Spencer v Taylor – Christmas cheer for landlords

Posted: December 10, 2013 | Author: | Filed under: Landlords, Letting Agents, Managing Agents, Possession, Property Law, Residential Property, Tenancy Deposits, Tenants | Tags: , , , , , , | 4 Comments

I recently gave a number of presentations to landlords and managing agents entitled “Possession Notices – getting them right”. The presentation provided guidance on how to draft Section 8 and Section 21 Notices together with the effects of tenancy deposit protection and Superstrike on the validity of such notices.

The presentation included a detailed review of Section 21(4) Notices. This included an explanation of when a Section 21(4) Notice can be served and the consideration of tenancy periods that must be taken into account when calculating the correct ‘end date’ of the notice.

I won’t seek to set out here a full review of Section 21(4) Notices other to say that it was established practice that a Section 21(4) Notice must be used when a Section 21 possession notice is to be served after the end of the fixed term of the assured shorthold tenancy. If a Section 21 notice was to be served during the fixed term then you could rely on a Section 21(1) Notice.

Section 21(1) Notice is a lot simpler to use. You do not have to worry about the notice expiring on an exact date and/or using any saving provision. Nor do you have to worry about common law provisions affecting the length of notice (for example, you may need to give at least 6 months notice under a Section 21 (4) Notice).

The common law provisions and calculation of the exact date are not issues I need to address here as halfway through my series of presentations a case was decided in the Court of Appeal which meant that I could, in effect, tear up my notes and completely rewrite the part of the presentation relating to Section 21(4) Notices. The case is entitled Spencer v Taylor. I have not yet had sight of a case report and am relying on information received from the barrister who represented the unsuccessful tenant in the case.

The background of the case is not important although I will provide further information on the case once the report is made available. As I say, I am working on limited information at this time but I understand that there were 2 key decisions made by the Court. The first related to the ‘key date’ and whether the introduction of a second date (under a saving provision) invalidated the notice. Again that is not a real concern for the purposes of this article as it is the second decision which really stands out. The decision didn’t just lead to a re-write of my presentation but, in effect, drove a coach and horses through the way that landlords, agents, lawyers and the Courts have dealt with Section 21 Notices over the past 25 years i.e. since their introduction.

The Court of Appeal stated that where there was originally a fixed term tenancy (which will be the majority of assured shorthold tenancies) then even if a Section 21 Notice is served after the expiry of the fixed term, the landlord can rely on a Section 21(1) Notice. Therefore, provided that not less than 2 clear months notice is given, a Section 21(1) Notice can be relied on at any time. The role of a Section 21(4) Notice then becomes one whereby that notice is to be served where the tenancy was periodic from the start.

Provided a landlord takes into account the effects of Superstrike and has complied with the tenancy deposit provisions (insofar as the deposit has been registered and prescribed information served) then the landlord need not worry about the complexities of drafting a Section 21 (4) Notice. This will result in substantially fewer possession claims being thrown out of Court due to technical errors in notices.

Further steps towards compulsory redress scheme

Posted: November 22, 2013 | Author: | Filed under: Bury & Walkers, Landlords, Letting Agents, Managing Agents, Property Law, Tenancy Agreements, Tenants | Tags: , , , , | Leave a comment

Following the publication of proposals to improve the quality and regulation of the private rented sector in England (see Government Proposals to Improve Private Rented Sector), the Department for Communities and Local Government (“DCLG”) has now published its proposed conditions for setting up a redress scheme for letting and managing agents.

It is proposed that the redress scheme will allow agents to be investigated where they have not been clear about any issues relating to the tenancy. Tenants and landlords will be provided with the ability, under the terms of the scheme, to seek resolution of any letting and management issues. This would include payment of compensation.

The proposed conditions that will need to be met by agents are available to view here.

DLCG aim to bring the scheme forward for approval with a view to the Secretary of State approving schemes in January 2014. Agents and landlords therefore need to be aware of the proposals so that steps can be taken to join a redress scheme which is to become a compulsory requirement.

