posts) contain the non-optional fees payable so that it is reasonable that any proposed Tenant looking in to the letting of a property will know the exact amount that they will be required to pay.

Filed under: England & Wales, , , ,

Daejan Investments v. Benson : Consultation on long residential leaseholds

So at last the Supreme Court has issued its judgement in Deajan Investments Limited v. Benson and others [2013] UKSC 14. The Court, consisting of a panel of five Justices including the President and Deputy President, overturned the Court of Appeal (and the Upper Tribunal and LVT). The decision was a three to two decision with Lord Hope (the Deputy President) and Lord Wilson dissenting. The majority judgment was given by the President Lord Neuberger supported by Lords Clarke and Sumption.

In brief the facts are that Daejan had proposed to undertake major works to a property in which the Respondents were leaseholders. Daejan had cut short the last stage of the formal Section 20 Landlord and Tenant Act 1985 consultation process. Daejan had made an application pursuant to Section 20ZA of the Act to seek dispensation from the consultation requirements. During the original hearing, before the LVT, Daejan had offered to reduce the amount claimed by £50,000 to compensate the Respondents for any prejudice which they may have suffered, although it was not accepted that they had suffered prejudice.

The LVT concluded that this was a major breach of the consultation requirements and the need for transparency was paramount. The LVT did not accept that it could grant some kind of conditional dispensation. The matter was appealed and whilst some of the reasoning changed the decision was upheld.

So the matter came before the Supreme Court. It is worth highlighting that argument in this case was heard before the controversial decision in Phillips v Goddard [2012] EWHC 3650 on which we have previously blogged.

The Supreme Court found in favour of Daejan and overturned the earlier decisions. They have granted dispensation but on terms.

So why is all this important?

If Daejan had stood then Landlords would have faced a very hard task to obtain dispensation where they had not properly consulted. The Court has now ruled that whilst agreeing with the Court of Appeal that the effect on a Landlord was not relevant it was pertinent to take account of the prejudice which any leaseholder may suffer. The Court made clear that the consultation requirements are part of the broader statutory regulation of service charges and ensure that leaseholders do not pay for inappropriate works or pay unreasonable amounts. This is different from transparency per se.

If there has been a breach of the regulations it would then be for the Leaseholders to show some prejudice. The Supreme Court makes clear the obligation to do this is upon the Leaseholders but it would then be for the Landlord to re-but this prejudice and generally any LVT considering such a matter should be sympathetic to the leaseholders.

The court went on to rule that the LVT was entitled to impose conditions. These could be limiting the amounts or awarding costs of investigating the prejudice. In this case the court accepted that the sum offered of £50,000 appeared to have been picked out of the air but given that on all the evidence this was greater than the value of any prejudice to the leaseholders the LVT was entitled to grant dispensation subject to this sum being deducted from the total sum sought. The court also determined that it was reasonable for the leaseholders costs of dealing with the application for dispensation at the LVT to be paid by the landlord. The judgment expressly addresses this point in connection with the LVT’s very limited current costs powers and makes the distinction between this being “costs” in the normal sense of litigation and it being an amount payable as a condition of the grant of dispensation.

In practice it seems that dispensation will remain very fact specific. Landlords would in our opinion be foolhardy to think they can simply flout the rules and then subsequently make an application for dispensation. That being said where there is a breach the well advised landlord will be looking to make an application at the earliest opportunity and to consider what reasonable conditions they should offer.

With regards to Phillips v. Francis, whilst we are sure many property managers and landlords are concerned as to the effect this may have on present and past service charges (particularly given the fact they have been paid does not mean that they cannot be challenged!), this may offer some hope that a well prepared application for dispensation under section 20ZA will receive favourable treatment.

What is clear is that each application and set of circumstances will need to be considered on its own merits.

Filed under: England & Wales

Marveen Smith on Money Box Live

Tune into Money Box Live on BBC Radio 4 at 3pm this Wednesday 6 March 2013 to hear Marveen Smith and the panel discussing and taking callers’ questions on renting and letting.

Filed under: England & Wales

Read the Lease!

A recent decision of the Upper Tribunal (Lands Chamber) in Sadd v. Brown [2012] UKUT 438 (LC) stands to remind us that it is always important that you read and understand the terms of the lease.

The case was about the recoverability of an insurance premium. In the past all parties to the lease had assumed that it allowed the recoverability of the costs incurred by the landlord in insuring the building. At first instance the LVT decided that whilst the amount charged was reasonable on the true construction of the lease the premium was not payable by the leaseholder. It would appear that this point was not itself taken by the parties but raised by the LVT itself.

Once again the Upper Tribunal made clear to the LVT that it is not for them to take points and certainly not without referring the issue to the parties for their comments. If we stop there it is important that all parties in approaching the LVT bear in mind that panels are now less likely to raise issues of their own motion and so parties must make sure they have properly considered what points they may have in their favour. The Upper Tribunal has made clear over the past 18 months that the LVT should be slow to interfere and raise points if not raised specifically by the parties.

The above being said the Upper Tribunal took the view given the landlord as part of its appeal had put forward its arguments it was reasonable for the upper Tribunal to determine the issue. The landlord contended that it was unusual for a lease to not include a term allowing the landlord to recover the cost of the insurance. He relied upon the fact that until this application both parties had assumed that the lease did allow recoverability. The landlord invited the tribunal to imply such a term into the contract relying upon Liverpool City Council v. Irwin [1977] AC 239. The Tribunal took the view that given this was a lease containing detailed provisions regulating the parties relationship and on the face of it contained all terms it was not appropriate to imply such a clause. Further the Tribunal took the view that it was not necessary to imply such a term to give effect to any other terms of the lease in the way that often the term “reasonable” is implied. Finally the tribunal decided that it was not necessary to imply such a term to give business efficacy to the lease (although we are sure the landlord did not agree with this!).

