Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

20 March, 2011 • 23:40 0

Cancellation Notice

In a recent case in Watford County Court an agent sought his commission for the successful sale of a property in October 2009.

The Defendant defended the claim on the basis that no Cancellation
Notice in the prescribed form pursuant to the Cancellation of Contracts in a Consumer’s home or Place of Work etc Regulations 2008 had been served.

In response to this defence the agent was relying on schedule 3 of the Regulations which excludes certain contracts from the Regulations. One such contract is for the sale or rental of immovable property.

However, the court held that the contract entered into by the parties was not a contract for the sale or rental of immovable property but one of marketing and as such schedule 3 did not apply.

The court also held that this was a commission contract and therefore caught by the Regulations. Therefore where no Cancellation Notice had been provided then pursuant to clause 7(6) the contract is unenforceable.

The agent’s case was dismissed.

Thank you to Mr Kennedy who brought this case to our attention.

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

18 March, 2011 • 23:07 2

Unlawful Eviction

We very rarely get asked questions about the possible consequences of an unlawful eviction where there has been violence. This is possibly a good thing or possibly a situation that agents stay clear of.

However, some recent cases have prompted this article only to provide some guidance to those that face such a situation.

In Boyle v Musso, Mr Boyle, began withholding rent due to some disrepair at the property. Rather than carrying out the repairs pursuant to the landlords section 11 repairing obligations, the landlord attended the property with another man and assaulted Mr Boyle.

The landlord was convicted of assault occasioning actual bodily harm and upon failing to reply to Mr Boyle’s civil claim for unlawful eviction also had a default judgement entered against him.

The judge noted that Mr Boyle had healed relatively quickly but he was left suffering from depression and panic attacks. The judge therefore found that Mr Boyle was left with serious and debilitating continuing anxiety as a result of the attack and awarded:

£15,000 for trespass to the person, to include injury to feelings;
£2,000 damages for finding that the dispute was for withholding rent;
£4,000 for breach of the quite enjoyment covenant;
£750 for loss of belongings;
and then finally the return of the deposit and three times the amount of the deposit for failing to register it with a tenancy deposit scheme.

In Strydom v Fowler, Mr Fowler fell into rent arrears. His landlord issued possession proceedings but while Mr Fowler was on holiday he changed the locks. When Mr Fowler forced his way into the house he found his landlord standing there with an iron bar. Mr Fowler ran away, but broke his heal when climbing over a gate. Mr Fowler therefore counterclaimed for breach of the quite enjoyment covenant and trespass.

The court awarded the landlord rent arrears and damages for dilapidations totalling £2,600. The court then went to assess Mr Fowler’s claim and stated that when making an assessment the court considers the difference of the value of the property occupied and unoccupied and reached a figure of £12,500. However the court then considered Mr Fowler’s actions and held that he had been unreasonable when failing to respond to the landlord for 5 weeks and failing to respond to the text messages the landlord had sent him in an attempt to resolve the situation.

The court therefore awarded Mr Fowler:

A reduction of the £12,500 to £2,500;
£3,000 for breach of the quite enjoyment covenant; and
£1,250 for trespass.

Whilst each case is decided on it’s own merits the courts are taking quite a hard line with landlords that decide to take matters into their own hands without consideration for the tenants rights. Whilst the landlord will often feel aggrieved about the length of the legal process when attempting to obtain possession they are reminded that the figures displayed above are a possible consequence of a heat of the moment decision.

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

7 March, 2011 • 17:22 2

Enforcement of possession orders

Landlords and their agents often breathe a collective sigh of relief following a successful court hearing for a possession claim. The hearing often represents the apex of many months of preparation and relief that the tenants, in contravention of their agreed obligations, will finally be ordered to leave and make good their breaches. However relief at this stage is premature. Tenants, even if they remain after the date a court orders them to leave, still have rights and there is a further process to embark upon to remove the tenant and pursue them for their debts.

Firstly evictions of tenants in England and Wales can only be carried out either by county court bailiffs or, if proceedings are in the High Court, high court sheriffs. The warrant can only be applied for once the date for possession on a court order has passed. Bailiffs will then attend the property to evict tenants and in most cases are successful in doing so, although police officers and further court proceedings for contempt of court can be necessary.

Pursuing debts:

If you have a money judgment against a tenant who subsequently fails to pay what is ordered, you have three options:

1. Pursue your former tenant(s) for the monies owed. However, further costs, delays and court proceedings may not be a viable option.
2. Drop the matter entirely and write off the lost monies against your tax liabilities.
3. Wait for a few months before doing anything. Your judgment remains valid for the next 6 years and the financial status of the former tenant(s) may change in that time.

Pursuing debts in England and Wales are inherently difficult and this should be borne in mind before undertaking the time and further costs incurred in pursuing the debtor. The first step is to find a forwarding address for the tenant. If the tenant has left no forwarding address then enquiry agents can be instructed to ascertain their whereabouts.

