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21 December, 2011 • 15:42 2

Energy Act 2011

Many of our readers have heard about the Energy Bill in some form or other.

The Bill was given the force of law on the 18 October 2011.

The basic issue for our readers is that:

• The Act includes provisions to ensure that from April 2016, private residential landlords will be unable to refuse a tenant’s reasonable request for consent to energy efficiency improvements where a finance package, such as the Green Deal and/or the Energy Company Obligation (ECO), is available.

• Provisions in the Act also provide for powers to ensure that from April 2018, it will be unlawful to rent out a residential or business premise that does not reach a minimum energy efficiency standard (the intention according to the Department of Energy and & Climate Change is for this to be set at EPC rating ‘E’).

Before the deadline of April 2018, the Secretary of State will need to pass regulations so that a landlord can not let a property until the above has been complied with. There does not appear to be any indication of when this might be however, the current Energy and Climate Change Secretary Chris Huhne has made his intentions clear about introducing the regulations.

The Act only applies at present to tenancies governed by the Housing Act 1988 or the Rent Act 1977 and so does not apply to Common Law or Company Let agreements but this could change and if it does we shall update. The other issue to note is that the Act does not apply where the EPC has been obtained prior to the Regulations coming into force.

Whether or not landlords believe that this:

“The Green Deal is a win-win opportunity for landlords by removing the upfront cost of work to upgrade the property making it cheaper to run, more environmentally friendly and ultimately more attractive to rent.” (Chris Huhne, Secretary of State)

The fact is that the legislation is coming into force and agents should warn landlords of it so they have more than enough time to carry out the energy improvements.

Filed under: England & Wales, comment, consultations, energy efficiency, EPCs, guidance, Housing Act 1988

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

13 December, 2011 • 15:39 2

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

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

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

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

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

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

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

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

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

Filed under: England & Wales, comment, legislation, litigation, long lease, procedure, service charges

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

14 October, 2011 • 09:11 0

What is a Flat?

This was the question which HHJ Cowell had to answer last week at Central London County Court in respect of a claim for Collective Enfranchisement made under the Leasehold Reform and Housing Development Act 1993 in the matter of Farndale Court Freehold Limited v. G & O Rents Limited.

The claim concerned a building which can best be described as akin to a student halls of residence. The building consisted of a terrace of 4 blocks. In one block was a management office which belonged to the freeholder and also a room used as a laundry. On either side of the stairwell on each floor was a Unit which typically consisted of 6 en suite bed sitting rooms, a corridor and a communal Kitchen/diner. There were 30 of these units and a Qualifying majority of tenants had given a Notice to Enfranchise under the 1993 Act. The Defendant freeholder had served a Notice alleging that the Units were not flats within the definition of the 1993 Act Section 101(1).

Further the Defendants also alleged that the Units were used as business premises. This was not raised in the Counter Notice.

As a result the Freeholder alleged that the Claimant nominee purchaser was not entitled to enfranchise.

The Claimant bought proceedings for a declaration under Section 22 of the Act that the participating tenants were entitled to enfranchise.

The Judge in deciding if the leases were of a flat took the view that each lease was for a separate set of premises and that each formed part of the building as a whole and had been constructed and adapted for use as a dwelling. The Judge did not feel that the cases relating to “houses” and enfranchisement under the Leasehold Reform Act 1967 assisted him but he did refer to Malekshad v. Howard de Walden Estates and the view of Scott LJ at paragraph 101 that a dwelling was either a house or a flat.

The Judge in this case found that the Units had been constructed for people to live in. Further he determined that whilst most units had 6 rooms, each room could not be said to be a separate dwelling since each was used with the kitchen. He went on to say that if each room could be said to be a flat that was in his view unrealistic and the alternative that there were no flats was equally unrealistic.

He held that each of the Units were a flat within the definition of Section 101(1).

The next point was whether the Defendant was entitled to rely upon the business user despite having failed to mention this in the Counter Notice.

The Judge relied upon a decision of HHJ Cooke at Central London County Court in the case of Bishopsgate Foundation v. Curtis [2004] and found that the argument over business user had not been thought about or hinted at in the counter notice and the Defendant could not rely upon this since there was no reference in the Counter Notice.