As a result the appeal was dismissed and the landlord could not recover the cost of insurance as the lease did not allow recoverability. As we have said before it is vital that a careful review of the lease is made. Anyone taking on block management should always ask to see all the leases and check with the Land Registry that no variations have been granted. Only when you have done this will you be sure as to what can and cannot be recovered as any failings are likely to find themselves laid at the managing agent’s door if they have not previously been drawn to the freeholder’s attention

Filed under: England & Wales, , , ,

Jackson Reforms on Costs

Many of our readers will not have heard about the Jackson Costs reforms specifically although you may have read about some of their effects in the press. Why should the amount us lawyers are going to receive affect you? Well you may ask but ultimately rules affecting costs and the recoverability affect anyone involved in litigation.

Whilst some of the rules are being finalised we do understand many of the new principles. Many of the new rules appear to be directed at those undertaking personal injury litigation and the desire to limit the recoverability of the costs in this field which it was felt were not reasonable. In particular this has led to the payment of referral fees in personal injury cases being banned.

However a number of the rules will impact on anyone using the courts. In particular from April of this year the small claims limit is due to rise to £10,000 and will then rise to £15,000. This will bring many more cases within that track and will mean that cases allocated to small claims will not generally recover any legal expenses. All businesses who have any involvement with the courts need to bear this in mind particularly if you often have debts which you pursue which fall below this level. It will mean that you need to think carefully how you pursue such debts and what use you make of legal advisers whose costs are likely to be irrecoverable. Perhaps the moral is look what debts you currently have outstanding and if between £5,000 and £10,000 and something you want to pursue using legal help it might be worth moving forward with these now rather than waiting until after April 2013.

We currently are awaiting various other changes to the rules. The courts will be imposing on fast track claims (those claims between £10,000 and £25,000) a fixed costs regime. Whilst talked about in the past it seems that the court will impose this upon all litigants falling within that track. This is likely to mean that not all legal costs will be recovered and so it is vital that early attempts are made to settle. To encourage this amendments are being made to the settlement regime (known as Part 36 Offers) to make it far more financially worthwhile to make a “good” offer at the outset to protect you on costs recovery.

As for multi track claims (which is the track into which many landlord and tenant matters fall) the court is going to require Costs Budgets which it will then review at the initial case management conference and supposedly everyone will then be bound by. This means all lawyers will need to provide robust estimates as their clients costs may be capped to these limits.

We await the rules but it seems there is a real desire to get a grip on costs and cap what can be recovered. This will not necessarily affect the amount a party has to spend (this will always depend on the particular case) but in deciding how to pursue a more careful consideration of the costs will need to be given.

Filed under: England & Wales

Consultation for Repairs on Long Leaseholds

We all await the Supreme Court ruling in the Daejan v. Benson case which hopefully we will receive judgement on soon. Shortly before Christmas the High Court Chancery Division got in on the act. It ruled in the case of Phillips v. Francis [2012]EWHC 3650 (Ch).
In brief the facts are that this related to a holiday park consisting of various chalets let on long leases. A dispute had arisen over charges levied by the freeholder. From the point of view of this article the interesting point was whether the consultation requirements imposed by the Landlord and Tenant Act 1985 as amended applied to “repair” costs. The issue was what are “qualifying works”.

The court considered the definition of “qualifying works” set out in the Act which provides that these are “works on a building or any other premises..”. Consideration was also given to a case decided prior to the current legislative framework being Martin v. Maryland Estates [1999] 2 EGLR 53 but this case was discounted as being of relevance.

Whilst only a High Court decision, the decision itself was given by the Chancellor of the High Court . He determined that all works should be bought into the account to calculate the contribution and then apply the limit. In essence what this means is that all repair works carried out in any service charge period should be lumped together and then if any one leaseholders contribution exceeds £250 then consultation should be undertaken. The Judge said it is not appropriate to simply break the works down into what he termed “sets of qualifying works”.

This means that where a leaseholder has been presented with a service charge account with any item over £250 including for repairs undertaken in a twelve month period they may be able to challenge this to have a cap applied. Typically repair costs in an account may be made up of various relatively minor ongoing maintenance issues which have arisen during that period none of which it was imagined individually would require consultation.

For Landlords this poses a dilemma. For past charges they need to see if challenged. If so Landlords will then need to consider whether they look to make an application for dispensation from consultation. Currently, whilst the outcome of Daejan is awaited, this is certainly not a forgone conclusion. Alternatively every year they will need to consult on the process they will seek to adopt for repairs, although practically it is difficult to see how this can properly be undertaken. It may be that this decision itself will be appealed.

What is clear is that this year is going to see much debate on the question of consultation. It appears to us as the regulation over consultation grows and becomes more complex it is likely that the costs charged by Managing Agents (either for management in general and consultation in particular) are likely to rise to take account of the increased work and the risks involved in providing this service.

Filed under: England & Wales, , ,

The Green Deal

28 January 2013 was the first day on which works can start under the government’s Green Deal initiative on residential properties in England.

The aim of the Green Deal is to improve the energy efficiency of properties by removing the upfront cost of improvements and instead allowing the cost to be paid in instalments through energy bills.

Green Deal Finance can be used to pay for improvements such as cavity wall or loft insulation; upgraded heating; installation of draught-proofing; installation of double glazing; and installation of renewable energy technologies such as solar panels or wind turbines.

A Green Deal Assessor will carry out an inspection of the property being proposed for improvements and will make recommendations as to the most suitable – weighing the cost of the improvements against the likely savings that the improvements would attract. The golden rule is that the savings enjoyed as a result of installing any particular technology must be equal to or greater than the cost of the finance required.

Once the Green Deal Assessor has made recommendations, a Green Deal Plan will need to be signed with a Green Deal Provider. The Green Deal Plan is a contract setting out what work will be done and how much it will cost and once it has been signed the Green Deal Provider will arrange for a Green Deal Installer to carry out the contracted work. All participants in the process are bound by the DECC’s code of practice and must display the quality mark.

Once the Green Deal Installer has carried out the work, the cost will be payable in instalments through energy bills. As the finance obligation passes with the liability to pay the energy bills rather than with the person that signs the Green Deal Plan, Green Deal finance must be disclosed in all new property transactions as part of the EPC information. A written acknowledgment of the finance should be obtained from the tenant, licensee or purchaser in a standard form to confirm the information has been given.

In respect existing tenancies, neither the landlord nor the tenant can sign a Green Deal Plan without the permission of the other.

