Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

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

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

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

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

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

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

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

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

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

Setting the record straight….

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

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

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

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

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

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, , , , , ,

“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, , , , , , ,

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, , , , , , ,

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, , , ,

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, , , , ,

Section 8: Back to Basics

From time to time it is important to go over old ground. It can be easy to lose track or just need a quick reminder of the basics of possession cases.

Section 8 notices, as I’m sure you are all aware, can be used as a vehicle to gain possession of the property whilst at the same time obtaining the rent arrears that may have developed. There are a number of different situations that can trigger the requirement of a Section 8 notice which could be scrutinised in an incredible amount of detail. With regards to this blog entry, I am going to focus more specifically on the mandatory and discretionary grounds and how they differ in the courts eyes in particular with relation to the more common grounds for possession i.e. grounds 8,10 and 11.

The Housing Act 1988 s.7(3) stipulates that when the court feels that any of the grounds listed in Pt 1 of Sch.2 of the 1998 Act are satisfied then possession must be granted for that property. If this is compared to Pt 2 which substitutes the phrase ‘must be’ with the far less convincing ‘may be’ then it starts to become clear why having mandatory grounds is infinitely more desirable that simply pinning hopes on discretionary grounds. As a general rule we as a firm only advise issuing proceedings on mandatory grounds unless the evidence is particularly strong on discretionary, as we have found that judges tend not to be too receptive to the idea of handing over possession of the property to the landlord and making the tenant potentially homeless, unless there is overwhelming evidence against them or the mandatory grounds have been met.

The most commonly used of the grounds for possession are 8, 10 and 11. Ground 8 is mandatory whereas 10 and 11 are discretionary. If for example the tenant at this point pays some of the rent arrears to the landlord, enough to just about drop below the 2 month minimum requirement (if it was a monthly rental period) to claim ground 8, it would mean the claim would be resting on discretionary grounds which, as explained earlier, are far from reliable, particularly in matters involving rent arrears. The discretionary grounds in cases such as this service the role of supporting the mandatory ground and are normally too weak by themselves to satisfy possession criteria. As soon as the mandatory ground is lost the case for the landlord is generally lost along with it.

This is not always the case. However, if a mandatory ground can be relied upon it is preferable to do so rather than assuming possession will be granted on discretionary.

With discretionary grounds, on the making of an order for possession, the court can postpone the order for as long as the court sees fit. In this period the court will normally issue certain conditions with regards to the payment of the rent arrears as well as any other conditions that the court deems applicable. If these conditions are followed, the court can discharge or rescind the possession order if it sees fit. Can you see the pattern here? The level of discretion available to the court is illustrated by the repeated use of the term ‘if the court sees fit’. The only discretion available to the courts when it comes to mandatory grounds is a delay from the usual 14 days to a maximum of 6 weeks in cases of exceptional hardship, but this in itself has a high threshold in which to satisfy.

In light of the above costs need to be considered and proceedings against a tenant to gain possession is not an insignificant sum. To risk this sum on the courts discretion, particularly when the order for possession would result in the tenant being made homeless, may not be the best course of action.

This blog has been drafted in response to a comment. Thank you for your continued support Valerie.

Filed under: England & Wales, , , , ,

Houseboats

In Mew and Just v Tristmire Limited the leaseholder obtained possession orders upon the expiry of 2 notices to quit.

Mew and Just lived in houseboats which were located in a rectangular shaped plot around the edge of a harbour. The houseboats are converted landing craft which were constructed locally during the Second World War. They were subsequently modified and made water tight and habitable. They were once capable of floating but now rest on wooden platforms which are supported by wooden piles driven and cemented into the bed of the harbour. Services such as water, gas and electricity were connected but they could also be easily disconnected.

An expert giving evidence at court confirmed that generally houseboats can be removed by crane and then floated to a new location however in this case given the age and condition, if the houseboats were moved they would be probably be damaged or destroyed.

When Mew and Just purchased the houseboats they did not purchase the plot that the houseboats were situated in, they were owned by Tristmire who served a number of notices to quit and section 13 notices to raise the rent. However Mew and Just claimed that they were not licensees of the plots but assured tenants under the Housing Act 1988 and as such the notices were invalid.