He did however go on to consider the business user point. The Judge did state that he could see that a layman looking at the letting arrangements and the units may well conclude that this was a business user but he was satisfied that this was not the correct test. The correct test was to have regard to Section 23 of the Landlord and Tenant Act 1954. The Judge was referred to Graysim Holdings v. P & O [1996] but determined that the current case was on all fours with this authority.

The Judge found that there was not a Business user (save for a short period in respect of two units only as a hotel).

As a result the Claimants were successful in their application although the Defendant may appeal.

It is believed that this is the first case on the point of what is a flat under the 1993 Act. It seems that if you have a dwelling then if it is not a house it will be a flat! Plainly the factual situation is going to be important and we still await the House of Lords decision in Hosebay which may or may not provide further assistance.

Further the Judge did make clear that in his opinion a Freeholder must set all arguments in the Counter Notice although he does not need to go into in detail. This is perhaps surprising but the Judge was clear that in effect the Counter Notice is akin to a pleading.

Perhaps not of huge interest save for those who practice in this field but an interesting decision none the less.

PainSmith were instructed on behalf of the Defendant Company and are happy to advise with regards to all residential long leasehold matters.

Filed under: England & Wales, comment, legislation, long lease

13 October, 2011 • 08:49 1

SHELTER REPORT

Many of you will have heard on the news today about the publication of SHELTER’s report on rent levels. We felt it was worthy of mention here on the this blog given our interest in all things relating to the private rented sector.

Campbell Robb, Shelter’s Chief Executive, says: ‘We have become depressingly familiar with first time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic.
With no cheaper alternative, ordinary people are forced to cut their spending on essentials like food and heating, or uproot and move away from jobs, schools and families.’

The report focuses on the affordability of accomodation in the private rented sector and is part of an ongoing series of reports which SHELTER intend to publish. The report highlights the large rises in rental levels over the decade prior to 2007 and suggests that in large parts of the country rental levels are now at a level that makes them unaffordable. As a result SHELTER is calling on the Government to stabilise the market and bring in policies which will bring rental levels into line with earnings.

What is clear from the report is that the supply of rental properties in some areas are not suffcient for those seeking such property. With changes to Housing Benefit there must be real concerns as to the effects this will have on many families. Plainly some elements of the Localism Bill (particuarly those in relation to planning) are supposed to assist in this area but this will take time to filter through. We are sure that this report will generate much debate and would welcome readers comments.”

Filed under: England & Wales, comment, rent

11 October, 2011 • 12:26 5

Housing Act 1988

CLT Conference

Excuse the plug but we are promoting the attached course for no other reason than the fact that Dee Clair will be speaking amongst others. The course will cover section 8, 21, 13, deposits and even common mistakes, and is designed for all those involved in lettings.

Filed under: England & Wales, comment

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

3 October, 2011 • 12:59 0

Look at the lease!

We have posted on this topic before but many questions we receive on the helpline come back to the same answer.

Whether you are dealing with an AST or long leasehold dispute the starting point must always be the agreement or lease. The Courts, adjudicators and LVTs will always look at the lease/agreement as the starting point. It is imperative that advisers check the document carefully to ensure that all terms have been complied with and/or the remedy sort is provided for. Generally Courts etc will not look to imply terms into such a written agreement and will expect parties to comply with the terms that are written. This is particularly true for the party seeking to rely on the same.

Service charge clauses in particular often contain detailed requirements. It is not sufficient to say a party is not prejudiced by a failure to comply strictly with the terms. A careful review should always be undertaken by all managers and owners whether or not it appears that everyone is happy. Parties can and often do raise disputes at a later stage.

The Courts, adjudicators and LVTs have issued a number of decisions over the past 12 months making this clear.

The moral is therefore, check the documents and check you comply!

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

3 October, 2011 • 09:01 1

Long Lease.

PainSmith are proud to be members of ALEP

PainSmith have recently been successful in their application to join the Association of Leasehold Enfranchisement Practitioners (ALEP).

ALEP was formed to provide a body of professionals all involved in the field of leasehold enfranchisement who adhered to an agreed level of conduct and service. All members of ALEP to receive membership have to be able to demonstrate that they have sufficient expertise and experience in this complex area of law.

PainSmith Solicitors as a specialist firm of Landlord and Tenant solicitors is pleased to have been made a member of ALEP. PainSmith are able to offer specialist advice on all aspects of long leasehold property and regularly act for Freeholders and Leaseholders in a variety of matters including service charge disputes, lease extensions and collective enfranchisements.