There are plans afoot to obligate landlords to install green technologies upon receipt of a “reasonable request” from tenants but, as we understand it, these are unlikely to come into force before April 2016.

Filed under: England & Wales, , , ,

Wood burning stoves and what agents need to know.

Over the past few years wood burners and open fires have come back into vogue. Most people agree that sitting in front of a fire on a cold winter evening is something they like to do. Open fires and wood burning stoves bring there own complications.

As part of the structure of the building landlords have an obligation to keep the stove and the chimney in good repair. Landlords should also check what the requirements are of any building insurer with regards to the same.

We have recently received questions asking whether landlords need some form of certificate; and can tenants be required to clean the chimney?

With regards to any fuel burning appliance installed after October 2010 it must comply with appropriate Building Regulations. This means that any such appliance must either have been installed by a HETAS approved engineer, who can then self certificate, or specific Building Regulation consent should have been obtained. A homeowner should ensure that such certification is kept in a safe place as this may be required. Under these regulations a carbon monoxide detector will also have to be installed which the landlord will have to check is in good order. The landlord will then be responsible for the ongoing maintenance and repair of such a stove whilst it is in the property. For appliances installed before this there is no specific requirement for certification save that landlords should be satisfied that they are safe and as part of this they would be well advised to ensure that a carbon monoxide detector is present.

We would always recommend that landlords carry out regular inspections to check what, if any, repair or maintenance issues may exist. There is however currently no statutory requirement to obtain some form of annual certification.

Generally such stoves require for general safety that the chimneys are swept at least once in every twelve month period. Many tenancy agreements contain a term that the tenant should ensure that this takes place. Some commentators seem to indicate that this is an unfair contract term relying on the guidance issued by the OFT in 2005. We disagree.

In our opinion provided a landlord can show that the chimney was swept before the start of a tenancy it is not unreasonable to place an obligation upon a tenant to ensure that the chimney is swept at regular intervals provided there is no obligation for them to return the property with the chimney in a better state than it was given to them. This can only apply to having the chimney swept and any maintenance which may be required from time to time would be the landlord’s responsibility. We are not aware of any specific challenges made by tenants to such terms and if anyone is would welcome hearing from them.

To summarise our view is that a well advised landlord will check if the installation was after October 2010 that they have a copy of the certificate. They will prior to any tenancy have the chimney swept (or make sure they have evidence that this happened) and also make sure that in any pre-tenancy inspection they check no repair or maintenance issues arise. We would always suggest that if in doubt a reputable professional is employed to undertake a check and the prudent landlord will ensure that their property has smoke and carbon monoxide detectors fitted.

Filed under: England & Wales, , , , ,

EPCs – latest news

Tomorrow 9 January 2013 sees the coming into force of changes in the regulations regarding Energy Performance Certificates.

The government announced these changes to the EPC, and air conditioning inspections regime, on 19 December 2012. The changes come from the EU Directive (Council Directive 2010/31/EU) on the energy performance of buildings (EPB Directive 2010). The directive mainly consolidates the regulations but there are some significant changes in relation to the contents, issue and display of EPCs.

In relation to residential lettings the significant changes are as follows:
• property advertisements are to include details of the energy performance certificate rating ( the A-G rating) where available;
• the requirement to attach the front page of the certificate to any written material is to be removed;
• listed buildings are exempt from the need to have a certificate on their sale or rent.

The above does get around some of the problems that agents have been facing such as how to attach a front page to the particulars on display in the window. However agents will nevertheless have to produce the EPC to potential tenants and there is no additional leniency in respect of obtaining it, and the penalties have not been amended for failure to comply.

Remember the other requirements still apply and you can read about them on our previous blogs here.

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

Private Rented Sector Consultation

Just a reminder to everyone in the Rental Industry that the Communities and Local Government Select Committee is currently conducting an enquiry into the private rented sector. Submissions have been invited from any interested party dealing with the private rented sector. Submissions should be emailed to clgev@parliament.uk by 17th January 2012.

In particular submissions are being sought in connection with possible rent control and also regulation of the sector. Full details can be found here.

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

Telephone Problems

Please be aware that we are currently experiencing problems with our telephones. We are urgently seeking to resolve these problems. Sorry for any difficulties caused.

Filed under: England & Wales

Landlords Costs: Can they recover in house costs?

In Fairhold Mercury Limited v. Merryfield RTM Company Limited [2012] UKUT 311 (LC) the Upper Tribunal again considered whether in house legal costs were payable to a Freeholder.

The case again involved Estates and Management Limited as agents for the freeholder who advised in respect of two Right to Manage claims. The LVT determined that the amounts claimed were reasonable but were not recoverable as they did not reflect disbursements for external advice.

It seems once again that the point taken by the LVT was not one advanced by the Respondent RTM Company and it was not put to the Appellant. As a result simply on the grounds of natural justice this decision had to be quashed.

The President went on to consider whether if there is an appointed agent and they gave advice the cost was recoverable. He very conclusively determined that the costs were recoverable and he could see no reason why they were not and given the LVT had determined that the amounts themselves were reasonable then the sums were payable.

The issue of whether in house legal costs can be recovered as been the feature in a number of cases over the past twelve months a number of which have related to Estates and Management Limited. What seems clear from this decision as that the Upper Tribunal consider it perfectly acceptable for Freeholders who employ agents to take advice from them and if they do these costs may be recoverable provided that the amounts claimed are reasonable. Certainly the price charged should be justifiable by the Agents (with reference to time spent, hourly rates and contracts etc) but in principle the sums are payable and it would seem that challenges to the pay ability per se are likely to fail.

Filed under: England & Wales

Trips and slips with Section 21 Notices

The agent, landlord or lawyer must comply with the requirements of the deposit protection rules. To serve a valid section 21 notice the deposit must be protected and prescribed information served pursuant to section 213 of the Housing Act 2004 as amended by the Localism Act 2011 within thirty days of the tenancy starting or the deposit being taken whichever is earlier. If the deposit is not protected then a valid section 21 notice cannot be served until either the deposit is handed back to the tenant in full or with agreed deductions. If the Prescribed Information (“the Information”) has not been served then a valid section 21 notice cannot be served until the Information is served . (N.B. doing the above will not avoid any potential claim for failure to protect the deposit).

