Am I guilty of Disrepair, Being Unfair or Both?

admin    Uncategorized     agents

A letting agent I use in Yorkshire has sent me an email today, as they have received a letter from the local council suggesting that I am guilty of disrepair.

This is probably a complaint in retaliation from a tenant that I invoiced, £97.87, for an emergency repair to her kitchen floor that had collapsed due to a water leak from her washing machine over a period of weeks that caused the suspended floor to crumble.

On the 21st June of this year, I was asked, via my letting agent, if the tenant could replace the kitchen laminate as her washing machine had been leaking and some of the laminate flooring in the kitchen had become warped.

Simple question, simple answer!

I had no objection and said I didn’t mind to the letting agent and thought no more about it.

Then on the 20th July, I got a phone call to say that the tenant had started replacing the flooring and had fallen through the kitchen floor and the house had now become uninhabitable.

To say I was alarmed is an understatement, so I cancelled my appointments for the day and dragged myself across the Pennines to find out what had occurred.

When I got there at 3pm, the laminate had been partially been removed by the tenant, or whoever was doing the flooring, revealing a rather large hole in the floor panels, where the tenants foot had gone through down to her knee.

That resulted in a hospital journey as the hole was knee shaped when I got there.

The reason, the floor couldn’t carry her weight, was that the kitchen floor was made from fibreboard and had been subjected to water for so long it had the strength of wet cardboard , i.e. NONE.

(The floor is suspended on joists above a 3ft drop to the planet below).

As I had limited time left, it didn’t take long to trace the source, (the washing machine) and I videoed the hole and then started to rip out the wet floor panels and more sections of laminate until I came into a section of standard floorboards underneath the laminate, further towards a load bearing wall, made of good old fashioned timber floorboards.

The timber was soaking wet and so were the floor joists.

The washing machine was suspended by the existing wooden floorboards and thankfully wasn’t in any danger of going through the floor.

I told tenant that I couldn’t remove the washing machine because there was no floor left to place its weight upon. It would have to stay in position until the rest of the floor was made load bearing again.

The only option was to replace two of the water soaked fibreboard panels, (the rest were intact), so I went to Wickes and bought some flooring grade fibreboard of the same thickness and by the time I got back the surface water had evaporated from the floor joists and I then got on with what I told the tenant would be an emergency temporary repair, so that she could use the kitchen again.

Whist I was removing the ruined panels, the letting agent arrived and was shocked at the extent of the rot that had set in and told the tenant that she might expect an invoice for the work,-as she had reported the leak weeks before and had only just started to remedy the situation.

I kept asking how the floor was so wet and I was originally told that the washing machine had leaked slightly, but that didn’t justify the amount of rot.

So I kept asking the same question in a different way for a couple of hours and finally I think I got an answer that made a bit of sense.

The tenant finally told me that the waste pipe of the washing machine had come off a couple of times and the kitchen floor had become wet because of it.

The waste pipe wasn’t installed properly, but I didn’t move the machine to check because I was too tired and I assumed it would be sorted after the floor had dried out.

To be honest, I was just happy that I had just enough time to get the fibreboard panels replaced so that the house could be used again and I think the tenant was also.

That was 8.45pm and I couldn’t stay any longer.

I told the tenant that whoever was doing her floor would have to leave time for the floor to dry out thoroughly, to which she agreed and about a week later I forwarded on my invoice for about 5 hours work, (at the minimum living wage rate), and the materials used. The total came to £97.87, which I thought was fair, considering it was her washing machine leaking and not mine.

So I went back to Merseyside and carried on with my life of Landlord drudgery.

Then last week I got another email from my letting agent that said that the tenant had told my letting agent she was going to ask her home help if she should pay for it.

I didn’t give that remark much thought, perhaps I should of.

Then POW!, today I got a letter from the Housing Enforcement team declaring that I am guilty of disrepair and wanting to know what my intentions are?

I thought I had made it clear to the tenant that the work I did would only be a temporary emergency repair and I wasn’t the person that would be carrying out the repairs, as they weren’t my fault.

So before I get beaten up by the council, would any Property118 readers like to advise on what to do or say?

Thanks in advance

Gary

The post Am I guilty of Disrepair, Being Unfair or Both? appeared first on Property118.

View Full Article: Am I guilty of Disrepair, Being Unfair or Both?

Section 21 – the New Pre-Conditions

admin    Uncategorized     agents

This is the fourth post in my 2017 Legal Update series.

In my last post I gave you the good news about section 21 – the fact that the dreaded ‘last day of a period of the tenancy’ is (in most cases) no longer needed.

However, that problem has been replaced by others! Meaning that many section 21 notices are still not accepted by the Court. This though is now more often due to the fact that the Landlord has not complied with the various pre-conditions for service of a section 21.

This is because the Government is now making the use of section 21 conditional upon landlords complying with their various obligations. All of the pre-conditions are things you are supposed to do anyway. But now if you don’t do them – you won’t be able to serve a valid section 21 notice.

Let’s look first at the older pre-conditions.

Deposits.

This is the pre-condition which causes problems for the most landlords. You must have both protected the deposit AND served the prescribed information within the 30-day deadline.

I’m not going to go into any detail as I discussed deposits in a previous post. Suffice it to say that in most cases, you will have to refund the deposit money to the tenant before you can serve a valid section 21 notice.

If you are in this situation, you may find my Legal Kit – the Deposit Error Repair Kit’ helpful.

HMOs

If you own or manage an HMO which requires a license but has not got one – you cannot serve a valid section 21 notice.