The argument put to the court by Mew and Just was that the houseboats have a degree of permanence so as to make them part of the plot and cannot now be removed without their disintegration. That even if they were in good repair they were just like houses on stilts which are not intended to be removed.

But the court found for Tristmire and held that that the houseboats remained essentially boats, albeit adapted for residential use. They were constructed elsewhere and placed in the plot and did not as such form part of the realty and therefore remain as chattels. The court compared the houseboats to caravans, which as designed, are moveable.

Therefore because the houseboats did not become affixed to the land Mew and Just could not become assured tenants and were indeed licensees and the notices were therefore valid.

We often get asked whether ASTs can be granted for houseboats and it is a grey area as confirmed above. It is the degree of permanency that is relevant and this detail needs to be obtained before any decision is made.

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

Article 8, the Tenant’s Human Rights.

We have been asked a few questions recently about a tenants right to remain in a property when there are rent arrears. We understand that some landlords and agents are concerned that tenants are defeating possession claims pursuant to Article 8 of the European Convention on Human Rights.
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> The reason for this concern is probably due to the recent cases in the Supreme Court. In Hounslow LBC v Powell, Leeds CC v Hall and Birmingham CC v Frisby the Supreme Court held that where a local authority brings possession proceedings relying on mandatory grounds for possession any defence to the claim, can include the tenants entitlement to have the proportionality of his eviction assessed under Article 8.
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> Given that these cases are concerned with social landlords as opposed to the private market, I will briefly explain the facts of the Powell case.
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> Mrs Powell fell into arrears and upon serving her with a notice to quit, Hounslow County Council issued possession proceedings. Mrs Powell admitted that there were rent arrears but then also averred that the reason for the arrears was due to the delays and errors made by Hounslow in processing the benefit claim.
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> Hounslow has since offered Powell suitable accommodation.
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> The reason for this article is to reassure those landlords that believe that tenants who are on benefits have rights to the property beyond that provided for in the Housing Act 1988.
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> The cases have one thing in common that is local councils who are subject to the test of proportionality when they apply for possession. This test of proportionality is not expected to be relevant in the private sector as that would prevent landlords from managing their own property in the manner they see fit within the parameters of the Housing Act 1988.

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

Rent Arrears on Common Law Tenancies- Last Chances to Act

Landlords who have common law tenancies which will become ASTs on 1 October and whose tenants are in arrears of rent should act now.

Once those tenancies become ASTs the tenant will need to be in 2 months of arrears before the landlord stands a good chance of securing possession in Court. If proceedings are issued before the tenancy converts then it will not become an AST, even if the Court hearing is after 1 October, and the landlord will be able to seek possession under the common law rules of forfeiture. These require the Court to award possession however small the level of rent arrears. While the tenant has the option of paying the outstanding rent and staying in the property he will also be obliged to pay the landlord full interest and their legal costs so the tenant has an incentive to pay up and the landlord does not lose out.

By contrast if the landlord waits until after 1 October he will need to wait for a full two months worth of rent arrears to accrue, give 14 days notice under section 8 of the Housing Act 1988 and then start proceedings. In Court he will get an order for the arrears, interest, but probably less than his total legal costs but the tenant has no right to stay if they pay the landlord. Therefore the incentive on the part of the tenant to pay the debt is much reduced.

However, proceedings must be issued by the Court before 1 October. In practice this means they will need to have been sent to the Court by 27 September at the very latest.

Filed under: England only, , ,

DCLG FAQs Regarding ASTs after 1 October

The DCLG have decided the final version of their FAQs regarding the Housing Act 1988 rent increase threshold to be placed on their website. We have seen an advance copy and are pleased to note that some changes have been made as a result of representations made to the DCLG by this firm, among others.

Most notably the DCLG has now resiled from their earlier position that all tenancy deposits for tenancies that have converted to ASTs must immediately be protected on 1 October. This is a view that we have previously criticised. The DCLG have listened on this point and the FAQ now states:

We do not consider that deposits taken before 1 October will need to be protected as these were not taken in connection with a shorthold tenancy and therefore do not meet the criteria for protection specified in the Housing Act 2004.

However, agents and landlords should be aware that this is a matter for the Courts to decide and it would be wise to protect deposits on 1 October and certainly on any renewal of the tenancy.