Notices need to be served in accordance with the terms of the notice provisions in the tenancy agreement; such as notices being served by first class post deemed served two working days later. Notices served pursuant to a “break clause” must comply with section 21 (1)(b) of the Housing Act 1988 AND the provisions of the clause itself. The courts will interpret the terms of a break clause strictly.
Another major hurdle relates to notices served pursuant to section 21(4)(a) Housing Act 1988. It is easy to get the date wrong, where the fixed term runs from different dates to the rent payment date. The courts have approved a “saving provision” whereby the notice can ask for possession “ after the end of the period of your tenancy which will next end after the expiration of 2 months from the service”. The believed end date is included within an accompanying letter.
If the property requires licensing under part 3 Housing Act 2004 for a House in Multiple Occupation (“HMO”) being selective licensing of residential properties. A licence will be required or an application in the pipeline before service of a section 21 notice.

Top Tips to serving a valid section 21 notice:
1. Check that the deposit is registered and Prescribed Information served BEFORE serving a section 21 notice.
2. If the deposit is not protected then hand the deposit back to the tenant either in full or with agreed deductions.
3. If the deposit is in a scheme but the Prescribed Information not served, serve the prescribed information BEFORE serving the section 21 notice.
4. Check the tenancy agreement for the service of notice clause. Does notice have to be served in a certain way? If so, do it.
5. Is notice being served pursuant to a “break clause”? Follow the requirements of the clause.
6. If the tenancy is periodic the 21(4)(a) notice use the “saving provision”.
7. Don’t cut dates too fine. A longer notice period might be quicker than re-serving a notice.
8. Check the HMO licensing requirements with the local authority.
9. Rent: Continue collecting the rent and passing it on to the landlord.
10. Make the landlord aware a section 21 is a notice seeking re-possession not forcing the tenant to move out without possession proceedings. The notice allows the judge to grant mandatory repossession in Court

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

Deposits: so what is next?

We continue to receive many enquiries relating to deposits and the effect of changes brought in by the Localism Act.

It seems clear that the Courts are aware of the requirements generally and certainly the experience we have is that Judges are alive to the issues and are considering them. The up to date Accelerated Possession Claim form requires information about any deposit taken to be included and also for the Claimant who is the landlord to confirm compliance with the rules of the relevant scheme including the giving of prescribed information and compliance with any other conditions such as the requirement to serve the Terms and Conditions of DPS on a prospective tenant. This means that any solicitor instructed must ask questions with regards to the above and satisfy themselves that there has been compliance before they can sign a statement of truth and commence proceedings in the County Court. Without such compliance any section 21 notice served will be invalid and proceedings would be dismissed.

It is therefore important that all agents and landlords regularly audit their portfolios to ensure compliance and perhaps more importantly ensure that they have systems ion place to be able to demonstrate that compliance has taken place meaning that all prescribed information has been served and the deposit protected within thirty days of the tenancy commencing or the deposit being taken whichever is the earlier. As we have blogged about previously the consequences of not being able to demonstrate compliance may make obtaining possession under the no fault section 21 ground difficult and leave both agent and landlord open to claims for a penalty from the tenant under the Housing Act 2004.

With regards to penalties as yet there seems little guidance regarding the factors the Court will take into account. As a result it is vital that if a landlord or agent becomes aware they have not complied they should urgently consider what action should be taken. In general terms they can either try and remedy any breach (e.g. by serving prescribed information out of time); an/or return the whole of the deposit to the tenant. It is not believed that this will prevent a claim but it may stand as good mitigation if a claim is made by any tenant. Agents in particular should be able to show why a lapse occurred and what steps they have taken to prevent this happening again. The impression seems to be that Courts will look favourably on those who are open and straightforward and save the harshest penalties for those deliberately flouting the rules and then prevaricating when claims are made. A documented system and protocol for dealing with deposits may be useful evidence. It seems likely that professional indemnity insurers will become alive to these issues and may impose their own requirements upon agents whom they offer cover.

It is worth remembering that certain aspects of the pre- Localism Act case law still applies. Certainly it is believed that where there is a joint and several tenancy agreement any claim will need to be made by all the named tenants. It may be that other aspects as time goes by will be upheld. The difficulty currently for advisers is that we have little guidance and so the advice offered must err on the side of caution.

No doubt over the coming months more cases will be reported and certainly as and when we become aware of them we will post further articles on this topic but if any of our readers have any experiences we would really like to hear them.

Filed under: England & Wales, , , ,

So what is a “house”?

The Supreme Court consisting of a panel of seven Justices handed down its Judgement in the cases of Day v. Hosebay and Howard de Walden Estates Limited v. Lexgorge Limited [2012] UKSC 41 on 10th October 2012.

This was an appeal to determine what is a “house” under the Leasehold Reform Act 1967 with regards to the enfranchisement of houses. The Act is in place to allow the owners of leasehold houses to enfranchise and thereby purchase their freeholds. Issues arose as a result of amendments made under the Commonhold and Leasehold Reform Act 2002 which removed the previous residence requirement. As a result of these amendments companies which owned leaseholds and those sub-letting or owning as a second home were able to exercise rights under the legislation.

In the Judgement (given by Lord Carnwath and agreed by all six other Justices) consideration was given to the intentions of Parliament in making such amendments and highlighting that the purpose was to address perceived flaws in the “residential leasehold system” and not in the wider sense.

In all of the lower courts it was found that the buildings in question were a “house” and so could enfranchise.

The property in Hosebay at the date of service of the relevant notice was being used as a self-catering hotel. In Lexgorge they were being used as offices. The Court said that this was not “a house reasonably so called”. Simply because the properties looked like a house and might sometimes be referred to as a house did not displace the fact that their use was entirely commercial.

What seems clear is that the Supreme Court has taken account of the intention of Parliament. The legislation should apply to properties genuinely being used as residential accommodation and simply because of the amendments made by the 2002 Act this should not be extended to allow buildings which may originally have been “houses” but are now used for commercial purposes being able to enfranchise. Undoubtedly the great estates in London and other property companies will be breathing a sigh of relief.