Once a forwarding address has been obtained the following enforcement options are available:

An attachment of Earnings:

Apply to the court for an order permitting the regular deductions from the debtors monthly/weekly wage.

Third Party Debt Order:

Apply to the court for an order which permits the release of funds by a third party. The third party is usually a bank or building society.

Charging Orders:

This option is only available if the Debtor has property and usually ideal where you have a Guarantor. The charge does not extract money from the Debtor or the Guarantor but secures the debt against property which is then discharged when the property is sold, just like a mortgage.

Bailiffs/Sheriff:

The Bailiff or Sheriff is instructed to attend the Debtor’s home and seize goods if the Debtor does not agree to pay the debt or enter into a dialogue with regards to a payment plan.

Partial Settlement:

Sometimes debtors are prepared to make a single lump sum part payment in full and final settlement of the outstanding debt which may be more economic than accepting small instalments over a lengthy period.

Given the inherent problems with recovery, it is in the landlord’s best interest to obtain a guarantor where possible to maximise the chances of recovery. Where a guarantor is not a possible option then landlords are advised that taking a commercial view on recovery can be the most pragmatic and cost effective option.

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

18 February, 2011 • 10:09 11

Meanwhile back at Deposit protection HQ….

While we await the outcome of Potts v Densley & Pays in the High Court, followers of deposit protection litigation might be interested in a case with similar facts to Potts, but a different outcome in the county court.

Gemma Shepley v Majid Yassen, Tameside County Court, Thursday 13th January 2011 (Unreported), has been spotted and commented on by Nearly Legal.

To recap, in Potts v Densley & Pays the main issue is, can the tenant sue for the usual penalties where the landlord has protected the deposit after the end of the tenancy but before the court hearing and failed to provide the prescribed information?

The Shepley v Yassen facts mirror Potts: the deposit was not protected during the tenancy, and after the end of the tenancy the tenants issued proceedings (in May 2010) for the usual remedies. The deposit was protected in August 2010 with DPS. But the prescribed information was never served on the tenants.

The (County) court held that protection after the end of the tenancy was not acceptable. The cases of Draycott and Tiensia were distinguished on the basis that in those cases the deposits had been protected late but had still been placed into schemes before the tenancy ended.

NL comments that this “seems to be absolutely correct. If a landlord can put the deposit into protection after the tenancy has ended then it makes a total nonsense of the legislation and almost encourages a “wait and see” attitude.”

Painsmith agrees. Currently no-one is sure of their position when a deposit is protected after the end of the tenancy and this is disconcerting for both landlords and tenants. With the Potts v Densley & Pays judgment still not handed down, landlords, tenants and lawyers are indeed having to wait and see, whether we want to or not. A High Court decision that deposits cannot be protected after the end of the tenancy would be welcomed.

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

16 February, 2011 • 13:49 0

Consultation Works

Where landlords of long leases (more than 21 years) wish to carry out works they must consult the leaseholders before they are entitled to a contribution towards these works. If the consultation process is not followed pursuant to s.20 Landlord and Tenant Act 1985 the landlord’s ability to recover monies is capped at £250 per leaseholder. The landlords can apply for a dispensation from these consultation requirements however this is subject to the LVT’s approval.

In Daejan Investments Ltd v Benson and others, Daejan sought to recover some £270,000 of service charges from five leaseholders in respect of the works to the common parts of the building containing their flats. However, unfortunately for Daejan, the LVT found that that it had failed to comply with the consultation requirements.

Specifically the LVT held that Daejan failed to:

1. set out a summary of the observations received and the landlord’s response to the initial notice;

2. ensure that the estimates were available for inspection at a place for the period specified in the notice;

3. give 30 days to enable leaseholders to make observations on the estimates.

The LVT held that it would be wrong to grant the landlord dispensation from the consultation requirements because it considered that the leaseholders had been prejudiced by not seeing the full estimates and having a shortened opportunity to make observations. This is despite the fact that the leaseholders had not identified what comments they would make, if any, if given the opportunity. Daejan appealed to the Upper Tribunal (Lands Chamber).

The Upper Tribunal dismissed the appeal and held that the LVT had to focus on the scheme and the purpose of the consultation requirements and any financial prejudice to the Landlord was irrelevant. However, the Tribunal confirmed that the extent to which the leaseholders were prejudiced or disadvantaged was relevant and a common sense approach should be applied when making any findings.

Daejan appealed unsuccessfully to the Court of Appeal. The Court of Appeal reiterated most of what was said by the LVT and emphasised that following the consultation process in the proper manner was the essence of the statutory scheme and curtailing consultation was a serious failing that could cause significant prejudice.