However contrary to what you may have been advised elsewhere, you CAN serve a valid section 21 notice if you have applied for a license, while the application is being processed – even if that license application is subsequently refused (once it is refused you won’t be able to serve your notice – unless maybe you make a second application).

The other alternative is to get a Temporary Exemption Notice (known as a TEN).

The rest of the pre-conditions come under the Deregulation Act 2015 and only apply to properties in England (Wales is developing its own rules, which are mostly not yet in force).

Compliance with prescribed legal requirements (England only)

The reasoning behind this is that landlords need to be compliant with their legal obligations before they can evict tenants under the ‘no fault’ section 21 procedure.

There are two ‘prescribed legal requirements’ so far – although there is power for the Secretary of State to add more. The requirements are:

• Service of the current Gas Safety Certificate, and
• Service of a current EPC certificate

These are supposed to be served at the start of the tenancy, but it is acceptable if they are served later – provided they are served before your section 21 notice.

There is an interesting question mark over EPCs for HMO properties which are let by the room. These normally do not require an EPC – is this the same under these regulations?

The answer is that until there is some case law on the point, we don’t know. Until that time – it’s best to serve it. I discussed this in some detail in my blog post here.

Prescribed Information (England only)

The use of the words ‘Prescribed Information’ is perhaps unfortunate as this is NOT the same as the deposit prescribed information. In this case it means the governments How to Rent booklet.

This is only available online and it is important to check the site from time to time as it is regularly updated and you need to be sure that you are serving the correct version.

If the booklet has been updated between when you served it originally and the renewal of the tenancy – you need to serve the updated version at that time.

But if you forget, its OK to serve it late so long as this is before you serve your section 21 notice.

Conclusion

So, to summarise. To be able to serve a valid section 21 notice:

• You MUST have complied with the deposit rules within the time limit or (in most cases) you will need to refund the deposit money before serving your notice
• You must also have an HMO license if your property requires one – but can serve your notice if you have applied for one (while your application is being processed) or if you have a TEN
• You must have served first the Gas Safety Certificate and a valid EPC (England only) and
• You must have served the governments How to Rent Booklet (England only).

Landlords in Wales – keep an eye out as new rules will be coming in for you over the next few years.

Landlords in England – the government may add to the list of pre-requisites so (again) make sure you keep up to date.

Further information:

There is a lot of information about all this on my Landlord Law Blog.

My Landlord Law membership site has a lot of guidance on section 21 including a guide which you can follow to check that you have complied with all the rules.

Members can also ask me ‘quick questions’ in the members forum area.

You can find out more about Landlord Law here

Next time we will wrap up on the section 21 rules.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

Additional course below:

Landlords – if you want to avoid legal problems, penalties and fines, this online course is just the job Please Click Here

The course will have a special 30% discount for PP118 readers via a coupon ( pp118cc30 ) due to expire in 3 weeks time.

The post Section 21 – the New Pre-Conditions appeared first on Property118.

View Full Article: Section 21 – the New Pre-Conditions

Do you know if your Property Insurance cover is correct?

admin    Uncategorized     agents

Insured Value:

Have you relied on your insurance broker to put an insured value on your properties for insurance purposes? Do you know for sure that the value he or she has arrived at does in fact cover the full replacement value of your properties? How can you tell if it’s correct?

As a landlord you need to make sure that your investment is fully protected by a good insurance policy covering all foreseeable risks based on full disclosure of all the risks by the insured. You need to contact your insurers if anything material changes, for example if the property is vacant for longer than is stated in the policy.

A good landlord policy will do all that, and perhaps even most importantly, will protect you against third party claims. These could be, for example, for injuries to your tenants, their visitors or to members of the public – potentially third party claims could be far greater than the loss of the bricks and mortar value in your property.

The market value or the price you paid for your property may not bear close comparison to the true cost of replacing the property in a total loss situation. Replacement cost is the key to insurance because insurance contracts are based on the indemnity principle: this means that after a claim, in theory, you should be in placed in the same financial position you were before the occurrence of the insured event: no worse off, and having made no financial gain.

If you are under insured, and this could easily be the case with rising prices, building materials costs, site clearance, professional fees etc., you will be subject to what insurers call “averaging”. In other words a house of value £500,000 would be under insured by 20% if you had put an insured value on it of £400,000. Therefore, any claim you make would be paid out, providing you met all the insurers’ conditions, less 20%.

The Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS) produces a range of detailed guidance on the cost of rebuilding standard houses and flats. The Association of British Insurers (ABI) has commissioned BCIS to provide the general guidance included in checking your sum insured and provides a calculator on its web site.

However, in the case of unusual properties such as very old, listed, conservation area, thatched or most commercial properties, these are difficult to value in a standard way, so you should get a professional insurance valuation carried out by a chartered building surveyor.

Most insurers will then index link the annual premiums so that you maintain an accurate insurance value over time, but of course this is all dependent on you getting the value right in the first place.

Never rely on your broker’s valuation because the broker is your agent, not the insurance company’s agent – any mistakes the broker makes are your mistakes. If your broker gets the value out, under insuring by 20%, as in the example, any claim you make will be averaged, that is to say, deducted by 20%.

Find the best landlord insurance policies – www.landlordzone.co.uk/directory/suppliers-directory/insurance

Building Surveyors – www.landlordzone.co.uk/directory/suppliers-directory/surveyors

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Do you know if your Property Insurance cover is correct? | LandlordZONE.

View Full Article: Do you know if your Property Insurance cover is correct?