Filed under: England & Wales, , ,

Service charges: Reasonableness of charges caused by breaches of other leaseholders covenants

An interesting case recently came before the Upper Tribunal (Lands Chamber) relating to what is the position when service charge costs have risen because of the breach by some leaseholders of their covenants.

 In the case of Liverpool Quays Management Limited v. Carol Ann Moscardini [2012] UKUT 244(LC) The President of the Upper Tribunal considered these points and various other points on appeal from the LVT.

 The facts were that this development in Liverpool was directly adjacent to the Liverpool Echo Arena which opened in 2008.  As a result of this and the fact that the development was experiencing problems from short term lettings of the flats the cost of providing security for the estate escalated significantly with the costs approximately doubling.  The Respondent challenged these sums and the LVT at first instance disallowed part reducing the amount to that of previous years stating that there had been “excessive increases over previous years”.

 The leases contained no covenant against short term letting although they did contain the usual provisions re nuisance and covenants that the properties only be used as private apartments and not for trade or business.  There was a covenant for enforceability by the management company but Mrs Moscardini had not exercised this.  Mrs Moscardini submitted that the real reason for the increase was as a result of the management company not properly policing and controlling short term and hotel type lettings leading to various problems including a large number of incidents involving the police.

 Invoices were produced by the management company and a director explained how the contractor had been chosen.  The President was satisfied that the increase was due to the opening of the arena and the problems with the short term lets.  He was satisfied that the response was adequate and the service provided was of a reasonable standard.  Whilst he recommended that the management company did look at taking some enforcement action he did accept that there response in increasing security was proportionate (and recoverable under the lease) and even if they had taken action this may not have successfully dealt with the problem during the period in question. Such action was a long term solution and would not alter the need for security.

 What is clear is that the President in reaching his decision was trying to balance the invidious position the management company found themselves in.  This is a not unusual situation where leaseholders are faced with a proportion of leaseholders not sticking to the terms of the lease.  For the management company they may not have funds available to take action directly themselves without some mandate from the leaseholders.  Most leases today have a mutual enforceability covenant which can be relied upon although as in this case it may require the leaseholder to offer some form of costs indemnity.   It would have been interesting to see if the decision would have been different if Mrs Moscardini had looked to exercise this or the application was supported by a wider group of leaseholders who could show a pattern of complaints to the management company.  The implication is that it might have been different if the management company had not then acted to deal with this nuisance. 

 Clearly if you are faced with a situation where you believe service charges are increasing due to breaches of covenant pressure should be bought to bear upon the management company to take action.  You should try and involve other leaseholders for them also to complain and require action by the freeholder or management company.  Records should be kept.  Whilst some freeholders will then take action if asked for an indemnity or some money on account it would always be wise to take advice to check what your liability is going to be or what action you can expect.

 One of those situations where perhaps it is important to understand fully your lease not just for what you can do but what you can prevent other doing!

Filed under: England & Wales, , ,

Appeals from the LVT and the Upper Chamber (Lands Tribunal)

Applications to the LVT appear to be on the rise.  Whilst currently the rules for these Tribunals are subject to consultation pending the formation of the Lower Tribunal (Lands Tribunal) it is worth reminding everyone about the current rules.

 Once you receive a decision of the LVT you have 21 days from the date when it was sent to apply for leave.  The Tribunal has produced a standard form for making such an application although this is not mandatory.  This time scale is quite short and it is open for a party within this period to request an extension of time together with reasons which the LVT will then need to consider.

 Generally as with most applications for leave to appeal the original panel will be reluctant to grant leave unless it is a clear cut case or there is some particular point of principle.  The reasoning behind this is that generally it is felt that the appellate court should determine what work it is hearing.

 If leave is granted the appeal continues to the Upper Tribunal.  If not granted it is then open to the parties, again within 21 days, to renew the application to the Upper Tribunal who will have the final say.  It is worth remembering that appeals to the Upper Tribunal can be by way of re-hearing in appropriate cases.

 Once a decision has been made by the Upper Tribunal this in effect is a final determination.  The Court of Appeal has recently considered the matte3r in the case of The Wellcome Trust Limited v. 19-22 Onslow Gardens Freehold Limited [2012]EWCA Civ 1024.  In this case the Court of Appeal reiterated that there was no right of appeal to the Court of Appeal. A challenge to the decision should be made by way of application for judicial review in the Administrative Court.

 So that is the process if you need to appeal.

Filed under: England & Wales, , ,

Moneybox Live 3rd October 2012

Marveen Smith will be appearing this week on Moneybox Live  http://www.bbc.co.uk/programmes/b01n1qy6 to discuss Renting and Letting at 3pm on Wednesday 3rd October 2012. She will be part of a panel of three well known industry experts so get your questions in!

Filed under: England & Wales

What factors should the court take account of in adjourning a trial?

We are often faced with questions when a final hearing is approaching asking about what will happen if the other side tries to adjourn or even our client wanting to adjourn!

The starting point for all Tribunals and Courts is that they should be reluctant to adjourn a final hearing unless there is good reason. The general principle is that given all parties will have had notice and will often have been involved in the whole listing process it would be against the overriding objective to adjourn trials given the expense and time that would be wasted.

Recently in the case of Dhillon v. Asiedu [2012]EWCA (Civ) 1020 the Court of Appeal issued guidance on the issues to be taken account of. The facts in the instant case are that the Appellant had taken a loan from the Respondent with the terms negotiated by a friend. The matter then appears to have been subject to litigation and the matter was listed for trial. Sadly shortly before this the friend died and the Appellant suffered a severe bereavement reaction. It would appear various trial dates were then adjourned and unless orders made and ultimately a litigation friend was appointed. At the trial date then fixed an application was made to adjourn on the basis that the Appellant was unable to attend, give evidence and be cross examined and it was fundamentally unfair to continue.

An interesting set of facts at probably the more extreme end of the scale and one can see that a court would have had sympathy with the Appellant given these circumstances.

The Court of Appeal set out the following guidance:

• Fairness requires the position of both sides to be considered and all cases must be dealt with justly, expeditiously and fairly. A number of outcomes are possible and only if the judge had failed to take account of relevant factors, had taken into account immaterial factors or come to a decision that was impermissible would the Court of Appeal interfere.