Whether or not and in what circumstances the LVT will grant dispensation, retrospectively or otherwise, is not clear following this judgment. However, where there has been no prejudice to the leaseholder due to a minor breach or where works have been carried out in a genuine emergency dispensation may be possible.

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

2 February, 2010 • 13:52 2

Emails as Contracts

In University of Plymouth v European Language Centre Ltd [2009] EWCA Civ 784 the Court decided that in legally binding e-mail correspondence it is essential to have an unequivocal offer and acceptance, together with agreed contract terms.

In the case itself , the parties had been in a contractual relationship since 1998. The University of Plymouth had provided European Language Centre Ltd (ELC) with student accommodation and teaching facilities, by a series of annual written contracts. Until 2005, previous contracts had recognised both parties’ intention to continue the contractual relationship in the coming year. However, the 2005 contract contained no reference to contractual obligations for the coming year, 2006.

During 2005, the parties had discussed by e-mail correspondence, the possibility of the University reducing the number of student accommodation available for ELC to use. ELC did not initially reply, but then in later e-mail correspondence expressed that they found the reduction unacceptable and the parties did not therefore formally produce or agree to a contract. ELC later alleged the University was in breach of contract by failing to provide the reduced beds and submitted that that the email of May 2005 constituted an offer of a reduced number of beds, which it had accepted and relied upon.

The Court noted that the parties had established a degree of mutual trust since 1998, and that it was usual for negotiations to be formally concluded by an annual written contract. The Court therefore held that the e-mail correspondence was lacking in detail and considered that it did not amount to an offer nor a clear acceptance. The Court held that an acceptance must be communicated in a way that objectively sets out on what basis the acceptance was being given and based on the facts before them ELC had done nothing which amounted to acceptance, either by words or conduct. The parties’ comments within the exchange of emails together with the previous contracts were not enough to determine that an unequivocal offer and acceptance had been made.

This decision emphasises the importance of the four essential elements which must exist for there to be a legally binding contract that is; offer, acceptance, consideration and an intention to create legal relations.

Agents are therefore advised to ensure that there is clear communication with Landlords and Tenants and ideally all negotiations should be concluded by written contracts which are clear and free from ambiguity. We have noted that many agents automatically place the phrase ‘Subject to Contract’ within their signature which will have the effect of preventing any contract being concluded this way. However, they should ensure that they obtain instructions and clarify that they or their clients do not want to be bound by informal email or telephone exchanges and should not assume that this is the best position.

Filed under: England & Wales, Northern Ireland, , ,

18 December, 2009 • 11:10 1

Electronic Disclosure

It is a general requirement of legal proceedings that all documents relevant to a case be disclosed. A failure to do so at the appropriate time can have serious negative costs implications. This is generally well understood but the part that is less carefully considered is just how wide the disclosure obligation is, and just what that can mean in the modern information age.

Agents, landlords and tenants communicate in a wide variety of ways. They frequently email one another; send text messages, and even use twitter, Facebook and other social networking systems. In addition, it is now common for telephone calls to be recorded and all post to be scanned as electronic documents.

Rule 31.4 of the Civil Procedure Rules defines a document as “anything in which information of any description is recorded”. This definition is wide enough to cover all of the above categories of communication. In any case where disclosure is required, such as a disrepair claim by a tenant, it would potentially be necessary to disclose all such communication between the parties where it concerned the matters at hand. Many agents can do this easily for letters, some can do it in relation to emails, few are able to do so in relation to text messages and other forms of electronic records. It can also be difficult to generate the information quickly and in a reasonably accessible format.

When keeping data in electronic formats it is important to also consider the need for future searching of that data. Leaving all emails in an email application does not deal with the necessity of backing it up and leaves you at the mercy of the (often poor quality) search functionality of the email application you use. Printing out all emails and placing them on a paper file removes the ability to search these documents save for the tedious, error-prone, and expensive method of reading everything.

It is important for businesses who wish to make use of the power of electronic systems to understand that the prodigious amounts of data these systems produce must be kept, logically organised, and made available for searching in connection with litigation. While it is always unattractive to spend money on data management systems during an economic downturn it should be remembered that it is always best (and a lot cheaper) to organise data before it is generated and that software companies are feeling the squeeze too and may well be prepared to offer attractive deals.