Free Seminar for Landlords & Letting Agents- Possession Notices and Superstrike

Posted: November 8, 2013 | Author: | Filed under: Bury & Walkers, Landlords, Letting Agents, Managing Agents, Possession, Property Law, Rent arrears, Residential Property, Tenancy Agreements, Tenancy Deposits, Tenants | Tags: , , , , , | Leave a comment

Last night I attended a meeting in Barnsley of 30 landlords and presented to them my latest seminar entitled “Possession Notices- Getting them right”.

As well as guidance on how to draft possession notices, the seminar provided an analysis of the recent Superstrike case which has raised concerns amongst landlords and agents as to how to deal with tenancy deposits.

The presentation was well received and if you would like to benefit from the guidance, I am repeating the free seminar in Leeds on 21st November 2013 and in Barnsley on 29th November 2013. Please find further details and a booking form here

Draft OFT Guidance for Letting Professionals

Posted: October 25, 2013 | Author: | Filed under: Landlords, Letting Agents, Managing Agents, Property Law, Residential Property, Tenancy Agreements, Tenants | Tags: , , , , , , | 1 Comment

The Office of Fair Trading is consulting on draft guidance aimed at letting agents and residential landlords. It focuses on potentially unfair contract terms and various consumer protection regulations with a view to get letting professionals complying with the law.

The Office of OFT previously published a report (February 2013) identifying a number of concerns about the private rented sector. Cavendish Elithorn, Executive Director at the OFT said, upon issuing the consultation earlier this month:-

‘The private rented sector is vitally important to millions of people, whether they are students, young professionals or families. Rental contracts can be the largest financial commitment some people have and letting agent fees can be hundreds of pounds.

Our earlier report into the lettings market found that both tenants and landlords were concerned about the clarity of communication from agents including about fees and charges and poor service.

Traders should always provide full disclosure of relevant information upfront, including a clear statement of the costs that will be incurred over the course of the rental. This guidance should ensure that businesses enable people to make decisions based on full information about the property and the agreement they are entering into, when they are looking to rent.’

The draft guidance provides an overview of the legislation relevant to lettings professionals that the OFT enforces and sets out some examples of the kinds of unfair trading practices or conduct specific to property lettings that may breach them.  It also provides some steps which letting professionals may wish to take in order to comply with the laws and offers guidance in relation to a number of areas from advertising a property, managing and terminating the tenancy.

The consultation is open until the 10th December 2013 and a copy of the draft guidance can be found here

Government Proposals to Improve Private Rented Sector

Posted: October 25, 2013 | Author: | Filed under: Landlords, Letting Agents, Managing Agents, Possession, Property Law, Residential Property, Security of tenure, Tenancy Agreements, Tenants | Tags: , , , | 1 Comment

I have previously written about the inquiry conducted by the Government into the private rented sector (see Private Rented Housing: Inquiry announced).

The Government has now published proposals in response to the inquiry, setting out the proposals for improving the quality and regulation of the private rented housing section in England. It has also issued a draft Tenant’s Charter to help tenants understand what to expect when they rent a property and how to take action over hidden fees or poor standards.

A copy of the Report containing 44 recommendations can be found here

A copy of the draft Tenant’s Charter, which sets out the basics that all private tenants in England should consider before and during their time in a rented property, can be found here.

The Government hopes the tenants will be able to request longer tenancies in order to provide stability for their family, avoid hidden fees and demand a fair deal from their landlord and letting agent.

A model tenancy agreement is provided within the draft Charter, although this is not going to be for compulsory use. The key to the draft Charter is “family-friendly tenancies” and to educate tenants so that they are able to have a better understanding, and access to information, about their tenancy.

The Government’s intention is that the new measures will attract new investments into the private rented sector, including the £1 billion Build to Rent Fund, a scheme delivering new build properties specifically for private rents.

Other recommendations (within the 44 contained within the Report) include establishing a code of practice for management of private rented property, introducing legislation requiring all letting and managing agents to belong to an approved redress scheme and guidance on the role of police and enforcement of eviction.