In this case the Court decided that the Judge was entitled to say that the late evidence of incapacity was not a sufficient factor as this could have been available sooner. Further he was entitled to say that the Appellant could have in the past filed evidence and complied with various unless orders. The oral agreement involving the deceased friend’s evidence was a key part and the Appellant could not have given material evidence on this in any event. It was accepted that the Appellant could attend the trial but she did have a litigation friend appointed to conduct her case. Taking all of these into account the Judge had to balance this against the fact that the Respondent lived abroad and had flown to the UK for the hearing which was the third time the case had been actually listed. On balance he was entitled to not agree the adjournment.

What is clear is that simply coming along on the day of the trial and seeking an adjournment is not going to find favour. If a party thinks they need an adjournment for whatever reason they should apply at the earliest opportunity and make sure they can go through all the reasons and try and demonstrate why this is fair and just. The courts are clearly entitled to take a robust stance with regards to such applications and the Court of Appeal will clearly be reluctant to interfere.

Filed under: England & Wales, ,

Why do Courts let Tenants make Unmeritorious Applications?

Many landlords and agents will have come across the situation where they have successfully been granted an Order for possession and then receive from the Court (often the day before execution of a warrant) an application from a tenant requesting the Court to set aside an Order on the basis of grounds either previously advanced at the original hearing; or on matters not strictly relevant to the possession process. For parties not experienced with the Court process this can seem inherently unfair to landlords; and be seen as the tenant simply “playing the system”. From the solicitors point of view it is also often frustrating having to explain to the Client that the process must be gone through before possession can be obtained.

The Courts are required to give proper consideration to any application made. Generally applications should be heard at an oral hearing at which both parties should have the opportunity to attend. Recently this approach was affirmed by the Court of Appeal in Frey and others v. Labrouche [2012] EWCA Civ 881 . In this case an application to strike out a claim was made. The Judge at the start of the hearing indicated that he thought the application was unsustainable and he was not going to hear from Counsel of the Appellant. The Appellant claimed that the judge’s refusal to hear the application was a breach of their fundamental common law right to present the case. The Court of Appeal agreed and stated that a judge could not properly dismiss the application without giving the applicant a fair opportunity to put its case. It was vital that justice was seen to be done.

Whilst it is accepted that judges can (and should under the Civil Procedure Rules) take a robust stance this does not preclude parties making applications and the Court should give proper consideration and allow oral argument. This is why applications, even when made at the eleventh hour are listed and heard even when this can delay the execution of a warrant or other process.

Filed under: England & Wales, ,

My Flat is Too Cold!

There has been an interesting decision in the case of Liverpool City Council v. Anwar Hadi Kassim [2011] UKUT 169(LC) relating to category 1 hazards under the Housing Health and Safety Rating System (“HHSRS”) of the Housing Act 2004 regarding lack of heating.

The facts are that Mr Kasssim owned a one bedroom ground floor flat in a terraced house. A Notice (a Prohibition Order) was served prohibiting use except by Mr Kassim as there was a category 1 hazard being excess cold and stated “There is no programmable, permanent, fixed and affordable heating in the dwelling. The level of thermal insulation to the dwelling is low”.

Mr Kassim appealed the notice under paragraph 7(10) of Part 3 of Schedule 2 of the Housing Act 2004. He contended that since the Notice he had double glazed all windows and installed an adequate heating system being various electric wall mounted heaters. The council contended that the heating system did not meet the requirements of the Notice because it was not capable of being affordable for a tenant to run the heating system. This contention relied upon Guidance issued by the Office of the Deputy Prime Minister in February 2006.

At first instance the Residential Property Tribunal agreed with Mr Kassim. It concluded that the heating system only had to be efficient and it should not judge the affordability in considering the health and safety aspects of the property. It therefore quashed the prohibition order.

The Council then appealed to the Upper Tribunal (Lands Chamber) saying that the affordability of the system was something which the Guidance referred to and under section 9(2) of the Housing Act 2004 there is a requirement to have regard to the Guidance. The Council put forwarded evidence that there was a need to have regard to affordability which arose from the requirement that any system should be energy efficient. Mr Kassim contended that the term “affordability” was not mentioned at all in the Guidance but “economically” was and in this context meant without waste. It was submitted on his behalf that any system was dependant upon the lifestyle of the occupant and which provider and tariff they chose to use.

The President of the Upper Tribunal determined that the affordability was of “potential relevance” and the cost of electricity was capable of being of relevance. Interestingly he made clear that the Guidance has no independent force but is there to assist in the application of the statutory provisions. The question was whether by reference to a “vulnerable group”, being those over 65, would be deterred from using the system as a result of the expense.

The matter was remitted for certain specific questions to be addressed by the Tribunal.

It is therefore important that in considering potential hazards and how these are addressed that consideration is given to all matters including any costs of operation of any system which may be passed on to an occupant. It is clear local authorities can require the installation of heating systems. Whilst the decision does not go as far as to say they can specify the exact type of system regard can be had to the cost of running any system to be installed particularly if the cost may mean that it will not be used. Each case will depend upon the specific property and the type (or actual) occupant of the same. The moral is that it is always best to try and work with the local authority as far as possible to avoid what was undoubtedly expensive litigation.

Filed under: England & Wales

Squatting

Just a reminder to all that from tomorrow squatting will become a criminal offence under section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act. This Act applies to residential property only. It applies to someone who has entered a residential building as a trespasser, and not to a person holding over after the end of a lease or licence (even if the person leaves and re-enters the building). If you believe your property contains squatters you should contact the police who have the powers to arrest anyone committing an offence.

It is yet to be seen how individual police forces apply this law but it is understood that the Metropolitan Police are briefed and ready to take action. We will in due course be posting a more in depth article but for further advice please contact us.