Filed under: England & Wales, ,

20 November, 2009 • 10:35 0

OFT v Foxtons Rides Again (Maybe)

At 9.45am on Wednesday 25 November the new Supreme Court will give judgement in OFT v Abbey National & Others. This case will be well known to most as it relates to the ability of banks to make charges to customers who overdraw their accounts and on the level of those charges. There should also be an indication as to whether banks will actually have to repay money they have previously collected in charges. Quite apart from the impact this case may have on the UK’s leading banks, possibly requiring them to repay hundreds of millions of pounds in charges, there will also be an impact on the ongoing matter of OFT v Foxtons. This is because Foxtons sought permission to appeal from the Court at the most recent hearing after the judgement criticising aspects of their fees had been handed down. However, they specifically requested that the Court refrain from considering their permission request until after the Supreme Court ruling in OFT v Abbey National. Therefore, depending on the judgement of the Supreme Court, Foxtons will either withdraw their request or will seek to appeal the matter to the Court of Appeal.
Additionally, there will be great interest as to whether the banks actually have to pay money back. If they do, this potentially opens the floodgates for previous Foxtons clients to claim return of fees paid to Foxtons which were paid on the strength of clauses deemed by the High Court to be unfair. This could end up costing Foxtons tens of millions of pounds. Naturally, an effort to make Foxtons return money will also have an impact on other agents who have already faced suggestions from landlords that their fees are unfair as well, notwithstanding the ruling against Foxtons being based entirely on the unusual wording used in their terms of business.
PainSmith will aim to post on Wednesday as soon as we have had time to digest the Supreme Court judgement. Watch this space!

Filed under: England & Wales, Northern Ireland, Scotland, , ,

11 November, 2009 • 12:41 1

TDP. New Case and a Summary

District Judge Burn at Bromley County Court has ordered a landlord to pay 3 times the deposit and to return of the initial deposit paid to his former tenants due to his failure to lodge the deposit with an authorised tenancy deposit.

In the recent case of Da Costa v Pinter the claimants were assured shorthold tenants whose tenancy had come to an end. The tenancy agreement required the rent of £1,950.00 a month and a payment initially of £4,200.00. A dispute arose with regards to the Deposit and the tenants issued court papers in order to recover the deposit amount. The court papers were then subsequently amended by the tenants for a further claim of £6,750.00 representing 3 times the initial deposit amount under the Housing Act (HA) 2004 section 214 (4). After proceedings were issued the deposit was then placed in an authorised tenancy deposit scheme.

The judge confirmed that she was happy that the £4,200.00 included a deposit of £2,250.00 and that the agent had described it as such. There was a clear breach of section 213 of the HA 2004 since the deposit was not paid into a scheme within 14 days of receipt. The judge was satisfied that the ‘initial requirements’ of a tenancy deposit scheme were not met and that the remedies of ss 213 and 214 therefore applied, that is the return of the deposit and an award of 3 times of the deposit. Undoubtedly, the judge was assisted in her decision by the fact that the tenancy had actually come to an end prior to the deposit being protected.

This case illustrates the ongoing problems both landlords and agents are having with the tenancy deposit schemes. The case law surrounding this area is mostly unreported however having viewed some judgements there does appear to be some uncertainty over whether the ‘initial requirement’ is to both lodge the deposit with a scheme within 14 days and to provide the prescribed information within the same period or whether lodging the deposit alone is enough. This uncertainty will no doubt continue until a court of record (High Court or above) is asked to rule on the point. Until such a time agents and landlords are warned that judges will decide each case as they see fit given that the decisions of the lower courts are not binding on other lower courts.

In order to assist with the uncertainty The Dispute service (TDS) has amended its rules and now confirm that its initial requirements are that the deposit be registered with the scheme within 14 days of receipt and that the prescribed information must be provided within the same 14 days. Consequently members that miss the 14 day deadline will automatically find themselves in breach of the initial requirements of the TDS and risk being ordered to pay 3 times the deposit.

In the case of Universal Estates v Tiensia MyDeposits have also been held to have similar ‘initial requirements’ to the TDS.

It is also vital that agents are particularly careful when landlords are registering the deposit themselves. Section 212 (9) (a) of the HA Act states:
References to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies.
This is of course open to interpretation but from an initial reading it seems that where the landlord fails to lodge the deposit the tenant may have a claim against the agent for the landlord’s failure to register. County Courts appear to support this position and agents may, therefore, wish to consider including a indemnity in their terms of business protecting them from the landlords failure. It may be prudent for the agent to seek confirmation that the landlord has registered with a scheme prior to sending the deposit to him or in the case of the custodial scheme that is Deposit Protection Service (DPS), sending the deposit to them directly. However this does not deal with the issue of relying on the landlord to ensure that the prescribed information is also provided to the tenant within the 14 day deadline. For a more ‘belt and braces’ approach, agents may wish to consider insisting on registering the deposit themselves through their own scheme membership.

The purpose behind the HA 2004 is to secure deposits and to return them quickly to tenants in the event of no dispute or to refer the matter to adjudication where there is, without the need for court. Landlords that do not secure the deposit within 14 days of receipt and then attempt to deduct monies upon the expiry of the tenancy are seen to be flouting the sprit of the legislation and agents need to ensure that they are not seen in the same light.