Case Study on UC tenants prospective

admin    Uncategorized     agents

The claimant and their landlord approached Caridon Landlord Solutions, seeking resolution to an on-going issue with the tenants Universal Credit claim, the tenant was not in receipt of any payments causing him to incur debt and was also unable to pay his rent.

The claimant was previously in employment until he became ill and his GP stated he was not fit for work.

Seeking advice, he attended Jobcentre Plus to make a claim for assistance, however this claim for benefits was not about to go smoothly.

As the tenant was not fit for work, he should have been advised to claim ESA, however, as a result of the JCP advisor using the claimant’s previous address, which was a care of address to set up the claim he was placed onto Universal Credit and directed down the wrong path.

Had the correct address been used to set up the claim from the offset it would have been identified by the JCP advisor that the claimant lived in the Universal Credit live area he would have been ineligible to satisfy the gateway conditions of entitlement to Universal Credit.

When the claimant was asked if he had any liability at the address (care of address) the tenant answered no, as he had never lived there, due to this he was not awarded Housing Costs causing him to fall into arrears.

The landlords unaware of this made a request for direct payments however the request was never actioned because of the incorrect address placed on the claim.

With our involvement we managed to identify the problems on the claim and get the landlords request for managed payment and backdated to the start of the claim recovering over £5000 for the landlord.

Caridon Landlord Solutions come across cases like this every day of the week and have helped numerous claimants and landlords receive payments they would otherwise lose out on.

If you have a case like this or any other type of LHA/UC issue, please contact us using the form below and a member of our team will be happy to offer you assistance.

jQuery(document).bind(‘gform_post_render’, function(event, formId, currentPage){if(formId == 398) {} } );jQuery(document).bind(‘gform_post_conditional_logic’, function(event, formId, fields, isInit){} ); jQuery(document).ready(function(){jQuery(document).trigger(‘gform_post_render’, [398, 1]) } );

The post Case Study on UC tenants prospective appeared first on Property118.

View Full Article: Case Study on UC tenants prospective

How to do a rent review – Part 2

admin    Uncategorized     agents

1.0  Introduction 

1.1 –  At rent review, the starting point obviously is to read the lease. I say ‘obviously’ because it never ceases to amaze me just how many landlords and tenants I come across having a go at rent review without bothering to read the lease. It’s as if they think that by diving straight in, the rent could be agreed regardless. After all, how hard can it be? The landlord proposes, the tenant counter-proposes, the difference between the respective offers is gradually narrowed by to-ing and fro-ing until a mutually acceptable figure is reached. Whether bartering reflects the provisions of the lease is anyone’s guess!

1.2 –  When bartering isn’t working – to barter the participants have to want to play the same game, or that one or both parties are sufficiently au fait to know that the lease plays an important part, or where surveyors are representing either one or both of the parties, or where a third party is required to fix the rent, the technicalities become the dominant factor.

1.3 –  Negotiation at rent review involves psychology- psychology at rent review is about how to influence decision-making so as to get what you want – but negotiation in isolation (that is, without regard for the technicalities of the lease) is unlikely to succeed when involving the technical stuff is also required.

2.0  Reading a Lease

2.1 –  When reading a lease, it is important to remember that the literal meaning of the words and phrases can differ from how those words and phrases would be interpreted. As I have explained elsewhere on LandlordZone, words are neutral but can attract connotations which can be positive or negative, depending upon the point of view. Interpretation is either from case-law or in the absence of any case-law an objective point of view. A subjective viewpoint might apply if that is what the law would also think. Subjective in isolation could be overly-emotive. But the fact that a different interpretation might apply, also trying to work out what is meant by some word or phrase, is quite possibly what leads to many landlords and tenants to cut to the chase and focus on the rent in isolation.

2.2 –  No matter how convincing an adviser might sound, either they know how to read a lease or they don’t. Often they don’t so if you are none the wiser then what they do know might not be enough. When you know how to read a lease, what you’re looking for is to spot any words or phrases that could materially affect the rent review, which means not only knowing what to look for but also where to find it. To expect everything and anything to do with the rent review to be in the review clause itself is unrealistic. The review clause is likely to mention provisions of the lease and generally those provisions comprise all the words and phrases in the lease as a whole including any related documents.

3.0  Drafting a Lease

3.1 –  Old ways have progressed to a more streamlined less haphazard approach to drafting leases. In the process, what might have comprised only a few pages is nowadays often a lengthy document. One reason for an increase in the number of pages is the inclusion of more detail. The theory is that the more expression and explanation a lease contains, the less likely the need for interpretation. In practice, whether that aim is achieved depends on the complexity of the terms and conditions, and mostly how much is at stake.

3.2 –  In a well-drafted lease, (including any related documents), the opening paragraph(s) will state the name and address of the parties and what they are to be known as in the lease: for example, ABC (“Landlord”) and XYZ (“Tenant”). There will be a ‘definition’ and/or ‘interpretation’ section in which meanings of the terminology (words and phrases) will be defined. The meanings are not necessarily literal but meanings within the context of the particular lease. Whether the ‘definition’ section is comprehensive depends upon the eagle-eyed skill of the lawyers, the parties themselves, and any other advisers (surveyors in particular) involved in the drafting and approval of the documentation. When drafting leases most lawyers use precedents, fair enough by reason of minimising costs and time-saving, except that there is no one size fits all. Problems can arise when precedents are followed slavishly without regard for the nature of the premises and the consequences in practice.