Filed under: England & Wales

Landlords’ safety obligations

Thanks to our friends at Nearly Legal we have been alerted to the recent case of Gillian Drysdale v Joanne Hedges (2012) QBD 27/07/2012. A tenant slipped off some steep steps while moving her belongings in at the beginning of the tenancy and injured her back. The steps were painted with gloss paint which became slippery while wet, and there was a dangerous drop unprotected by railings. The tenant claimed against the landlord under section 2 of the Occupiers Liability Act 1957 (OLA), section 4 of the Defective Premises Act 1972 (DPA), as well as under his common law duties. You can read a full summary here.
In short it was decided:
1. Section 2 OLA did not apply at all – a landlord’s duty is defined in section 4 of the DPA and it is this Act which applies.
2. Section 4 DPA provides that where there is an express or implied right of access for the Landlord to carry out repairs, there is a general duty of care to occupiers (and their possessions) to take reasonable care to ensure safety from damage or injury as a result of any defect which the landlord is liable to repair, and which they are – or should be- aware of. (Note that this duty applies without actual notification if the landlord should reasonably have been aware). The court confirmed that these provisions did not translate into a duty to make safe.
3. Common law duty of care: the court confirmed the principle that there was no requirement to make safe a property let in a dangerous condition. ( In this particular case there was no common law requirement to make the drop safe, but there was a duty of care not to create an unnecessary risk of injury).
The claim was dismissed.
So what does this mean for Landlords? It does not mean that they can leave their tenanted properties in a dangerous condition. It means that the court confirmed the position with regard to the claimant’s claim and the landlord’s liability under the DPA, OLA and his common law duty of care. There are however safety standards set out in other legislation and regulations.
Landlords will be aware of the provisions of the Housing Act 2004. The Housing Health and Safety Rating System ( HHSRS) introduced by part one of the Act imposes a set of safety obligations on Landlords, including obligations in relation to slips, trips and falls. Under the HHSRS a local authority, by way of an environmental health officer, can inspect a property for hazards and require that remedial action be taken to diminish a risk. (NB, HHSRS applies to all residential properties, not just rental properties).
Houses in Multiple Occupation ( HMOs) are subject to enhanced safety obligations . See our blog here
Further all landlords will be aware of the Gas safety ( installation and use) Regulations 1998 which we have blogged on here.
So although in this particular case the tenant was unable to claim against the landlord under the heads of claim pleaded, there are nevertheless requirements on landlords to keep their properties safe. We often get queries on our Helpline as to safety in rental properties. Landlords and agents should bear in mind not only their repairing obligations but also the requirements of HHSRS and the raft of other legislation designed to keep occupiers safe.

Filed under: England & Wales, , , , ,

Forfeiture of Residential Long Leases

For sometime there has been debate as to whether a County Court default Judgment satisfied the requirements of Section 168 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) and section 81 of the Housing Act 1996 (“the 1996 Act”)

The section of the 2002 Act provides that a Landlord cannot serve a forfeiture notice in respect of a tenant’s breach of covenant until a Court or Tribunal has determined that the breach has occurred. The 2002 Act introduced a special procedure for the Leasehold Valuation Tribunal (“the LVT”)to determine breaches of covenant. The 1996 Act provided that there needed to be a final determination or agreement before forfeiture could take place.

Many landlords continued as part of their debt collecting processes to issue proceedings in the County Court and obtain default judgements which they then relied upon to seek forfeiture. If claims for service charges in the County Court are defended then often they will be transferred to the LVT for a determination. Until recently it was not clear as to whether a default judgement was a final determination with two results in cases, one saying it was a default judgement and the other the opposite.

In Church Commissioners v. Koyale Enterprises and Thaleshwar [2012] 21 EG 96 at first instance the District Judge determined that a default judgement was not a final determination and therefore section 81 of the 1996 Act was not satisfied. The landlord appealed.

The matter then came before HHJ Dight at Central London County Court. He ruled that where a default judgement had been entered the issues were to be treated as “determined” between the parties and that for the purposes of section 81 of the 1996 Act a default judgement was a determination.

In his view the leaseholders had been provided with an opportunity to mount a challenge to the charges if they had chosen to do so. Simply deciding that a default judgement was a “final determination “did not prevent the leaseholders form subsequently challenging (e.g. making an application to set aside the judgement). The judge was concerned that requiring an actual hearing in circumstances where no defence was filed would be unfair on landlords and increase pressure on the courts. For all of these reasons the judge decided that a default judgement was a final determination.

It seems that the judge was perhaps swayed by the practical difficulties that would arise if a default judgement was not a final determination. This may require landlords in service charge cases to require the Court to hold a hearing even when the leaseholders had not looked to defend. Clearly at a time when the Court Service is under enormous pressure this was not appealing particularly given the whole process of seeking a judgement does allow the defendant an opportunity to appeal.

What this case means is that in respect of service charge arrears recovery freeholders and landlords can rely upon County Court default judgements as the basis for forfeiture. For landlords this system is seen as relatively quick and user friendly for the majority of claims which are not defended. If a landlord thinks a matter may be defended they may still wish to consider whether to use the County Court or the LVT and both options are open. Hopefully we do now have some clarity on this difficult issue although the Courts still remain reluctant to forfeit a residential lease for what are often modest service charge arrears when considered against the value of the leasehold interest.

Filed under: England & Wales, , ,

I Haven’t Protected the Deposit? What can I do?

As regular readers of this blog will be aware the 6th April 2012 saw the amendments made to the Housing Act 2004 by the Localism Act 2011 come into force.

Prior to these changes various court decisions (in particular Tiensa v. Vision Enterprises Ltd [2010] EWCA Civ 1224 and Gladehurst Properties Ltd v. Hashemi [2011] EWCA Civ 604) rendered the provisions on enforcement of the deposit protection scheme, in the words of Lord Justice Sedley, “a dead letter”. These decisions meant that where a deposit had not been protected it was relatively easy for landlords and agents to avoid any of the penalties as included in section 214 of the Housing Act 2004. The changes were meant to correct the errors in the original drafting and give the Housing Act 2004 real teeth.

The changes mean that if a deposit is now not protected (and more below as to what this means) properly then the landlord and/or agent will be subject to a penalty amount if the tenant makes an application to the Court. The other serious consequence is that a landlord will not be able to serve a valid Notice under section 21 of the Housing Act 1988 (Section 215 Housing Act 2004). This Notice allows a tenancy to be ended without the landlord having to prove any fault on the part of the tenant and is a sure way for a landlord of obtaining possession.