DCLG has, however, maintained their position that a section 21 notice issued in respect of a tenancy which becomes an AST on 1 October cannot expire until 6 months after that date, ie. not before 1 April 2011. This is a view that we do not agree with and have previously criticised. We are pleased to note that the DCLG has watered this position down in the light of our representations and now says that it will be for the Courts to make a final decision on this issue. Doubtless such a case will appear in the Courts in short order.

You can view all of our blog posts on the Housing Act 1988 rent threshold increase by following this link.

Filed under: England only, ,

Housing Act Threshold Changes Coming Soon

It is now less than a month to the change in the maximum rent threshold of £25,000 found in the Housing Act 1988 in England.

We have written a large number of posts on this topic which can be found by following this link.

Filed under: England only, ,

Short Lets After 1 October

We have recently come across another unanticipated issue which may become a problem after 1 October. A number of properties in London are let on ‘short lets’ to individuals working or holidaying in London. In the past the high rents charged on these properties meant that they were excluded from the Housing Act 1988. However, with the increased rent threshold this exception will apply to far fewer of these properties.

Premises being let for the purposes of a holiday in London will still fall outside the Housing Act 1988 and these will not present a problem. However, properties being let to individuals who are working in the UK for a short period and where the rent is below £100,000 per annum (pro rata) will now fall under the Housing Act 1988. This of course means that the tenant is entitled to 6 months security of tenure in the property.

To clarify, there is no requirement that a property which falls under the Housing Act 1988 is let for 6 months as is sometimes believed. It is perfectly possible to let such a property for a shorter term. However, a Court is simply not empowered to give possession on a section 21 notice any sooner than 6 months from the start of the initial tenancy. Therefore letting a property for a shorter period is a calculated risk on the part of the landlord as he is at risk of the tenant continuing to pay the rent and simply staying for 6 months with little or no recourse.

What options does the landlord have? If the landlord has resided in the property before as his main residence then he can give a notice before the tenancy begins under ground 1 of Schedule 2 to the Housing Act 1988. This would allow a section 8 notice to be given at any stage giving the tenant 2 months notice to vacate provided that the landlord wishes to reside in the property again as their main home. Otherwise the only option will be to avoid creating a tenancy at all. If a landlord wishes to do this then they will need to provide some services as a part of the agreement which will require access to the property. A landlord who was providing regular cleaning and fresh towels and linen as a part of the agreement should be able to argue that he has not created a tenancy at all but has only created a licence and so the provisions of the Housing Act 1988 will not apply at all. Of course, this will involve a lot more organisation on the part of the landlord but it may be worth it if it is necessary to be sure that vacant possession of the property can be obtained.

Filed under: England only, FLW Article, , ,

Harsh Results in Rent Increases After a Long-Lease Ends

A recent case has exposed a very unfortunate loophole in the law which might have harsh consequences for certain long leaseholders.

Certain long leaseholds are protected under the terms of Part 1 of the Landlord & Tenant Act 1954. The qualification for this protection was that the tenancy was for more than 21 years and the tenant would otherwise have fallen under the protection of the Rent Act 1977 save that the rent was too low too qualify for that protection. At the end of the term of such tenancies the tenant would originally have gained the protection of the Rent Acts. These provisions are being phased out after the introduction of the Local Government and Housing Act 1989 and a wholly new scheme set out in Schedule 10 applies. This scheme provides that the original lease continues until specified notices are served at which stage the tenancy changes into an Assured periodic tenancy under the Housing Act 1988. Part of this process includes a process by which the parties are to agree a new monthly rent and if they cannot agree the Rent assessment Committee has the power to set an appropriate rent. Quite properly, when setting the rent the RAC is required to exclude from its consideration any increase in the rent that would be attributable to improvements the tenant has made to the property. Therefore if the tenant has fitted a new kitchen during the long lease the landlord cannot take advantage of it to seek a higher rent once the tenancy becomes Assured.

Naturally, once the tenancy has become Assured the landlord is entitled to increase the rent to a market level every 12 months using the normal procedure supplied by section 13 of that Act. Bizarrely, although the RAC is required to exclude consideration of tenants improvements on the initial setting of the rent it is not permitted not do so on any subsequent determination of the rent. Therefore although a tenant who fits a new kitchen will not be liable to pay a higher rent for that improvement when he or she first gets the Assured tenancy, the landlord will be able to seek a higher rent due to that improvement 12 month later using the usual section 13 process.