3.3 –  Usually the ‘definition’ section will incorporate matters specific to the actual landlord and actual tenant. The remainder of the lease (including any related documents) devoted to matters of a more general nature where the bulk of the wording and phrasing is interspersed with the words and phrases from the definition section. The generalities include (but not limited to) the operational covenants and conditions. In addition, typically, leases contain schedules for particular aspects, for example: rights reserved, rights excepted, service charge, format for Authorised Guarantee Agreement, and so on.

3.4 –  At or towards the end of the lease are the signature page(s). On engrossment, a lease is drawn up in two identical parts: the lease, which is signed by the landlord, and the counter-part, which is signed by the tenant. On completion, the parts are exchanged so that each party has a copy of the lease signed by the other. The two-parts arrangement is to avoid dispute and mostly that aim is achieved. Occasionally, some content of one part will differ and that can happen because when the draft document is finalised it is common for spaces to be left blank pending completion and one or other of the party’s lawyers have forgotten to fill in the missing information on completion. It can also happen when the parties agreed to alter something in manuscript (handwriting) but one party has not made the alteration. Amongst the mistakes that I have encountered are the duration of the contractual term, review dates, and wording of the user clause.

3.5 –  After completion, whether a mistake can be rectified depends upon whether it was a genuine mistake by the original parties. In the event of dispute, the court will want to investigate what was envisaged by both parties. Normally, a mistake cannot be rectified where the identity of one or both of the original parties to the lease has changed after grant of the lease.

4.0  Dates in Leases

4.1 –  The lease date is simply the date of the document and it is entered, usually in manuscript (handwriting), as distinct from typewritten, onto both parts of the lease on completion of the lease. Unlike buying and selling where contracts are normally exchanged before completion, a period of time between exchange and completion, leasing transactions do not exchange contracts but go straight to completion. The only time a lease would not complete straightaway is when an agreement for lease is entered into. An agreement for lease is when the parties want to be legally bound to a transaction that is subject to condition(s) that will take time to satisfy; for example: a pre-let before the property is built, or a letting subject to obtaining planning permission. The agreement for lease will incorporate the agreed form of lease and once the condition(s) is/are satisfied the lease itself would be completed, the agreement for lease then becoming redundant.

4.2 –  The term commencement date is the date of commencement of the contractual term. The duration of the contractual term would be defined in the lease, so too what is to happen during any statutory continuation, if applicable. (A lease (business tenancy) is inside Landlord and Tenant Act 1954 unless otherwise stated in the lease, also the statutory procedure for contracting-out complied with. A lease will not be outside LTA54 otherwise.) Sometimes the term commencement date will be the same as the lease date, but it can pre-date the lease (document) date: commonly on lease renewal where the renewal contractual term runs from the previous lease expiry or notice end date.

4.3 –  Where the rent review date(s) are not stated in the lease, whether the review date(s) are to be computed from the lease date or the term commencement date depends upon what the lease says.  The review date is the valuation date unless the lease specifies a different date. A different date does not have to be specified in the lease: it could be a date that would be known only after the review procedure is started. Where the review is initiated by notice, it is not unusual for the date of the notice to be the valuation date, as distinct from the review date. Whether the revised rent payable date is necessarily the same as the review date also depends upon what the lease says.

4.4 –  There is no standard lease. Some landlords, some tenants, many lawyers, have their own standard format, and the Law Society has a ‘template’ lease, but regardless of the format, the actual terms and conditions between each landlord and tenant and for the actual premises is a matter of agreement between those particular parties. To save time and costs, lawyers generally use and follow precedents, often slavishly, and frequently with not enough thought whether the practical consequences would suit the rental of the premises, Rent, as I have said, is a product of the lease: one cannot state categorically “this is the rent for the premies” without also stating and defining the terms and conditions of the existing lease or that is to be granted.

4.5 –  Lease content and style is fashionable. Over the years, the trend has been away from a dictatorial rent review approach into a looser procedure. Arguably, the chief reason for the change in attitude stems from 1977 when whether time is of essence for a rent review was considered by the House of Lords, in United Scientific Holdings v Burnley Borough Council.

5.0  A Series of Steps

5.1 –  Rent review procedure may be described as a series of steps, of which some are not necessarily sequential. Whether chronologically or out of order depends upon the parties’ strategy for their respective agenda.

5.2 –  Unless the review date is specified in the lease, the first step is to compute the review date according to the lease. To ascertain the correct date, the starting point is not to assume the lease date or term commencement date, but to read the review clause. Somewhere in the review clause the parameters will usually be stated: for example: the anniversary of the fifth year of the term. Thereafter, read the lease for the definition of ‘term’.

5.3 –  The next step is to initiate or trigger the review. This step includes any time limits. Time limits can be vital or critical in review procedure, because failure to comply can mean the landlord losing the right to review, or the tenant losing the right to object.

5.4 –  Depending upon what lease says, triggering the review can be by notice. Even where no (formal) notice is required, some communication that the review is to be operated will be needed. In my opinion, review communication should be in writing. To communicate triggering a review orally/verbally, possibly with a rent proposal, can lead to misunderstanding and in the event of dispute make it difficult if not impossible to prove what was said precisely. Despite connotations that can attach to words, at least with a communication in writing there is less room for doubt; the communication can also be read at leisure. Where a notice is required, to do so casually can be a mistake. Notices are usually in writing. The wording and phrasing of the notice, whether the notice can be headed ‘without prejudice’ and/or ‘subject to contract’, the mode/method of service, the address for service of the notice, when the notice should be served, whether any counter-notice is required, whether the notice has to specify the rent or contain a proposal, can if the procedure in the lease is not complied with cause problems for either landlord or tenant.