Filed under: Uncategorized, , ,

5 November, 2009 • 12:42 0

When is a Trial Not a Trial……

When it is a hearing of course! The recent case of Forcelux v Binnie in the Court of Appeal reviewed the status of initial hearings under part 55 of the Civil Procedure Rules, which govern possession actions. It seems that the first hearing before a Court is not a trial even though a possession order may be awarded and it may be the only hearing.

The key upshot of this is that it is far easier for a tenant to apply to set aside any possession order made at such a hearing where it has been made in his absence. This is because any attempt to set aside a decision made at trial can only be made by application under rule 39.3(3) and this requires that the party seeking for the order to be set aside must show:
1. He acted promptly;
2. He had good reason for his non-attendance; and
3. He has reasonable prospects of success at an re-trial.
This can be hard to do and therefore has the effect of preventing many re-hearings of matters where the defendant was not at the original trial. However, as the first hearing of a matter under CPR 55 is not a trial CPR 39.3(3) does not apply and the Court power to set aside the hearing is provided by CPR 3.1(2)(m). This does not require prompt action or the Defendant to show that they have reasonable prospects of success but merely requires a the Court to be persuaded that justice will not be done without a proper hearing.

In practice, this means that many more Defendants may have the opportunity to apply to the Court to set aside possession orders where they can show that the overriding objective of fairness will be best served by doing so. Agents and landlords should be aware that this may allow unscrupulous tenants to delay possession further and should also be aware that simply proceeding to a hearing without the presence of the tenant may not be the ideal situation that it may first appear to be.

Filed under: Uncategorized, , ,

23 September, 2009 • 09:32 0

Accuracy of Information on Websites

Many people will be aware of the problems of obtaining accurate information on the internet. As a law firm we frequently receive communications from individuals telling us what the law on a particular matter is. Often this is based on poorly written commentary or, more amusingly, on the law in other parts of the world.

For agents this is a particularly important issue as property advertising on the internet continues to grow. The risks of misrepresentation and misdescription (which for estate agents is prosecutable under the Property Misdescriptions Act 1991) are growing and the modern phenomena for sites taking automatic data feeds from agents own software means that small (and otherwise inconsequential errors) can rapidly be magnified into major problems.

However there is some good news. A recent case in the Court of Appeal dealt with the liability of a company for incorrect information appearing on its website. In Patchett v SPATA the Court of Appeal held that the Defendant was not liable for a misleading representation on its website in relation to the quality of third party contractors. This was primarily because the website “urged independent enquiry”. The website made reference to other documents supplied by the Defendant and set out a series of enquiries that should be made before relying on the contractors mentioned on the site.

Agents would be well advised to take this on board by making clear on their websites that further details of properties are available and should be sought before reaching a decision on rental or purchase.

However, agents should also take care of the details appearing on their websites and on other internet portals and should make sure they have a proper procedure in place to review this information and check its accuracy on a daily basis. Not only will this help avoid mistakes but it will also provide a defence against any threatened prosecution under the Property Misdescriptions Act.

Filed under: Uncategorized, , , ,

1 September, 2009 • 20:02 2

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, ,

10 July, 2009 • 13:05 0

Initial response to OFT v Foxtons

Following the ruling today in this matter, letting agent terms of business may well contain some significant flaws and unenforceable terms.  In particular any term which seeks to charge a commission fee where the landlord sells the property to the tenant will be deemed unfair.  In addition, where an agent seeks to charge commission on a renewal where the landlord has sold the property to another landlord such clauses will be deemed unfair.

What is not unfair is the charging of a renewal fee, even where the agent has not been involved in the negotiation of the renewal, provided that this charge is signposted to the landlord at the outset of the instruction and drawn to their attention.  The reporting of this matter is inaccurate in this aspect.

Nothing in today’s judgement requires agents to refund monies to landlords but it will prevent agents from using or relying on clauses that have been found to be unfair.

PainSmith have already amended our standard terms of business and are able to provide these for immediate use as a stop-gap measure until such time as agents can amend their standard terms.

Filed under: Uncategorized, , ,

21 May, 2009 • 12:51 1

OFT v Foxtons- A Clarification

It is not normally the practice of this blog to comment on matters that are still before the Courts but we are becoming frustrated by the large amount of incorrect information about this matter that is floating around.

Currently the OFT has suggested that certain aspects of Foxtons terms of business may be unfair.  They have particularly focused on the practice of seeking a fee on the sale of a property by a landlord to a tenant where the tenant was introduced by Foxtons and on the practice of seeking a fee where a tenancy which was carried out on a let only basis is renewed for a further period without any involvement by Foxtons.

The OFT has not said that all agents fees or even all renewal fees are unfair. They are particularly focused on those issues where the agent has not done any work to secure the renewal.  They have also suggested that charging the same fee on a renenwal as on an initial rental may also be unfair as the amount of work done in the two situations is different.