Essentially this is precisely what has occurred in the case of Hughes v Borodex which came before the Court of Appeal a few months ago. The Court of Appeal held, with regret, that it had no power to change the rent assessment of the RAC which had taken into account the tenant’s improvements on setting the rent under a section 13 notice. What makes this case even more unjust is that the RAC determination took the rent over the sum of £25,000 per annum making it possible for the landlord to evict the tenant as the Housing Act 1988 no longer applied to her tenancy.

Regrettably, if all this had occurred just a few months later the tenant would have been protected by the increased rent threshold for Housing Act 1988 tenancies that will be introduced on 1 October 2010.

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

After a Section 21 Notice Expires

We are often asked the question of what the situation is once a notice pursuant to section 21 of the Housing Act 1988 expires.

Thanks to the decision of the House of Lords in Knowsley Housing Trust v White it is known that a tenancy agreement for an assured or assured shorthold tenancy does not in fact come to an end until the Court Bailiff has executed an order for possession. Therefore the service of a section 21 notice does not in itself bring a tenancy to an end. This means that the measures of only referring to rent as mesne profits after the service of section 21 notice are not necessarily required (although they may be a good idea so as not to confuse busy District Judges!).

If a tenant wishes to stay after the expiry of a section 21 notice for a short period this can easily be dealt with by simply sending a letter advising the tenant that the landlord will not be enforcing the expired possession order until a specific date. Subscribers to the PainSmith helpline service will be able to obtain a suitable letter from the document vault on their website.

Section 21 notices have no finite lifetime in which they can be used, they oldest reported case involves a section 21 notice which expired 6 years before the possession action began. Therefore agents should not be overly focused on the section 21 notice and tenants staying on after it has expired and more on making sure they have not offered a new tenancy which might override the notice.

Filed under: England & Wales, FLW Article, ,

Uncertainty About Tenancy Agreements Approaching 1 October

We have been asked a lot of questions recently about how to draw up a tenancy agreement in the run up to 1 October.

The short answer is that it does not really matter. Tenancies that will become ASTs on 1 October will become ASTs on that date irrespective of what the actual agreement says. Equally, they will not be ASTs before that date irrespective of the wording on the agreement.

Therefore agents can draw up these tenancies on Common Law Agreements now and accept that the agreement will misdescribe itself from 1 October or they can draw them up as ASTs now and accept that the agreement will misdescribe itself until 1 October. Alternatively, the agreement can state that it will change to an AST on 1 October or a new agreement can be issued on that date. All of these are reasonable approaches and each agent and landlord should decide what works best for them. Anyone purporting to sell some form of agreement that will deal with the situation is really just taking money for old rope and this is the reason that this firm has chosen not to produce a special tenancy agreement to cover the transitional period.

What will be necessary for members of The Dispute Service will be to make sure that the prescribed clauses required by the scheme are incorporated into the Agreement after 1 October. This can easily be done by sending the tenant a letter setting out the clauses and stating that they will be incorporated into the agreement. It would be wise to ask the tenant to sign and return a copy for recording purposes.

Don’t forget that when the deposit is registered a copy of the registration certificate, the information required by the Housing (Tenancy Deposit) (Prescribed Information) Order and the appropriate scheme leaflet must also be sent as well.

Filed under: England only, ,

Assured Tenancies After 1 October 2010

We have posted already (several times) on the issue of the increase in maximum rent threshold under the Housing Act 1988 which will occur on 1 October 2010.

While it is well understood that this will increase the number of assured shorthold tenancies it has been forgotten that the Act also includes assured tenancies, that is market rent tenancies with a security of tenure for life. These will also be affected by the change.

Therefore non-Housing Act tenancies which began after 15 January 1989 but before the 28 February 1997 will not convert to ASTs on 1 October but will convert to Assured tenancies. Equally, formerly Assured tenants who have lost their protection due to their rent being raised above the £25,000 threshold will regain their assured status.

Presumably this will affect relatively few tenancies but the effect will, of course, be profound. Landlords in this position would be well advised to make sure that they have clearly and unequivocally terminated these tenancies prior to 1 October by either evicting the tenants or, at the very least, signing deeds of surrender and granting new ASTs.