5.5 –  That second step (notice or not) can be a hurdle for people for whom British English is not their first or native language. For the inexperienced and uninitiated, the language of leases can be intimidating. As well as the legalese, reading the ‘small print’ in lengthy documents is not something that pleasures most people. But unless the ‘how to set the review in motion’ step is followed to the letter or the person starting the review is knowledgeable enough to know that any time-limits in the lease can be safely ignored, there is the risk that indifference to the requirements of the lease could result in a lost opportunity.

5.6 –  The third step is to how to determine the rental value. Assuming the review is to market rent – as distinct from some formulaic rent to be calculated arithmetically, in which case the calculation can be communicated for agreement – the basis for market rent is determined by what is known as the ‘hypothetical lease’.

5.7 –  Where a rent review is to market rent, the review clause will incorporate the hypothetical lease.  Hypothetical is a supposition. Suppose the premises were to be let in the (open) market – ‘open’ is superfluous (and stems from a bygone era when markets were not necessarily open to everyone) – what rent would the premises fetch? But as I have said elsewhere on LandlordZone it is not simply a matter of rent in isolation, but what rent on the terms and conditions of the lease that would be granted.

5.8 –  The hypothetical lease contains various matters to be assumed and disregarded and what those matters are will be stated in the review clause. Often the hypothetical lease will replicate the principal terms and conditions of actual lease but not always and it doesn’t have to. In fact, the wording in the hypothetical lease is often used to overcome any limitations on the market rent that the (actual) lease might be imposing. For example, the user clause in the (actual) lease might be restrictive, but in the hypothetical lease unrestricted. The hypothetical lease will also refer to the duration of the term, whether the original term or the unexpired residue or the unexpired residue subject to a specified minimum period. The general rule is that the term is calculated from the review date unless stated otherwise. (In part 3, I shall discuss the hypothetical lease is more detail.)

5.9 –  Although a rent review can be stopped in its tracks at the notice stage by reason of invalid notice and/or time-limit, it is at this step for determining the rental value that negotiations can become complex and protracted. At rent review, the rent is not subjective, not what the actual landlord might want or the actual tenant could afford, but objective as between a hypothetical willing landlord and hypothetical willing tenant, whose meanings are enshrined in case law. Rent is a matter of informed valuation opinion and, depending upon the nature of the premises, there may be different valuation methodologies, of which the most commonly used is probably ‘comparable evidence’. What constitutes ‘comparable’ is more than just comparison with pro-rata rents of other premises, it goes beyond that narrow way of thinking into the wider realms of leases of other premises. Moreover, valuation is both an art and a science. Opinion doesn’t have to be logical. The body of case law concerning the interpretation of matters involving the hypothetical lease is extensive. Explaining the intricacies can be time-consuming, all the more so when an inexperienced landlord or tenant’s expectations for the rental value differ from experienced thinking and informed interpretation.

5.10 –  Most rent reviews are settled by agreement but, where agreement cannot be reached, leases normally contain a procedure for resolving disputes, generally known as ‘referral’ to a third party. The third party is required to be impartial. It is at this step that the wider consequences for the parties, which up until now have taken a back seat, enter the fray.

5.11 –  The third step (determining the rental value) and this referral step do not have to be taken sequentially. Often, the referral step is taken whilst the third step is still continuing. And sometimes, the referral step is taken after the trigger notice step. Whether chronologically or out of order depends upon the parties’ strategy for their respective agenda.

5.12 –  The principal wider consequence is whether one or both of the parties is to be responsible, both initially and ultimately, for the cost of the dispute procedure. Costs consist of the cost (if any) of applying for a third party, the third party’s own costs, and the respective parties’ own costs.  Where referral is to arbitration, never mind what the lease might say about costs, the Arbitration Act 1996 overrides so the arbitrator has overriding jurisdiction. Where referral is to a surveyor acting as an expert, known as an Independent Expert, the parties’ responsibility for costs will depend upon what the actual lease says. Where the lease is silent on the Independent Expert’s costs, the party making the referral would normally be responsible for the appointed Independent Expert’s costs unless otherwise agreed with the other party. Fortunately for landlords and tenants the number of draftspersons that think that an Independent Expert has the same jurisdiction on costs as does an arbitrator is diminishing!

5.13 –  Although many landlords and tenants suggest that ‘reasonable people’ should surely be able to agree a rent review without involving a third party, let alone needing to instruct surveyors to represent the respective parties’ interests. That way of thinking on the face of it makes sense, especially between experienced landlords and unrepresented small tenants, the latter for whom the cost of a surveyor on their side might be promoted by the landlord as a waste of money for the tenant, the tenant thinking the same but for different reasons, the reality of rent review otherwise is different.

5.14 –  There is no such thing as a rental ‘norm’. Different landlords have their own investment policies. Different tenants have their own business plans. In the more confrontational locations, such as city centres, larger towns, and suburbs, and where the landlord is keen to improve rental yield (return on capital) the rent review relationship between landlord and tenant is diametrically-opposed, the landlord wants more, the tenant less. Often, the rent review clause is worded as upward-only: the greater of the market rent and the rent passing. As I have explained elsewhere in LandlordZone, an upward-only review doesn’t mean the rent necessarily has to go up; simply that the rent payable after the market rent is agreed or ascertained would not be less than the rent payable before the review. While there is bound to be disagreement on how much of an increase – ‘review’ doesn’t have to mean “increase” but amongst landlords generally implied – landlords are, unless external events are such, rarely content with no increase, at least not for a long period of time.