For further information on ALEP please visit the website or for advice please contact us.

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

1 October, 2011 • 22:06 2

An apology please, we should be so lucky!

Many people have different opinions on squatting and some of you may have read about it in the Guardian newspaper. We at PainSmith would like to follow the rest (in a sheep like fashion-we ain’t proud) and add our name to those advocates objecting to Mr Weatherley’s comments.

Mr Weatherley, we look forward to the official retraction.

In the meantime if readers want to read more please click here for the nearly legal blog.

Filed under: England & Wales, FLW Article, comment

30 September, 2011 • 16:57 0

Equality Act: what does this mean for Agents and Landlords?

2010 saw the enactment of the Equality Act which provided that Landlords must consider making reasonable adjustments for people with a disability looking to rent their property.

The purpose of the duty included within the Act was to ensure that disabled people do not face barriers to occupation and enjoyment of rental property. The duty applies to the tenant but also to others entitled to occupy such as spouses and children. In so far as this article we are referring to the actual premises themselves and to private rented accommodation. A failure to comply with this duty will of itself amount to a form of discrimination and it is believed that the duty will apply also to agents acting on behalf of landlords. Currently as a new Act there is little case law and no specific code of practice and consideration needs therefore to be given to previous codes, cases and provisions under the Disability Discrimination Act 1995.

Generally in respect of premises the duty only applies if there has been a specific request by a person. It is a question of looking at the circumstances and seeing if it is reasonable to assume that a request has been made. This could be as simple as a prospective tenant indicating to an agent that they find it difficult to read the print on a tenancy agreement. This is likely to be sufficient to trigger the duty to look at how you can make the tenancy more accessible to that person and the agent would then be required to take reasonable steps. What is reasonable is objective and will depend on the specific circumstances.

The duty to make adjustments has 2 requirements which apply currently. There will in due course be a third requirement in respect of physical features to common parts when further parts of the Act are brought into force.

Firstly where something puts a disabled person at a disadvantage compared with a non-disabled person reasonable steps must be taken to avoid this. Secondly to provide an auxiliary aid if this prevents the disabled person being at a substantial disadvantage. It is believed in considering this you must have regard to all policies, procedures, rules and requirements and it includes any terms of the letting. The threshold is lower than previously being “substantial disadvantage” and this is defined as being “more than minor or trivial”.

What this means in practice is a landlord must consider any request made. This is at any stage of the process and therefore may apply in the pre tenancy stage and also during the continuance of the tenancy. An example is given of a disabled tenant with mobility problems who asks the landlord to install a walk in shower and grab rail. If the landlord refused they must be able to give clear reasons as to why and to show this would not be unreasonable. The landlord may be able to impose conditions such as the color should match the existing suite or that the tenant must ensure removal at the end of the tenancy. Ultimately it is for the landlord to show the conditions are reasonable and interestingly there does not seem to be a requirement necessarily for the landlord to pay the cost although if an improvement is being made to the property in some way it may be reasonable for the landlord to contribute to the cost. Again it is a question of reviewing all the circumstances to determine what is reasonable.

Currently there is little case law to rely upon even under the 1995 Act. It is hoped that a code of practice will be issued to clarify what parliament contends but for the time being landlords and agents must take care. Generally if in doubt it is probably best to consider any request as potentially triggering these provisions and if any consent is not granted to have noted the reasons why. Both agents and landlords need to be able to step back from the decision they have made and look at the reasons and be satisfied that any reasonable person would support that decision. Currently the bulk of decisions under the 1995 Act have tended to refer to secure tenancies from social housing providers but it is believed that this Act could result in more claims being made. You are warned.

With regard to common parts the Act does provide that reasonable adjustments should be made to physical features. Currently the Home Office has said they are considering when to bring these provisions into force. It is likely that if and when brought into force these will make some fairly significant changes which are believed will offer disabled occupiers greater flexibility and independence. A case of watch this space!”

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

27 September, 2011 • 11:45 1

Mitigation

We have heard that agents have been advised recently that a landlord is required to mitigate his losses when seeking to recover rent arrears, where a tenant abandons the demised premises. This is not correct, the landlord is in fact under no such obligation.