At the current time (21 May 2009) none of these fees are unfair and they will not be so until the High Court rules on the point (probably mid to late June 2009).  Even then there is a high chance of appeals to the Court of Appeal and possibly further.

In terms of outcomes there is a large range of possibilities.  The Court could decide that the specific clauses used by Foxtons are unfair or that any similar clause used by Foxtons is unfair or that clauses of this type are generically unfair and can also choose whether to impose this view only going forwards or retroactively.

Finally it should be noted that the OFT case is based on a general challenge and is therefore focused on the idea of a ‘typical consumer’.  This leaves open the option in any other case for an agent to show that their landlord was not a ‘typical consumer’ and that they should not be protected by the decision.

In any event there is still a long way to go.

Filed under: Uncategorized, ,

21 May, 2009 • 12:16 1

Proper Place for TDS Claims

The Court Service has published guidance setting out that the proper route for bringing claims under the Tenancy Deposit Provisions of the Housing Act 2004 is via Part 8 of the Civil Procedure Rules.

Key points to note are:

  • these claims are automatically allocated to the multi-track which means that legal costs are recoverable irrespective of the size of the claim;
  • the claim must be commenced on a form N208 and not the standard N1 claim form;
  • the claim cannot be commenced using the moneyclaim online service;
  • the Claimant is required to serve a witness statement with their claim form setting out their evidence;
  • the Defendant is required to serve a witness statement with its aknowledgment of service setting out its evidence;
  • failure to serve witness statements at the appropriate times will preclude reliance onm evidence save by permission of the Court

A great many claims are currently not being commenced correctly and are not having the appropriate procedure followed.  While it is unlikely that a claim will be struck-out for following the improper procedure, a defendant may be precluded from giving evidence and there may be costs implications for both parties if the correct procedures are not followed.

Filed under: Uncategorized, , ,

17 March, 2009 • 18:11 15

More TDP Problems

PainSmith Solicitors is currently instructed in a matter relating to Tenancy Deposit Protection which has significant implications for the entire industry. In this case the agent was instructed on a full management basis and held the deposit in a separate designated account. The landlord and agent subsequently failed to register the deposit within the 14 day timeline. Leaving aside the still, highly disputed, question of whether late registration is acceptable this case raises another, far more concerning issue. The tenant has issued proceedings against the agent and not the landlord and has stated that the agent is liable for the penalty of three times the deposit. To support their argument the tenant’s solicitor has put forward the wording of section 212(9)(a) of the Housing Act 2004 which states:

references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies

The tenant therefore submits that this definition includes the agent and therefore the penalties set out in s214, which are expressed as applicable to the landlord, are equally applicable to the landlord’s agent.
This poses a serious problem for agents. The DCLG has advised, and the view has generally been, where an agent acts for a let-only landlord, the liability is on that landlord to ensure that the deposit is properly protected and that if the landlord does not do so then the agent has no liability. This case has the potential to overturn that comfortable certainty of which will leave agents acting for clients on a let-only basis or a full management basis in a difficult position. It is likely that the only sure way for agents to resolve any potential claims will be to require landlords to leave their deposits with the agent for the agent to register under their own scheme membership. As this case demonstrates it is fundamental that the agent ensures the deposit and any initial requirements of the Tenancy Deposit Scheme are complied with within 14 days of receiving the deposit. In the meantime many agents will be faced with a large number of potential claims. It may be possible to seek insurance to cover this risk but this is not a good time to ask insurers to cover large potential risks of uncertain scope.

UPDATE: PainSmith has lost this case at first instance but application has been made to the High Court for permission to appeal.

Filed under: Uncategorized, , ,

15 March, 2009 • 17:07 0

New Generic Pre-action Protocol

From 1 April 2009 the 49th update to the Civil Procedure Rules will come into force.  One of its most important changes is the introduction of a generic pre-action protocol.  A number of types of case already have pre-action protocols in place, the new general protocol will apply to most other case types.

As with other protocols failure to comply without good reason will lead to a request for an explanation for the non-compliance by the Court and could lead to costs being awarded against the defaulting party, even in the small claims track.  It is therefore clear that an understanding of, and compliance with the new protocol is important.

There are genuine practical advantages to compliance too.  The aim of the protocol is to assist parties in settling disputes at an early stage without embarking on litigation.  Therefore compliance with the protocol could assist parties in settling their dispute more quickly and at a lower cost.

Pre-action Letter

The protocol requires a pre-action letter to be sent by the claimant.  The letter should include:

  • The claimants name and address;
  • The basis of the claim;
  • A clear summary of the facts;
  • The remedy the claimant seeks;
  • An explanation of how any financial remedy sought has been calculated;
  • Provide details of any specific funding arrangement entered into by the Claimant;

The protocol also requires the claimant to:

  • List the main documents on which they rely (and presumably include copies);
  • State when the claimant expects a response;
  • Offer ADR if the claimant thinks it appropriate and invite agreement;
  • Ask for copies of specific documents that the claimant desires to see.