5.15 –  Amongst many landlords is an inclination to commission a preliminary report by a surveyor on the market rent. As an approach to review, frankly I think having nothing to show for it is short-sighted and most surveyors regard such instructions as a lucrative money-spinner. With fees charged by surveyors for rent review competitive, often the cost of the report can exceed what a surveyor would charge to handle the review. What the landlord gets is a one-sided opinion of the market rent which might not encompass all the evidence that could emerge if the review were to be initiated. Nothing ventured, nothing gained!

5.16 –  Rent review negotiating psychology depends upon with whom you’re dealing and up against. There are no hard and fast rules. Many surveyors when acting for tenants believe that the landlord should have to justify an increase, but that is a nonsense and unsupported by case law. A rent review is for the benefit of both parties, albeit tenants rarely see it like that. Although involving the dispute procedure might be thought best avoided at all costs, referral is commonly used as a negotiating ploy. Initiating referral does not mean having to go the whole hog. The rent can normally be settled by agreement at any stage of the proceedings before a third party has determined the rent; the costs shared by agreement. Referral as a step to be taken in parallel as distinct from a last resort when all else fails is often capable of achieving better results.

6.0  Recording the Agreement

6.1 –  The final step is recording the agreement. Generally in the form of a Memorandum signed by both parties and sometimes any guarantor(s), rather than endorsement of the lease and counter-part. Where a rent is fixed on referral, the third party’s award or determination serves as evidence of the revised rent but it is generally administratively simpler to complete a Memorandum . A Memorandum also avoids the need to disclose how the review has been arrived at.

6.2 –  My standard draft form of Memorandum has met with the approval of countless lawyers. Not pre-printed, I draft each Memo from scratch, in free-form layout.

6.2.1 –  A plain sheet of paper headed Memorandum of Rent Review. Whether or not the lease uses numbers in parentheses I do, to differentiate between the parties. For example; Pursuant to the Lease dated x (dated is optional, usually I put Pursuant to the Lease x where x is the date in full) between (1) A (A = name of first landlord) whose interest is vested in B (B = name of  current landlord), (“Landlord” or whatever terminology is used in the lease  and (2) C (C=name of first tenant) whose interest is vested in D (D= name of current tenant) (“Tenant”) – ditto – and (3) E (guarantor or surety if appropriate), the Landlord and Tenant (hereby – optional) agree that the rent from and including (date in full) is £ per annum (exclusive of VAT is appropriate). Signed …. (shorter name of landlord above dotted line, with space for signatory to enter name in block capitals and position if a corporate entity; ditto for the tenant.  The date of the Memo is left blank for the landlord to fill in, unless the Memo is to recorded a third party agreement itself dated.

6.3 –  You might think how to word a Memorandum would be obvious, but when you’ve read as many Memos as I have one wonders what the draftsperson is afraid of!  Fear I guess is that because a Memorandum is legally-binding, wording has to be convoluted and/or stray from the lease terminology. For example, where the landlord in the lease is known as ‘Lessor’ and the tenant as ‘Lessee’ there might not be any difference in practice but that doesn’t mean the Memorandum should refer to the parties as ‘Landlord’ and ‘Tenant’.

6.4 –  How a Memorandum is worded can affect the capital value of the landlord’s interest. Generally, tenants are more interested in the rent payable after the review is agreed or ascertained (by a third party) so if the rent payable after the review is agreed were the same as the rent previously passing (payable beforehand) – what is known as ‘nil increase’ – then the chances of the tenant being interested in agreeing the market rent itself are none. But  nil increase does not mean the passing rent is too high – known as ‘premises overrented’ –  it can also mean the passing rent is the same as the market rent or near enough as to not be worthwhile pursuing any increase.  By stating in the Memorandum that the market rent is £x or disguising the fact by referring to the Lease (as one would expect in any event), the rent review is agreed as the market rent pursuant to the lease.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – How to do a rent review – Part 2 | LandlordZONE.

View Full Article: How to do a rent review – Part 2

Buying the freehold: What’s involved?

admin    Uncategorized     agents

The freeholder of my BTL flat is selling the freehold to me. It is going through now but I would like to know what my responsibilities and roles are as well as the advantages and disadvantages. I have emailed my solicitor twice regarding this but no response.

I contacted RLA who directed me to Leasehold Advisory Service. I have a telephone appointment with the Leasehold Advisory service, which is 15 minutes long in September but wonder if anyone here can advise what I actually need to do as a freeholder of two flats in a Victorian building with 999 leases paying service charges and ground rent to a freeholder. The only thing I know about is the insurance for the whole building.

As the new freeholder do I pay service charges to myself? I’ve looked around the Leasehold Advisory Service website but my particular circumstances does not seem to apply as its only two flats.

It’s probably too late now to get another solicitor and he has dealt with all my other properties OK but it’s been nearly a year since it was offered to me!

Any advice?

Regards

Barry

The post Buying the freehold: What’s involved? appeared first on Property118.

View Full Article: Buying the freehold: What’s involved?

Looking at Section 21

admin    Uncategorized     agents

This is the third post in my 2017 Legal Update series.

Section 21, as you will know, is the section in the Housing Act 1988 which sets out the rules for ‘no fault’ eviction for Assured Shorthold Tenancies (ASTs).

Section 21 has been both a blessing and a curse to the private rented sector.