TENANT’S NOTICE TO QUIT – LENGTH OF NOTICE

Posted: October 17, 2013 | Author: | Filed under: Bury & Walkers, Housing Act, Landlords, Letting Agents, Possession, Property Law, Residential Property, Tenancy Agreements, Tenants | Tags: , , , , , , , | 1 Comment

An enquiry has been received by me via Twitter (@garetharcher) relating to the length of notice that a tenant is obliged to provide the landlord to terminate the tenancy. The landlord, who raised the enquiry, asked if putting a provision in the Assured Shorthold Tenancy agreement for the tenant to provide two months notice to the landlord was binding upon the tenant ie. could the landlord insist on two months notice rather than one month as is common place?

The answer depends on whether the tenancy is still within the fixed term or has become a periodic tenancy.

Termination during the fixed term

Contractually, the tenant will be liable for the rent for the whole of the fixed term, even if they leave the property early. A tenant who wishes to leave during the fixed term would only be able to do so if the tenancy agreement allows (eg. a break clause, assignment of the tenancy or underletting) or with the agreement of the landlord that the tenancy would be surrendered.

If the tenant wishes to give notice to end the tenancy when the fixed term expires (on the last day of the fixed term), unless there is provision within the tenancy agreement, no notice need be given. The fixed term tenancy would simply come to an end provided that the tenant moved out before the end of the last day of the fixed term.

It is usual for a landlord to seek notice of the tenant’s intent to vacate the property at the end of the fixed term. For this reason, contractual provision is made within the tenancy agreement for them to give notice, whether that be one or two months. If the tenant fails to give that notice, it is then for the landlord to consider enforcement action although provided the tenant pays rent to the end of the fixed term, the landlord’s loss may be minimal, if any.

Termination of a periodic tenancy

Once the fixed term has expired, and the tenancy has become a periodic tenancy (whether statutory or contractual), the tenant is obliged to give notice if they wish to leave. NOTE: If a new tenancy agreement has been entered into and a new fixed term agreed, the position remains as provided above (see “Termination during the fixed term“).

During a periodic tenancy, the tenant’s notice must:-

  • Be in writing;
  • Give at least four weeks notice (as provided by Section 5 of the Protection from Eviction Act 1977). At least four weeks notice must be provided if the rent is paid on a weekly basis or at least a month’s notice if the rent is paid on a monthly basis;
  • Expire on the last day of a period of the tenancy. For example, if during the periodic tenancy, rent is paid on the 15th of each month, the notice period provided by the tenant must end on the 14th of the month.

Whilst the tenancy agreement can provide for notice during the fixed term, the tenancy agreement cannot change the position under a periodic tenancy due to the provisions of Section 5 (3)(e) Housing Act 1988. Arguments as to the fairness of a clause seeking longer notice may therefore arise as a clause requesting, say, 2 months notice would go beyond that as provided for by Section 5.

Therefore, whilst a landlord can ask, during a periodic tenancy, for the tenant to provide two months notice, the tenant may not be obliged to provide this if rent has been payable on a weekly or monthly basis, leaving the landlord to consider whether or not they wish to pursue a claim for rent for the whole period requested from the tenant in the agreement.

Consultation on tackling illegal immigration

Posted: July 9, 2013 | Author: | Filed under: Bury & Walkers, Landlords, Letting Agents, Managing Agents, Property Law, Residential Property, Tenancy Agreements, Tenants | Tags: , , , , | 2 Comments

The Home Office has published a consultation on proposals which will require private landlords to check the immigration status of new tenants. The consultation can be found here.

The consultation is open until the 21st August 2013 with the Government to introduce legislation with the anticipated new rules taking effect in 2014.

There are currently controls which apply to the employment of illegal workers and the new requirements for landlords are modelled on these. It is the Government’s belief that whilst many private landlords already implement checks on tenants’ identity and credit status (making it difficult in practice for illegal migrants to rent properties from them), this is not done by all landlords, and a small minority of rogue landlords knowingly target illegal migrants. The Government proposes that all private landlords must undertake checks on tenants before renting accommodation and will require the landlords to ask the proposed tenant to produce evidence of their permission to be in the UK. Landlords will need to check this evidence and keep a copy for their records.