A number of points are worth noting from this list of requirements:

    1. The claimant must show a basis for calculation of any financial demands.  This is something that claimants frequently do imprecisely, if at all, and so it will be necessary to apply more rigour to such calculations;
    2. While the protocol does not require the claimant to provide the documents he is relying on he is required to list them and so the implication appears to be that copies should be provided;
    3. The claimant is encouraged to put forward a proposal for ADR.  Interestingly the protocol list several different methods of ADR, including mediation, early neutral evaluation, arbitration, and plain old negotiation so the current bias in the Courts toward mediation as the only valid form of ADR may start to change;
    4. The claimant is allowed to ask for copies of documents.  However he is required to ‘identify’ them so the protocol is not a licence for ‘fishing expeditions’.

Additionally, where a defendant is believed to be unrepresented the claimant is expected to refer the defendant to the protocol and provide a warning that ignoring the letter could lead to the commencement of legal proceedings.

Defendant’s Response

The defendant is normally expected to respond within 14 days in full.  Where that is not possible they should send an acknowledgment letter within 14 days stating:

  • If an insurer is involved;
  • If the defendant is seeking advice who they are seeking it from;
  • When the defendant, its insurer, or its advisors will provide a full response;

The letter should also request any further information the defendant requires to make its full response.

The full response should begin by accepting the whole or part of claim or denying the claim.  If the defendant is not accepting the whole claim the letter should then state:

  • Why the claim is being denied by reference to the facts which are disputed and clearly identifying any parts which are accepted;
  • State whether any counter-claim is to be made and provide the same information as must be provided by the claimant’s pre-action letter;
  • State whether the defendant believes the claimant to have been to blame for any part of the claim and, if so, state why;
  • Agree to the proposals for ADR or state why they are not agreed and propose an alternative form of ADR or state why no ADR is relevant;
  • List the essential documents on which the defendant intends to rely;
  • Supply any documents requested by the claimant or, alternatively, state why they will not be supplied;
  • Identify and ask for any documents the defendant wishes to view.

Claimants Response

In response to the defendant’s letter the claimant should provide the documents sought or state why they will not be provided and, if the defendant has made a counterclaim, should respond in the form required for the defendant’s letter.

After this process the protocol anticipates that the parties will be in a position to review the relative merits of their respective cases, to eliminate unimportant issues, and consider how to proceed.  The protocol encourages further careful thought before the issue of proceedings.

Debt Proceedings

Where the claim being contemplated is one by a company against an individual for unpaid debts there are further requirements to be followed.  The initial claim letter is required:

  • To provide details of how the outstanding monies can be paid;
  • To state that the defendant can contact the claimant to discuss repayment options and provide details of a suitable contact; and
  • Give the defendant details of organisations that can provide free, independent advice and help.

Conclusions

Many will undoubtedly see this process as an unnecessary and unwieldy bar to swiftly progressing a claim into Court.  However, the Courts are increasingly awash with relatively minor claims that could easily be resolved by sensible negotiation between the parties.  By forcing both sides to declare their case earlier and also creating significant costs consequences for failure to comply with the protocol in all tracks the Courts presumably intend to reduce the quantity of cases being litigated.  The introduction of the protocol makes it even more important for landlords and agents to consider whether their agreements should include clauses offering suitable forms of ADR to reduce their reliance on the protocol and to help expedite disputes.

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12 February, 2009 • 01:22 1

Mortgage Possession- Tenants Notice

The 49th update to the Civil Procedure Rules comes into force on 6 April 2009. Part of the update amends rule 55 which governs possession actions and, particularly, amends the rules on mortgagee possession claims.

Currently rule 55.10 requires that the mortgagee send a letter to the property addressed to ‘The Occupiers’ not less than 14 days before the hearing for possession. This requirement has been amended to force the mortgagee to send the notice not more than 5 days after receipt of the hearing details thus giving occupiers approximately 2-3 weeks more warning of a possession hearing.

Unfortunately the rules do not require any more than this and many people assume post addressed to ‘The Occupiers’ to be junk mail – something the amendment could easily have addressed by requiring a notification on the outside of the envelope. However, where such a notice is not sent in time the tenants could appear in Court and seek an adjournment of the hearing due to the mortgagee’s failure to comply with the rules. The added cost of this might induce the mortgagee to negotiate with the tenants – allowing them to stay in the property on payment of rent direct to the mortgagee, for example.

In practical terms, those acting for tenants should remind them to open all post addressed to ‘The Occupiers’ and should keep in mind the possibility of forcing an adjournment where the rules have not been adhered to as a method of extracting concessions from the mortgagee.