Filed under: England & Wales, England only, ,

Housing Act Rent Increase Order Published

The Government has finally published the necessary statutory instrument to change the maximum rent threshold for tenancies under the Housing Act 1988. The Assured Tenancies (Amendment)(England) Order 2010 has been laid before Parliament as at 25 March 2010 and will come into force on 1 October 2010.
Despite all the suggestions from the Government that they were trying to decide the best way of making the change work they have ultimately gone for the simple approach. On 1 October the threshold will change from £25,000 to £100,000. While this is not, as has mistakenly been stated, a retroactive change it will affect tenancies that are already in place on 1 October. Therefore a tenancy that has started before 1 October which is for a rent in excess of £25,000 per annum but for less than £100,000 per annum will on 1 October automatically convert to an AST.
This will mean that a number of tenancies will, on that date, potentially need to have their tenancy deposits protected and will also fall under the section 8 notice regime for breach of contract and the section 21 notice regime for the termination of the tenancy.
Technically this poses a potential problem in three areas:

  1. Tenancy deposits that have been taken for tenancies starting before 1 October which have become ASTs on 1 October will have had the deposit taken more that 14 days before it is registered. This may leave the landlord and agent open to a claim for the usual penalties. There is of course the reasonable argument that the deposit was taken at a time that the tenancy was not an AST and therefore that there is no need to protect in much the same way as there was no need to protect deposits taken prior to 6 April 2007 when the tenancy deposit legislation first came into force.
  2. Where Court proceedings have been started for breach prior to 1 October there is a potential argument at the time it reaches trial that the tenancy is now an AST and the appropriate notices have not been served.
  3. For tenancies that end shortly after 1 October there will not be time between 1 October and the end date to serve the necessary two months notice under section 21. If the notice is served before 1 October, at the time when a tenancy has not become an AST there may be some doubt as to its validity.

All of these problems will not doubt need to be worked out by the Courts.
It should be noted that the change is being carried out in England only. It is not certain what the Welsh Assembly will choose to do. They have an ongoing consultation on the private rented sector which discusses a similar threshold change but this does not end until 14 May so they will, presumably not act until at least that date. However, the pressure to act in Wales is somewhat lower as rents there do not tend to reach the levels found in some parts of England.

Filed under: England only, , ,

Housing Act Threshold Increase

It is now being widely reported that the maximum Housing Act 1988 rent threshold is to be increased to £100,000 as from 6 April. Some commentators are incorrectly calling this a retroactive change. A retroactive change is one that applies backwards in time. This does not. What is occurring is that the threshold is being changed for all tenancies. Therefore the change will apply to currently existing tenancies. While this is not retroactive it does mean that tenancies which are already in place where the annual rent is in excess of £25,000 but below £100,000 will automatically become ASTs. The date of change for currently existing tenancies is uncertain and has been variously reported as 6 April and 1 October. Tenancies that fall outside the Housing Act 1988 for other reasons, such as lettings to companies, will be totally unaffected.

Tenancies that fall into the Act as from the changeover date will need to have their deposits put into protection with an authorised scheme immediately unless they were already protected (the TDS scheme has been dealing with deposits on non-Housing Act tenancies since inception) and such tenancies will need to follow the usual provisions for termination by service of section 21 notices etc from that date.

There are several interesting problems raised by this change.

For one it could be argued that all tenancies falling into the tenancy deposit regime after 6 April or 1 October (whichever it is) will automatically be in breach of the requirements to protect deposits as they will have had their deposits placed into protection more than 14 days after they were received. This problem was raised in the Draycott v Hannells case (see paras 47-49) but the Court made no ruling on the point.

Secondly, there will be difficulty with tenancies that are due to end less than 2 months after the changeover date. Landlords will not be able to serve valid section 21 notices giving the statutory minimum two months notice to end the tenancy after the date to bring such tenancies to an end at the end of their fixed terms. It is not clear if a notice served before changeover would be valid for the purposes of s21 and it could only be so if the deposit had already been protected prior to service.

Thirdly, forfeiture actions for rent arrears may also be in some difficulty. Actions commenced prior to the changeover date will fall under the provisions of the Act after that date and so tenancies which have technically been ended by the service of a claim form (which is the rule in forfeiture cases) may be held to have been revived by the legislative change. If so the action can only proceed on the service of a valid section 8 notice unless the Court exercises its discretion to dispense with the service of such a notice.