To properly protect a deposit there must be strict compliance with the rules of one of the authorised schemes (section 213 Housing Act 2004). This now means that the deposit must be protected within 30 days of receipt (not necessarily the same as the start date of the tenancy), together with the giving of any and all prescribed information and any other requirements of the particular scheme (some require an advice leaflet to be given). If the deposit has not been fully registered within this scheme the general view currently is whilst you can register the deposit out of time this will not afford you protection.

So if the deposit is not properly registered what can happen? Firstly you will not be able to use a section 21 Notice to seek possession. The court forms for accelerated possession have been changed to ensure that details of the deposit and its registration are included. In our experience Courts are looking at this information and considering if deposits have been properly registered. The tenant may also make an application under section 214 of the Housing Act 2004 to seek a return of the deposit and also a penalty amount.

The Court has the power to order the return of the deposit in full to the tenant or that it is paid into an authorised scheme. Whilst prior to the changes the Court had to award a penalty amount of three times the deposit this has been amended so the Court can award an amount between one and three times the deposit amount. It is here that the Court retains some discretion as to the amount. It will be for the landlord or the agent to adduce evidence to try and mitigate this amount perhaps by showing that there was a technical breach, financial hardship etc. Clearly an award requiring the return of a deposit and also a penalty of three times the deposit (which of itself could be more than 4 months rent) will be crippling to many landlords and if such a claim is made as a counterclaim in rent arrears proceedings may wipe out any and all arrears meaning that possession is not granted.

With regards to section 21 notices if the authorised scheme has not been strictly complied with the landlord cannot serve a valid Notice. At this stage there are no particular cases relating to the changes and how in practice the Court will look at this situation. It is however believed that simply complying with the requirements out of time will not of itself allow you to then serve a valid section 21 Notice. Section 215 does provide that you can return the deposit in full to the tenant. It is believed that tenants will be advised not to accept the return of the deposit so in this way preventing a landlord from being able to serve a section 21 Notice. If the tenant brings a claim under section 214 Housing Act 2004 and this has been determined, withdrawn or settled this will allow the landlord to then be able to serve a section 21 Notice. If a section 21 Notice cannot be served this would then mean that a landlord could not rely upon this mandatory no fault ground to bring possession proceedings. A tenant would then find themselves in the position of almost being akin to an assured tenant only able to be made the subject of a possession order if one of the grounds to Schedule 2 of the Housing Act 1988 had been made out.

We are yet to see how the Courts interpret the amended Act and whether they give landlords “get outs” as they did previously. Most people will not want to be the no doubt expensive guinea pig to test this situation. The will of Parliament was to give the legislation teeth as part of the regulation of the private rented sector. It is vital that you do comply and if you become aware of a deposit which has slipped through the net take advice.

Filed under: England & Wales, , , , ,

Interaction Between Courts and LVTs

Over the past 12 months the Leasehold valuation Tribunal (“LVT”) has fallen under the responsibility of the Ministry of Justice. It is due to reform to become part of the Lower Tribunal (“Lands Chamber”) to reflect the various changes in jurisdiction of tribunals and organisation undertaken over the past few years. This will result in a new set of rules and procedures governing all cases before the LVT. It will however continue to be a specialist tribunal with members of the panel having appropriate specialist knowledge.
The LVT has over the past decade interacted increasingly with the Courts. In particular since the Commonhold and Leasehold Reform Act 2002 (“CLRA”) came into force the Courts have had a power to refer matters relating to service charge disputes to the LVT to determine. This jurisdiction has seen many claims which have been started in the County Court as a traditional debt claim being referred to the LVT to determine particular questions. Case law has provided that in such cases the LVT is however only allowed to deal with the particular question posed of it by the County Court. For this reason County Courts should ask specific questions of the LVT so that all parties are clear regarding the questions that the LVT are being asked to determine.
This procedure means that usually if a claim for a service charge debt is defended the Court as part of the allocation process will wish to consider if a referral is to be made to the LVT. The LVT has powers to consider points under which it already has jurisdiction such as the reasonableness of the service charge; and what often flows from this point is whether the lease itself allows recovery of all or part of the service charges being claimed. In practice it is evident that an LVT may determine all substantive matters; which when referred back to the Court the Court by the LVT allows the Court to simply giving final effect to such findings. The Court will of course continue to have costs jurisdiction in the usual way and it will be for the Court to determine any costs which may or may not be awarded for or against either party using the usual principles of court procedure.
The CLRA also provided jurisdiction to the LVT for the first time to determine if there was a breach of the terms of a residential lease. In essence this procedure was made the first step which a freeholder had to undertake if they wished to try to forfeit a lease. Once such a determination was made by the LVT then the matter could proceed for forfeiture in the usual way. Ultimately this could lead to an application to the Court for forfeiture. In considering a forfeiture claim the Court would no longer usually have to consider whether or not there was a breach of the lease as this aspect would have been predetermined. Obviously this can lead to many such claims taking up less time before the Court and being resolved prior to actual forfeiture proceedings. The determination of a breach procedure is viewed by many practitioners as being a fast and efficient way of dealing with allegations of breach, particularly given that in practice most can and will be remedied.
These changes have reflected the fact that it is generally accepted that the LVT is a specialist tribunal which can bring specialist knowledge and expertise to residential leasehold disputes. This was recently reiterated by the Court of Appeal in the case of Winstone v. Great Gate Management Company Limited 2012 unreported which was a case involving a leasehold dispute, injunctions and service charge matters where in an obiter statement the Court of Appeal suggested that the parties might seek to have the remaining items in dispute following the appeal referred to the LVT given its specialist jurisdiction.
What is clear is that everyone practising in this field must give careful consideration as to the correct forum to begin a claim as often a claim could be issued either in the Court or the LVT. There may be tactical advantages in using one avenue over the other, but ultimately the party making the decision could find themselves before the LVT come what may. The influence of the LVT and no doubt its successor are growing as may the jurisdiction over disputes which they cover.
If any help or assistance is required in this complex field PainSmith Solicitors are happy to advise.

Filed under: England & Wales

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