• It’s been a blessing as it allows landlords to recover possession of their property as of right at the end of the fixed term (previously under the Rent Act this was impossible) and therefore arguably is the reason why we have a successful private rented sector today.
• It’s been a curse for landlords as it has always been easy to get things wrong and many landlords have come out of Court angry and confused after the Judge rejected their claim due to a defective s21 notice.
• It has also been a curse for many tenants as some landlords (not a majority but a fair number) use it to intimidate tenants into accepting sub-standard property. I will be talking a bit about this later on in the series when I discuss the anti-retaliatory eviction rules.

But today I want to look at notice periods and the two types of notice.

The two types of section 21 notice

The first type of notice

This is set out in section 21(1) of the Housing Act 1988.

This is the ‘easy’ section 21 notice where you just have to give not less than two months’ notice to your tenant and ensure that the notice period does not expire before the tenancy fixed term does.

For a long time, we thought that this type of notice could only be served DURING the fixed term of a tenancy.

Meaning that if you had a periodic tenancy – you had to use the other notice, the one set out in section 21(4).

The second type of notice

This notice (the section 21(4) notice) is more difficult to draft correctly due to the requirement that you must specify in the notice a date which is “the last day of a period of the tenancy and not earlier than two months after the date the notice was given”.

Which means that, in most cases, the notice period will need to be more (sometimes quite a bit more) than two months – and it is essential that the expiry date is correct.

Many, many landlords have had their claims for possession chucked out because they served their notice during a periodic tenancy and put the wrong date in the notice.

Good news – Spencer v. Taylor

The good news now is that in a case called Spencer v. Taylor, the Court of Appeal have held that for the past 25 years we had all been interpreting section 21 the wrong way!

It does NOT, apparently, say that you can ONLY serve a s21(1) notice during the fixed term. In most cases (said the Court of Appeal Judges) you can ALSO serve it during a periodic tenancy!

So now you can (usually) serve the easier section 21(1) notice and not worry about the ‘last day of a period of the tenancy’ date. There are now only two circumstances where you still need to do this:

1. Where there has never been a fixed term. However, this is rare – almost all tenancies in the private rented sector will have a fixed term at least to start with
2. Where the tenancy agreement provides for a contractual periodic tenancy to follow the fixed term. Note that this is not 100% certain (as there is no case law on the point) but for technical reasons it is probable.

So, if you have a tenancy which provides for a contractual periodic tenancy to follow the fixed term, you still need to worry about s21(4) if you serve your s21 notice during the periodic tenancy.

UNLESS the Deregulation Act rules applies.

More good news – the Deregulation Act 2015 amendment (England only)

This says that if your tenancy started or was renewed on or after 1 October 2015 – section 21(4) is amended to remove the need to give the last day of a period of the tenancy.

So, at the moment you only need to worry about s21(4) for pre-October 2015 tenancies and for Welsh tenancies.

However, it gets better – after 1 October 2018, the new rules will apply to ALL ASTs. So, after that you will never need to worry about s21(4) and the ‘last day of a period of a tenancy’ again. Hooray!

Note though that the this only applies in England – as Wales is developing its own set of different rules for housing matters (mostly not yet in force).

In conclusion

I have gone into this in a bit of detail as I know it is something that has always bothered people. But to sum up:

• For most ASTs – just give a straight two months’ notice (provided it does not end before your fixed term does)
• For all tenancies which started or renewed on or after 1 October 2015 – the same applies – provided they are in England.
• You only need to worry about s21(4) notice periods if either there has never been a fixed term, or your periodic tenancy is a contractual one.

But even for those – s21(4) won’t be a problem after 1 October 2018 as the ‘last day of a period of the tenancy’ wording will be abolished for all ASTs (in England).

Further information:

There is a lot of information about all this on my Landlord Law Blog (do a search for section 21).

My Landlord Law membership site has a lot of guidance on section 21 including a guide which you can follow to check that you have complied with all the rules.

Members can also ask me ‘quick questions’ in the members forum area.

You can find out more about Landlord Law here

Next time I will be looking at the pre-conditions for serving a valid section 21 notice.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

Additional course below:

Landlords – if you want to avoid legal problems, penalties and fines, this online course is just the job Please Click Here

The course will have a special 30% discount for PP118 readers via a coupon due to expire in 3 weeks time.

The post Looking at Section 21 appeared first on Property118.

View Full Article: Looking at Section 21

Young men can no longer afford a bachelor pad…

admin    Uncategorized     agents

The traditional bachelor pad could be a thing of the past for the working and professional young man according to figures just produced by the Halifax Building Society.

What was once considered a “rite of passage” for young men of a certain standing is now being severely curtailed. A growing number of young men are struggling to get on to the property ladder without the help of a partner.

The Halifax’s research found that around 50% of 18 to 35-year-olds are relying on their partner to help them get on to the property ladder. And in the survey men were twice as likely as the women questioned to say that not being able to buy with someone else is a barrier to getting on the property ladder.

Batchelor pads it would seem are definitely on their way out for many young men, with around 18 per cent of men and 9 per cent of women thinking they would need to buy a property jointly or carry on renting.

The rapid rise in house prices over recent years, far out-stripping wage increase and young people’s ability to save the average deposit amount, now set at £32,899, an amount which is well above the average person’s annual salary.

Halifax economist, Martin Ellis, told The Daily Telegraph:

“It’s not difficult to see why so many young people are now waiting for a partner to take their first step onto the property ladder.

“With many people trying to fund day-to-day living while saving for a deposit may not even be able to imagine raising this amount of cash on top of all their regular outgoings, first-time buyers in the UK are still on average £651 a year better off buying their home compared to renting.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Young men can no longer afford a bachelor pad… | LandlordZONE.