If a landlord rents the accommodation without requiring the required evidence, it is proposed that the landlord will be liable to pay a penalty. It is suggested that penalties will be proportionate to the office so that a landlord who has on one occasion inadvertently rented a property to an illegal migrant, faces a smaller penalty to that of a rogue landlord who has repeatedly breached the requirement.

The guidance is to be issued as to the nature of the checks to be carried out and landlords are not going to be responsible where they have been subjected to a fraud, unless it is clear from the documents that there are not genuine..

Checks will need to be completed before the tenant moves into the property. The new rules will not apply to existing tenants.

Whilst responsibility for completing the checks would normally rest with the landlord, responsibility can be transferred to a letting agent where that agent agrees to this in writing.

Once the tenancy has started, and the initial checks undertaken, the landlord would not normally need to make further checks unless the tenant is a foreign national with an immigration time limit on their stay.

Many landlords will believe that further regulation will simply increase their costs, paperwork and potential liability. However, the Government are keen to implement these further regulations as part of their objective to encourage more illegal migrants to choose to leave the Country, reduce the temptation to enter illegally in the first place and, if they do enter, reduce access to benefits and services. The checks therefore will be unavoidable but opinions on the consultation can be lodged via the survey which you will find through the link above.

Tenancy Deposits- Update

Posted: June 24, 2013 | Author: | Filed under: Housing Act, Landlords, Letting Agents, Managing Agents, Possession, Property Law, Rent arrears, Residential Property, Tenancy Deposits, Tenants | Tags: , , , , | 2 Comments

A recent Court of Appeal decision has clarified an issue previously touched on here. The case, Superstrike Limited v Rodrigues [2013] EWCA Civ 669, addressed the position where a deposit was taken before April 2007 (i.e. before the requirement to register a deposit came into force) and the tenancy then became a statutory periodic tenancy after April 2007.

Briefly, the facts of the case were that the tenancy began in January 2007 for a term of 12 months. A deposit was paid at that time and following expiry of the 12 months, the tenancy continued as a statutory periodic tenancy. In June 2011, the landlord served a Section 21 Notice and issued possession proceedings.

The matter found its way to the Court of Appeal, The Court was asked to determine whether the requirements of the deposit legislation applied and, thus, whether or not the failure to register the deposit meant that the Section 21 Notice can be relied upon.

The Court determined the two issues. Firstly, they decided that the statutory periodic tenancy did constitute a new tenancy.

Secondly they considered whether or not the deposit had been received by the landlord in January 2008 when the tenancy became a statutory periodic tenancy. The Court decided that it had been received.

The landlord had argued that the deposit had not been physically received by him in January 2008 and Section 213 of the Housing Act 2004 therefore didn’t apply. The Court determined that the tenant should be treated as having paid the amount of the deposit to the landlord in respect of the new tenancy by way of set-off against the landlord’s obligation to account to the tenant for the deposit in respect of the previous tenancy. In effect, the original deposit related to the obligations under the original tenancy, not the new periodic tenancy. There was a deemed re-receipt of the deposit by the landlord and, as such, it should have been registered. The possession order was therefore set aside as the landlord cannot rely on the Section 21 Notice that he served.

As previously set out in other articles, where a deposit is to be protected, the landlord has 30 days from receipt of that deposit to do so. Where deposits were received (as deemed in this case) prior to 5th April 2012, protection must have taken place before 6th May 2012 in order to avoid liability for a penalty and in order to avoid problems with relying on a Section 21 Notice.

The case also raises another issue in relation to service of prescribed information. This could also affect the validity of a Section 21 Notice if the prescribed information has not been served within the 30 day period following receipt of the deposit. This issue was not addressed by the Court here but it would follow that if the Court deems that a statutory periodic tenancy arises in circumstances requiring the deposit to be registered then prescribed information shall also be served within the requirements of the legislation.

I’m afraid it’s a case of watching this space as further issues are addressed by the Court.