With thanks to Francis Davey.

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29 January, 2009 • 17:28 5

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.

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29 December, 2008 • 20:37 2

Shareholders and Leaseholders- Different Obligations

In Morehead Mansions Ltd v Di Marco the Court of Appeal has held that there is a difference between a tenants obligation to pay service charges and an arrangment made by a shareholder to pay into a company fund by seperate agreement.

The Defendant in the case was a shareholder in a company which owned the lease of a series of flats. Simultaneously, the Defendant held one of those leases. The shareholders had agreed to pay into a new ‘recovery fund’ in two tranches in a sum which varied according to their respective shareholdings.

The Court held that the payment was not related to the Defendants role as a tenant and so was not governed by the limitations imposed by the Landlord & Tenant Act 1985. Equally, failure to make such a payment, as it was not a lease-related matter, was enforceable as a normal breach of contract and did not give rise to the normal forms of enforcement and recovery used by a landlord against a tenant such as forfeiture of the lease.

It is important therefore where a company is set up to run a block and is, in effect, owned by the block residents whether payments into that company are being levied by way of service charges, in which case all the normal requirements of consultation and the like must be carried through, or whether they are to be levied by way of contractual agreement with shareholders, avoiding consultation but giving up the more powerful enforcement options.

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15 December, 2008 • 16:19 0

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.

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12 December, 2008 • 15:55 0

Agents Fees

In the recent case of Foxtons v Pelkey-Bicknell the Court if Appeal considered the fee provisions in Foxtons terms of business. These were based on the Estate Agents (Provision of Information) Regulations 1991 but are similar to those used across much of the estate and lettings field.

There was extensive discussion regarding the nature of effective cause terms and whether these should be implied into the agency contract but the Court declined to make such an implication. The Court focused instead on the phrase “a purchaser introduced by us” and looked closely at its meaning.

Ultimately, Lord Neuberger, who gave the leading decision, took the view that the proper reading of this phrase was “a person who becomes a purchaser as a result of our introduction” and not “a person who at some time in the future becomes a purchaser” as was put forward by Foxtons.

This is an interesting decision. The Court was keen to point out that users of residential agents should be afforded more protection than those using commercial agents and wherever possible the position should be that a vendor or landlord should not have to pay fees to two agents in respect of work done. However, it is clear that the Court was unwilling to imply terms into the agreement that were not there and so, if a fee clause is correctly expressed it would seem to be the case that an agent can still seek a fee where an individual comes to a property through the seperate efforts of two sole agents.

PainSmith Solicitors have produced a clause which they believe will survive the decision in Pelkey and can supply this on request.

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26 October, 2008 • 15:57 0

Costs and the Disrepair Pre-Action Protocol

In a recent case the Court of Appeal considered the issue of legal costs on a claim using the Disrepair Pre-Action Protocol.
In Birmingham City Council v Lee the Council was initially given notice of disrepair in Mrs Lee’s property by solicitors in a letter which made mention of the protocol. The Council repaired the property during the course of the following month and negotiations then took place with regard to payment for damages and Mrs Lee’s legal costs.  These apparently broke down and a claim was issued in the for damages of between £1000-5000.  As the repairs were complete there was no claim for specific performance and as the amount claimed fell below £5000 the matter was properly allocated to the small claims track.  However, Mrs Lee sought damages on the fast track scale for, at the minimum, the time between notification and completion of the repairs.  It seems fairly likely from thr papers that the action was largely begun in an effort to obtain legal costs.

At first instance the Deputy District Judge refused costs.  On the tenant’s appeal the Circuit Judge made a costs order allowing costs prior to allocation to be reserved for consideration by the trial judge at the conclusion of the matter.  The Council appealed this decision to the Court of Appeal.

In a unanimous verdict the Court (led by Hughes LJ) declined the appeal in its main points, largely because it left too much to be decided later.  They substituted an order awarding Mrs Lee costs up until completion of the repairs.

While both sides made much in argument about the nature of litigation funding the Court set this aside and took the view that it should decide whether an award of pre-allocation costs was necessary in order to make the protocol operate as intended.

Ultimately the Court decided that this was necessary otherwise landlords would have the option of refusing to repair until a pre-action letter was issued then completing all repairs pre-allocation, having the matter allocated to the small claims track, and thereby having no liability for the tenant’s reasonably incurred legal costs in forcing the landlord to carry out works in the first place.

This decision will prove a boon to a number of public assistance firms as it will increase their ability to recover legal costs where they have assisted tenants under the protocol, even where the landlord immediatley does the works required.  From a landlord’s point of view it reinforces the need to get works done early as once a pre-action protocol letter arrives the legal costs meter will start ticking.

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24 October, 2008 • 17:10 0

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.

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