View Full Article: Young men can no longer afford a bachelor pad…

Dealing with Deposits

admin    Uncategorized     agents

This is the second post in my 2017 Legal Update series.

Today I am looking at Tenancy Deposits

Tenancy deposits were first introduced in April 2007 and ever since then all landlords have had to:

• Protect their tenants’ deposit within a government authorised scheme within a time limit and
• Serve ‘prescribed information’

Although many deposits have been protected and dealt with perfectly satisfactorily under the rules, the legislation proved to be most unsatisfactory and has had to be amended twice.

Frankly if they had intended to mess it all up, the Parliamentary Draftsmen could not have done a better job!

The most recent changes came with the inappropriately named ‘Deregulation Act 2015’ which also brought in changes to section 21 which I will be explaining later in this series.

This is how it now works:

Protecting the Deposit

When you take a deposit, you need to protect it in a scheme within 30 days of receipt of the money.

There are two possible problems areas here:

• Deposits that are paid a long time before a tenancy starts, and
• Situations where landlords allow tenants to pay deposits by installments.

So far as the early deposits are concerned – the best advice is to just protect them within 30 days.

Some people assume that as the tenancy has not started yet there is no AST to (as it were) hang the need to protect on. However as soon as the tenancy is created you will instantly be out of time. So best to just bite on the bullet and protect.

So far as accepting deposits by installments is concerned this is a VERY bad idea. Each and every installment must be protected within 30 days of payment and many landlords have got into trouble by waiting until all payments are paid. If you must accept installments its best to do this with the rent rather than the deposit.

Serving the Prescribed Information

Prior to the Deregulation Act we had a ridiculous situation (following on from the Superstrike Case) where landlords had to keep serving prescribed information forms whenever the tenancy was renewed, e.g. as a periodic tenancy.

Thankfully the Deregulation Act changes stopped this nonsense. However, you still need to be careful to serve the notice within time.

Remember that it is the information that is prescribed not the form – there is no actual prescribed information form. So, you need to be careful to ensure that all the information is actually provided.

Serving a copy of the certificate and your scheme’s leaflet will satisfy most of the requirements but not all. For example, you also need to tell the tenant the clauses in your tenancy agreement which set out the deductions you are entitled to make from the deposit.

For this reason, it is best to use a properly drafted legal form so nothing gets overlooked – suitable forms are provided by TDS and the DPS and I also have one for my Landlord Law members.

What if it all goes wrong?

The problem about failing to comply with the rules is that you cannot then serve a valid section 21 notice until you are compliant – which includes refunding the money to the tenants.

If you are ever in this situation, I have prepared a Legal Kit which you can read about below, which explains the law and gives step by step guidance.

Tenants are also entitled to bring a claim for up to 3x the deposit sum if you breach the rules. So, it is best to comply so they have no chance to do this.

Further information:

Probably the best source of information is the website for your scheme.  This will have guidance, the scheme terms and conditions and helpful articles.  The schemes also have free telephone advice lines – you can find the number from your scheme website.

The websites are

• TDS
• The DPS
• My Deposits

On my Landlord Law site, I have a lot of help for members on deposit issues, including a ‘compliance checker’ trail you can follow to see if you have complied with the rules, a long article explaining the prescribed information and a prescribed information form you can use.

Members can also ask me ‘quick questions’ in the members forum area.

You can find out more about Landlord Law here.

If you forget the protect the deposit in time, my Deposit Error Repair Kit has step by step guidance to help you comply with the law and serve a valid section 21 notice.

Next time I will start looking at section 21 and the complicated rules that now apply.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

Additional course below:

Landlords – if you want to avoid legal problems, penalties and fines, this online course is just the job Please Click Here

The course will have a special 30% discount for PP118 readers via a coupon due to expire in 3 weeks time.

The post Dealing with Deposits appeared first on Property118.

View Full Article: Dealing with Deposits

Tenants of National Trust properties facing huge rent rises…

admin    Uncategorized     agents

Ground Rents:

The National Trust has told one of its tenants – an 87-year-old man – that his rent payments will go up from £148 to £15,000 per year, according to a recent report in The Times.

The Trust has told hundreds of tenants in its leasehold properties around the country that they are facing ground rent increases approaching 10,000 per cent.

The charitable organisation has around 5,000 homes on its land which it rents to over 10,000 people, most of them currently rented on monthly rent payments, but some leases were sold as long-leaseholds, mostly of 49 years’ nominal duration, and with an affordable ground rent.

However, as the lease lengths diminish and the tenants apply to extend their leases, the trust is saying they must accept an increased charge or pay tens of thousands to “buy up” the higher ground rent.

In his case the 87-year-old leaseholder would have to find £78,000, and around 300 people could find themselves in a similar position.

The issue surfaces as Government ministers have pledged to ban “feudal” leases with quickly escalating ground rents, a practice which is increasingly being used by building companies when they sell new homes, oftentimes to unsuspecting young buyers.

A spokesman for the National Trust told The Times that some long leasehold tenants had not been aware of how “Modern Ground Rents” work and the trust is “working to find a fair solution” with a 50 per cent reduction in “relevant cases”.

“We know that some leaseholders feel they have been misled as to the impact of modem ground rents. If we are satisfied that that has happened then we will consider foregoing modern ground rent altogether,” it added.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tenants of National Trust properties facing huge rent rises… | LandlordZONE.

View Full Article: Tenants of National Trust properties facing huge rent rises…