Finally, the various tenancy deposit protection schemes will face a sudden rise in the number of tenancies being registered with them and, presumably, in the number of disputes they have to resolve. Those disputes will, naturally, be for greater sums of money and will inevitably be more complex. This may prove hard for schemes to deal with under their current financial and business constraints.

There is a tendency to blame the Government. However, it is not clear that they had much choice. The Housing Act 1988 simply gives a power to change the threshold figure from one number to another and not to get creative as to the implementation of that process. Admittedly, there were other legislative routes to dealing with the issue but they would all have taken more time. This is a change that needed to be made and it would have been difficult at any time. However, there is still a feeling of an unseemly dash to push through these changes in advance of a presumed election in May.

However, the Government could certainly have done far more to make the position clear by publicizing the changes more aggressively and also by (simply) publishing the legislation in good time so that we can actually take a look at it.

PainSmith Solicitors are running a seminar looking at the changes in London on the evening of 25 March. More information at www.painsmith.co.uk/seminars.

UPDATE: We are now given to understand that the necessary statutory instruments have yet to be finalised to bring the threshold change into force. However, the Government is intending to have these in place in time for 6 April with the intention that the actual changeover date will be 1 October.

Filed under: England & Wales, , ,

AST Threshold Increase and Seminars

The Statutory Instruments to increase the maximum rent threshold from £25,000 to £100,000 have apparently been laid before Parliament and should be made more generally available shortly.

In order to assist clients with understanding the change PainSmith Solicitors are holding a seminar in London in the evening of 25 March to look at the changes and to revise the key provisions of the Housing Act 1988.

More information is available at www.painsmith.co.uk/seminars.

Filed under: England & Wales, , ,

Notices to Quit

A recent Court of Appeal decision sheds light on issues relating to Notices to Quit by tenants. In Bradford Community Housing Ltd v Hussain & Kauser the Court of Appeal ruled on the validity of a Notice to Quit which contains a saving provision and on whether the acceptance of rent or holding back on enforcement can invalidate a Notice to Quit.

Mr Hussain and Ms Kauser held an assured tenancy from Bradford Community Housing Ltd and after allegations of domestic violence their relationship collapsed and Ms Kauser (at the urging of Bradford) served a notice to quit on Bradford. As the tenancy was periodic by this stage the notice was valid to terminate the tenancy without the involvement of Mr Hussain following the well-known decision in Hammersmith & Fulham LBC v Monk. On the back of this notice possession proceedings were taken.

Before the Court of Appeal two arguments were made. The first was that the date on the notice was wrong and that the standard saving provision made the notice ambiguous as the saving provision and the given date ultimately referred to different dates. The second argument was based around correspondence between Bradford and Ms Kauser whereby Bradford had suggested suggested that they would not enforce on the notice to quit immediately and would continue to accept rent monies on an ad hoc basis. It was argued that this arrangement had the effect of renewing the tenancy and thereby made the notice to quit ineffective without the consent of Mr Hussain.

The Court of Appeal dismissed both arguments out of hand.
The Court was in no doubt that the use of the saving provision did not create and doubt in the mind of a reasonable recipient of the notice. This is an interesting point as the same question has been raised (although not at such a level) in relation to section 21(4)(a) notices and the possibility of ambiguity if they contain both a date and a saving provision. It would seem that this argument is now dead.
The Court was also not prepared to accept that a statement by Bradford that they might not immediately enforce the notice to quit and would in the meantime accept rent in any way acted to create a new tenancy. The Court made reference to the case of Clarke v Grant and made clear that mere acceptance of rent after the expiry of a notice could only create a new tenancy if this was the settled intention of the parties.

While this is a small case it provides clarity over one or two points of interest.

Filed under: Uncategorized, ,

Rent Increase Clauses and Statutory Periodic Tenancies

In a periodic Assured or Assured Shorthold Tenancy the provisions of section 13 of the Housing Act 1988 are used to increase the rent. This is not a wholly satisfactory system as it is overly technical and ultimately allows appeals to the Rent Assessment Committee which can be somewhat capricious.

It has been thought that a clause in the agreement which set out a mechanism for increasing the rent, however abbreviated, would be sufficient to oust the provisions of section 13 and the clause would prevail.