In Reichman v Beveridge the Court of Appeal dismissed the appeal of two tenants who had abandoned the office premises. The landlord took no steps to terminate the lease and sued for the rent arrears for the period that the premises were abandoned. The tenants argued that the landlord should have mitigated its loss by marketing the property or accepting the offer of a prospective tenant.

However the court held that the tenant’s argument should fail because the landlord had not acted wholly unreasonably in refusing to take steps to find a new tenant. The court also held that damages would not be an adequate remedy for the landlord as, if current market rent had been lower than that reserved by the lease, terminating the lease and re-letting the premises would leave the landlord with a shortfall in rent which it would be unable to recover. If, however, market rent was the same or higher, then it would have been possible for the tenant to take steps itself to find an assignee.

The rationale behind the decision is that landlord will be prevented from enforcing his contractual rights to maintain the contract and sue for the contract price only where an election to keep a contract open is wholly unreasonable, or where damages would be an adequate remedy.

Therefore whilst there is no requirement in most cases of L&T to mitigate, the advice is that you consider it. If for example your tenant is from abroad and for whatever reason abandons the premises is makes no sense to sue for the rent if there is no possibility of recovering it. What should be considered is for the tenant to be put on notice that whilst the landlord is not required to mitigate he will do so by replacing the tenant at the tenant’s expense and confirming that the tenant is responsible for the rent until a new tenant has been secured.

Filed under: England & Wales, FLW Article, comment, commercial lease, rent

23 September, 2011 • 10:00 4

Collective enfranchisement: what is it?

Collective enfranchisement is the term given to Leaseholders acquiring the Freehold of the property they live in. For the purposes of this article we will be referring to the Leasehold Reform Housing and Urban Development Act 1993 (“the Act”) as amended and the collective enfranchisement of flats. There is other legislation such as the Leasehold Reform Act 1967 which mainly relates to houses.

For many people owning a share of the freehold of the block of flats they occupy is seen as being vital as people often do not like the idea of simply being a tenant. In practice there are many different considerations which need to be weighed up before any application is made.

Firstly the Leaseholders need to act together (at least in part) since in simple terms 50% of the long leaseholders have to all come together to be able to purchase the freehold and if the building has any commercial parts these must not exceed 25% of the building. Assuming that these basic conditions are met the Leaseholders can then at least in principle consider whether they wish to pursue this route. Often there will be a vocal group who wish to “get on ” with the application. At this stage it is usual that people will then look to appoint a surveyor experienced in these matters to provide some guidance on the price payable. The methodology is set out in the Act and has been subject to numerous decisions of which the most famous is probably the decision in the case known simply as Sportelli. It is vital that a proper valuation is undertaken at an early stage to give all of the potential participants some idea as to what price may be paid.

Assuming that the numbers then match the Leaseholders pockets a detailed consideration should be given as to the right to qualify. Often a valuer experienced in this field will already have flagged if he foresees any particular issues. At this point it would always be advisable to instruct someone experienced in this field as the law, despite various amendments being made under the Commonhold and Leasehold Reform Act 2002, remains hugely technical with various pitfalls for the unwary. The adviser can then draw up the appropriate documentation and advise whether the Leaseholders will hold the freehold subject to any trust or company structure. It is worth pausing at this point to highlight that it is always open to Leaseholders to enter into informal negotiations with the Freeholder.

A Notice will then be served upon the Freeholder specifying a date by which they must reply. If there is no response then an application can be made to the County Court but usually (assuming a valid Notice has been served) the Freeholder will respond agreeing the right but disputing the price. There can however still be many technical reasons why a Notice may not be accepted by a Landlord and the Court of Appeal and the Supreme Court continue to hear a large number of appeals on very technical aspects although the bulk of these do relate to high value properties in what is known as Prime Central London however the outcomes tend to be binding on all.

The Act then allows for a period of negotiation after which if no agreement is reached an application can be made to the Leasehold Valuation Tribunal for a determination of the terms of the purchase. After this determination or agreement there will then be a transfer of the freehold and the Leaseholders will have acquired the freehold.

It is at this point that the hard work starts. Often Leaseholders will be advised to grant to themselves extended leases (typically 999 year terms) and possibly review any other perceived or actual failings in the lease. Certainly this should be looked at at this stage as there can be various issues if the Leaseholders only look to do this some way down the line, not least certain tax consequences which can arise.