Rent in advance- Deposit or no deposit?

Posted: April 26, 2013 | Author: | Filed under: Housing Act, Landlords, Letting Agents, Managing Agents, Possession, Property Law, Tenancy Agreements, Tenancy Deposits | Tags: , , , , , , , , , , | Leave a comment

Recent uncertainty as to whether rent in advance is a deposit or not has been clarified by the Court of Appeal decision in the case of Johnson v Old. Much to the relief of landlords, the decision was made in favour of the landlord. This means that when rent is paid in advance, where payment of the monies is to discharge the tenant’s liability for rent only, it is not treated as a deposit and therefore does not need to be registered.

I have set out in my previous articles the requirements of deposit registration and the consequences of failure to do so. This decision is important therefore for landlords that seek to take rent in advance as it now provides them with some peace of mind that a Section 21 Notice served will not be invalidated and they will not be liable to pay a penalty.

The case itself of Johnson v Old involved the Court dealing with some issues to the drafting of the tenancy agreement. So far as to say, the clearer the terms of the tenancy agreement, the less likely any dispute is to arise. The important issue addressed by the Court was whether a payment of 6 months rent in advance was a deposit or not.

The Court held that where money is paid in order to discharge a current liability (rent), it is not paid with the intention that it is to be held as security. The money taken in advance was to be allocated for rent only for the first 6 months and it was not to be allocated elsewhere or held as security for any breach of the tenancy agreement.

Importantly, the tenant had not been asked for further payment of rent within the first 6 months following the payment in advance. Had rent been demanded within that 6 month period, the landlord would clearly be seeking additional monies when rent had already been paid (by way of the advanced payment). An amount for further rent within that initial period is likely to render the advanced payment as a deposit.

Essentially, a landlord cannot take rent in advance and then ask for further rent to be allocated to the same period. If this is done, the advanced “rent” would need to be registered as a deposit.

Therefore, where a landlord is faced with a the tenant who cannot supply adequate referencing and the landlord wishes to request rent in advance, the landlord should ensure that no further rent is demanded for the period (already paid) unless the landlord is willing to treat the payment in advance as a deposit (and thus register and comply with the initial requirements).

Speaking to a number of landlords about tenancy deposits, many don’t take deposits now. As with many things, there are advantages and disadvantages of not taking the deposit but this recent case provides now some further scope for landlords and an option to take rent in advance.

There is a potential knock on effect of taking rent in advance which applies to the length of notice to be given pursuant to Section 21 of The Housing Act 1988. Landlords should take advice and I would be happy to offer some guidance in this respect.

Letting and managing agents: first steps towards regulation of conduct

Posted: April 23, 2013 | Author: | Filed under: Landlords, Letting Agents, Managing Agents, Property Law, Residential Property | Tags: , , , , , , | Leave a comment

On 16 April 2013, the government tabled draft legislation designed to open the way for better regulation of letting and managing agents. Amendments to the Enterprise and Regulatory Reform Bill will permit the Secretary of State to introduce a requirement that letting and/or managing agents of domestic property must belong to a redress scheme. This might be a private or a government-administered scheme. The proposals do not extend to letting agents who deal with commercial property.

The amendments are intended as a substitute for the House of Lords proposal that letting and managing agents should be subject to the Estate Agents Act 1979. That Act imposes wide ranging requirements, including the need to belong to a redress scheme.

A recent OFT report on the Lettings Market recommended that the government consider whether to require agents to sign up to a code of practice or join a redress scheme. The amendments to the above Bill pave the way for this. The Under Secretary for the Department for Business, Innovation and Skills (Jo Swinson) said:
 There would be a consultation first, but no draft consultation paper yet existed.
 The OFT recommendations would be taken into account in the drafting of the secondary legislation.
 The government intends to introduce that legislation as soon as reasonably possible.

The draft clauses set out what will qualify as “lettings agency work” and “property management work”, and permits the secondary legislation to impose sanctions such as civil penalties, criminal offences or orders prohibiting any offending agent from further work in their field. Such steps will no doubt be welcomed by landlords.

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