In London District Properties Management Ltd v Goolamy [2009] EWHC 1367 (Admin) this view has been overturned. The High Court ruled that the prevailing view was inaccurate. Taking a literal view of section 5(3) of the Act the Court held that in a statutory periodic tenancy the provisions of section 13 would overrule any rent increase clause.

Bizarrely, the legislation appears to draw a distinction between tenancies which are intended to be periodic from the outset and those which start out as fixed term tenancies and become periodic by operation of section 5. The former can incorporate rent increase clauses, the latter will have theirs overruled by the section 13 process once the tenancy has become periodic. While the Court does not mention this point it would seem that the way around the problem is to simply agree a tenancy for a fixed term with a contractual provision that it will then continue as a periodic tenancy. Presumably if it is pre-agreed that this will occur then the provisions of section 5 will not be required to create a periodic tenancy and thus the section 13 provisions will not be given the primacy that section 5(3) provides.

Whether this will work or not remains to be seen.

Filed under: Uncategorized, ,

Changes to ASTs

The government has published a response to the Rugg Review.

One of the proposed changes is that the upper limit threshold on Assured and Assured Shorthold Tenancies (set at £25,000 by para 2(1)(b) of Schedule I of the Housing Act 1988) should be raised to £100,000.

Section 2A of the Act allows this amount to be easily varied by Stautory Instrument and we have heard on the grapevine that the government is minded to do this as soon as October this year.

This will have far reaching consequences, particularly in the South-East as the majority of higher value tenancies that were outside the Act will not be brought into it. This will mean a large increase in the number of tenancies requiring to have their deposits protected and changes in the way possession proceedings are brought for these tenancies.

There are some important uncertainties. Will it be the case that the raise will be retroactive such that all tenancies under a rent of £100,000 per annum will automatically fall inside the Act? If so, this will affect tenancies already in place and will mean that their deposits will need to be placed in protection.

It would be better if the change was made so that only new tenancies after the start date were caught. However, in that case it will be necessary to bear in mind that renewal tenancies will drop inside the Act.

Filed under: Uncategorized, , ,

The End of the Tolerated Trespasser

Where a suspended possession order is granted by the court but suspended on terms there has been a problem in the past. The reason for this is that the Court order has the effect of ending the tenancy but prevents eviction of the tenant as long as they comply with the terms of the order. The result is that the tenant becomes a, so-called, ‘tolerated trespasser’ on the date of possession as stated on the order. A tolerated trespasser is a peculiar legal fiction which denotes that the former-tenant has lost ther tenancy rights thereby making them a trespasser but cannot be removed from the property hence the use of the word tolerated (admittedly a rather strained use!).

The loss of tenancy rights has some rather bizarre consequences such as an inability for the tenant to enforce repairing covenants against landlords and the landlord losing the right to rely on the relevant Housing Act provisions and the tenancy agreement itself. So the landlord’s ability to increase the rent, for example, is also affected.

However, the House of Lords has eliminated this problem by holding in the cases of Knowsley Housing Trust (Respondents) v White (FC) (Appellant) Porter (FC) (Appellant) v Shepherds Bush Housing Association (Respondents) [2008] UKHL 70 that the tolerated trespasser is indeed a fiction and does not exist.

In Knowsley they allowed White’s appeal against the decision of the Court of Appeal that her assured tenancy had come to an end when she failed to comply with the terms of a suspended possession order. The Lords held that assured tenancies only came to an end when the tenant either voluntarily gave up possession or when they are evicted pursuant to an order. Therefore an assured tenant cannot become a tolerated trespasser.

This could be a problem where a landlord with a previously assumed tolerated trespasser has taken advantage of their status by refusing to repair the property. As the status cannot now have ever arisen these reinstated tenants will have a claim for disrepair against their landlords.

The situation will become a lot clearer when the Housing and Regeneration Act 2008 comes into force. The Act received Royal Assent on 22 July 2008. Schedule 11 of the 2008 Act makes amendments to the Housing Act 1985, Housing Act 1988 and the Housing Act 1996 to prevent the tolerated trespasser arising by stating that a tenant’s assured or secure tenancy does not end until the landlord has obtained a Court Order for possession and the eviction has actually taken place. Existing tolerated trespassers still in occupation of their original properties as their only or principle home, have had their tenancy status reinstated by virtue of “replacement tenancies”, which reinstate the tenant’s rights and obligations of the tenancy they held prior to the Possession Order coming into effect. The possession order itself will remain enforceable against the new tenancy.