It is important that all parties to the Collective Enfranchisement understand that there will still be a Leaseholder and Freeholder and whilst not impossible to own a freehold flat this is highly undesirable for reasons outside the scope of this article. The previous leasehold structure will then remain. For this reason before going down the route the Leaseholders must consider what Collective Enfranchisement will mean in practice.

The Freeholder will still be required to comply with both the terms of any leases (whether participants in the acquisition or not) and also the various statutory rules particularly governing recovery of service charges. The LVT in various recent decisions has made clear it has no jurisdiction to deal more leniently with Resident Owned freeholds than those owned by commercial investors. Given how complicated some of these rules are Leaseholders will always be well advised to consider appointing external managing agents to make sure these obligations are complied with. Owning the freehold brings both rights and obligations and this should not be forgotten. In particular awkward situations can arise where you have non paying tenants as the Freeholder and the Leaseholders who comprise the same will need to pursue action against these people.

As a result careful consideration needs to be given not just as to the acquisition but what this means for the future. It is also worth noting that simply because a building has undergone Collective Enfranchisement on one occasion does not mean this will not happen again and the writer has seen instances where one group have enfranchised but there has been a parting of the ways with some members of the freehold and so a second collective enfranchisement has taken place!

For some Leaseholders the costs of Collectively Enfranchisement mean that this is more economic than bulk lease extension applications but Leaseholders should proceed with their eyes fully open as to what is involved once you have been successful. Advice at an early stage of the process is vital so all are aware of the full implications of going down the route but if you decide this is the route for you it really can be a satisfying journey to have greater control of your destiny for what for many is their largest single asset

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

20 September, 2011 • 11:30 4

Change in Tenants

Sam asked “change of occupancies can be a legal minefield so some clarification on the best procedure would be helpful.”

The document you need is the Deed of Assignment.

The 3 main points to note:

Deposit
We do not know how many of you have been affected by this but DPS in their rules (16c) state that they will only allow registrations to be changed where you have the written consent of the outgoing tenant. So the Deed should include a clause which states that the outgoing tenant permits the landlord to change the registration of the deposit into the name of the new tenant and that the new tenant and outgoing tenant agree to settle the issue of any deposit monies to be passed between them themselves.

Inventory
The Deed also needs to include clauses relating to the inventory. When a tenancy is being assigned the new tenant must be given a copy of the inventory and given the opportunity to go through it before the Deed is signed. This may mean an additional visit to the property. However when the inventory is agreed this should be noted in the Deed and the inventory should be attached to the Deed. If the new tenant takes issue with the condition of the property then have the outgoing tenant and the new tenant deal with that between themselves even if that means the outgoing tenant compensates the new tenant and then have them contact you to finalise the Deed. The new tenant must agree that the condition of the property when they move in is as per the inventory compiled at the beginning of the tenancy. Agents and landlords should not finalise the Deed until the inventory is agreed to as this will affect the landlord’s ability to make any claim on the deposit at the end of the tenancy if the need arises.

It is recommended that you consider both the issues above no matter what scheme the deposit is registered with.

Signature
As you are no doubt aware when tenants enter into a tenancy they do so on a joint and several basis. This means that when one gives notice you can accept it on behalf of all of them and when one defaults in his rent payment you can seek the default amount from those that have already paid. It is due to this joint and several principle that many argue that when there is going to be a change in tenants that the remaining tenants consent should be sought and they should also sign the Deed.

It is therefore advisable that all the tenants that remain also sign the Deed along with the outgoing and new tenant and of course the landlord. However obtaining everyone’s signature is sometimes easier said than done. Whilst you can choose not to release the outgoing tenant unless they obtain the consent of the others, if for example, they are leaving the country they are unlikely to be too concerned about the procedure that they need to follow. Therefore if you obtain the signature of only the outgoing and new tenant along with the landlord the new tenant has at best an equitable right to remain in the property where rent is paid and accepted. This means that possession proceedings can be pursued against all those in the property following the assignment but the assignment needs to be fully explained in the court papers.