Filed under: Uncategorized, , ,

Ground 14 and Possession for Criminality

The Court of Appeal has recently had cause to consider Ground 14 of Schedule II to the Housing Act 1988 in some detail. This ground provides a discretionary right to possession where the tenant has committed a criminal offence in, or in the locality of, the dwelling-house.

In Raglan Housing Association Ltd v Fairclough the tenant was convicted of downloading and possessiing indecent images of children. However, the offences were committed prioir to the current tenancy while he was residing in a property under a tenancy from the same landlord a few doors away. The Court of Appeal upheld the order for possession deciding that the relevant date was that of conviction and that the objective of Ground 14 was to ensure that individuals who might be disruptive or offensive did not remain in the locality.

In North Devon Homes Ltd v Nova Batchelor the tenant was convicted of possession of cannabis, possession of cocaine with intent to supply, and money laundering. The Court declined to award possession on the basis that the crimes were of a minor nature and it did not consider it necessary. The Court of Appeal upheld this decision.

The upshot of these decisions is that the position on Ground 14 possession for criminality remains uncertain with the higher Courts unwilling to interfere in the exercise of discretion by lower Courts. A more detailed discussion of these cases can be found at http://www.painsmith.co.uk/downloadnow/ground14.pdf.

Filed under: Uncategorized, ,

New Tenancies Under Section 34

InTruro Diocesan Board of Finance Ltd v Foley [2008] EWCA Civ 1162 the Court of Appeal considered the effect of section 34(1)(b) of the Housing Act 1988.

In this case Mr Foley had compromised a prior dispute with the Diocesan Board by a consent order under which he surrendered his tenancy under the Rent Act 1977 and gave up possession for approximately 24 hours before being granted a new assured shorthold tenancy for 5 years under the Housing Act 1988.  In due course he was served with a section 21 notice and contested this on the basis that he could not have the protection of the Rent Act removed in the manner in which the consent order sought to do.

Section 34 sought to prevent the granting of any further protected tenancies under the Rent Act 1977 but intentionally kept open the possibility that certain tenants would be able to gain such tenancies primarily in order to prevent unscrupulous landlords inducing protected tenants to sign new assured shorthold tenancies thereby losing their protection.  Section 34(1)(b) requires that a tenancy “granted to a person … who … was a prtoected or statutory tenant and is so granted by the person who at that time was the landlord” will remain a protected tenancy.  In section 45(1) it is stated that  “except where the context otherwise requires [a] tenancy includes … an agreement for a tenancy”.

Mr Foley’s argument was simple.  The consent order was an agreement for a tenancy between a landlord and tenant who had previously been related by a protected tenancy.  Therefore any tenancy flowing from the agreement should also be a protected tenancy.

The Diocesan Board’s argument was equally simple.  They suggested that section 34(1)(b) was clearly one of those areas where “the context otherwise requires”.

Perhaps unsurprisingly, the Court of Appeal was not entirely keen to allow an agreed consent order to be set aside in this manner and unanimously followed the argument advanced by the Diocesan Board.

However, that was not quite the end of the matter as Mr Foley advanced a second argument.  This was the, rather clever, postion that the consent order was a signed agreement which set out all the termns of a tenancy and should therefore take effect as the grant of a tenancy under the principle established in Walsh v Lonsdale.  This would have the effect of making s45(1) irrelevant and allow s34(1)(b) to be engaged directly.  This argument was leant weight by the fact that the consent order was executed as a deed in order to comply with the provisions of s52(1) of the Law of Property Act 1925 and that no further tenancy agreement between the parties was in fact ever entered into.

Perhaps surprisingly, the Court of Appeal divided itself over this issue.  The majority (Sir John Chadwick dissenting) distinguished Walsh on the basis that the intention of the parties in that case was clearly different from the intention here.

TYhe upshot of this decision is that practitioners can feel confident when drawing up consent orders, and potentially any agrement, by which a prtoected tenant surrenders their tenancy for the grant of a new Housing Act 1988 tenancy.

Filed under: Uncategorized, , ,

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