The problem with this issue is that there is no legislation or case law that supports the view that everyone should sign or not as the case may be. There is also the concern that in the case of an assured shorthold tenancy the new tenant could argue that he has 6 months security of tenure because he has a new tenancy. At PainSmith, 2 solicitors a barrister and 2 paralegals argued over this issue for some time and still there is no consensus. Therefore whilst the easy option is to sign a whole new tenancy this may not be what the landlord wants because of the security of tenure issue and as such the Deed with only the outgoing and new tenant signing maybe the only option available with the landlord warned of the above risks. To minimise the signature being a problem agents could consider handing tenants a letter at the outset explaining that if there is to be a change that everyone will have to sign a Deed and if they do not that not change will be considered. We can draft a template of this letter for readers to purchase if needed.

Sam thank you for the feedback and sorry for the delay!

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

18 September, 2011 • 17:53 4

Homelessness and what this means to Landlords…..

We are often faced with questions from Landlords and Agents about information they have received from Tenants about homelessness and the advice given by local authorities.

Often a Landlord/Agent will have had a good relationship with a tenant but for whatever reason the Landlord requires back the property. Assuming therefore that the Tenant occupies under an assured short hold tenancy generally (subject to the appropriate rules) the Landlord can obtain back possession by serving a valid Section 21 Notice upon the Tenant. This is a non fault ground and the Tenant should vacate at the expiry of the Notice.

Many tenants, particularly those in receipt of state benefits, will approach the Local Authority to see if they can access any form of social housing. Generally local authorities owe duties to people such as those with children or who suffer from some form of disability or illness. All too often these people will receive advice that they should simply remain in the property until such time as the Landlord has applied to the Court, obtained a Possession Order and then looked to enforce the same. The Tenant then finds themselves in the invidious position of having to explain this to the Landlord/Agent and explaining that if they do not comply with this advise then the Local Authority is likely to owe them no (or at best a limited ) duty to rehouse.

This of itself can lead to what previously was a good relationship breaking down but the Tenant often has little choice. Whilst arguably Local Authorities do not have to wait until an Order is made or a bailiffs appointment fixed for most this is the policy they have adopted. The duty potentially arises to rehouse if they believe that the Landlord does have a genuine intention to obtain back possession but most in our experience will not enter into dialogue with the Tenant or the Landlord/Agent until the Court progress is underway. Sadly this policy is difficult for a Tenant to challenge.

With the changes to Housing Benefit it is likely that Agents and Landlords will come across this far more frequently. It is perhaps worth trying to understand the position Tenants find themselves in. If they remain in the property the Local Authority may rehouse them (although some do not even properly assess the Tenants rights and claim until the proceedings are underway) but if they simply leave then the Tenant will receive no support. For Landlords and Agents the way forward is perhaps to engage with local authorities and Councilors to get them to look again at the policy although sadly given the shortage of accommodation most Local Authorities are unlikely to change their policies.

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

6 September, 2011 • 17:36 5

Squatters

On the 2 September 2011 Judge Fiona Henderson ordered Camden City Council to comply with a freedom of information request made by a member of the Advisory Service for Squatters. Judge Henderson when making the order stated that it was in the public interest to release the information, adding that there was a strong public interest in bringing empty properties into use, that squatting not was itself a crime and there was not a direct link between squatting and crime.

The council has 28 days (29 September) to comply with the Information Tribunal.

In response Mr Grant Shapps the Housing Minister, said rather than trying to prevent the anti-social and unfair practice of squatting, this judge is instead insisting that Camden City Council publish a ‘squatter’s road map’ – which in other areas has led to the numbers of squats doubling. I think this is madness, really. It’s clearly opposite to the expressed direction of [Government] policy.”

The Government has a £100 million fund to help councils bring empty homes back into use. About 80,000 homes are vacant across the capital, many of them under local authority control. Mr Shapps said: “I also want to shut the door on so-called ‘squatter’s rights’ once and for all, and end the misery, expense and hassle that far too many people have had to endure for too long, which is why we are consulting on making squatting a criminal offence.”

We have at PainSmith noted that squatting appears to be on the increase where landlords and even tenants have gone away on holiday. Obtaining a possession order can take a few weeks and as such precautions should be taken which could include hiring a house sitter or even having a friend visit your home every so often. If however squatters do get in and they refuse to leave upon a reasonable request then proceedings should be initiated.

Reasonable force is only an option for a Protected Intending Occupier, that is a tenant under the Rent Act 1977 or Housing Act 1988 and Displaced Residential Occupiers that is homeowners who are being prevented from occupying the property by squatters. For anyone else, including landlords, force is simply not an option despite what you might read elsewhere!

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

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