What Landlords Can’t Do

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A Landlord Guide:

Residential Conveyancing Partner Amanda Sutcliffe of Bray & Bray Solicitors explains a landlord’s responsibilities to their tenants.

In a survey by Homelet, 90% of landlords stated that they were “very happy” (55%) or “quite happy” (35%) with their current tenants, but over 50% also stated that they’ve had problems with at least one tenant in the past.

Landlords’ relationships with tenants can make the difference between a seamless rental experience and a complete nightmare.  I’ve known landlords to sell an investment property after dealing with tenants that have put them off renting to anyone ever again.

The best way to be prepared for both good and bad tenants is to know your rights as a landlord and how to enforce them.  It’s also worthwhile letting your tenants know what rights you have as their landlord, so that they won’t be surprised when you serve them with a notice to evict them, or to inspect or sell the property.

Many things that a landlord cannot do are obvious.  The list below has been compiled to help identify the things that you may not know you can’t do when renting a property to a tenant. The aim is to start the landlord/ tenant relationship off well and avoid any potential disputes in the future.

Things landlords cannot do:

Landlords can’t discriminate

This might seem obvious, but you can’t turn down a tenant on the basis of personal attributes such as age, gender, race etc.  You also can’t charge them more than you would charge other tenants because of any personal attribute e.g. if you think they’re more likely to damage the property based on their age.

Similarly, if someone who is disabled wishes to move into your rental property, you can’t refuse to make reasonable changes to either the tenancy agreement or the property itself, which would allow them to live there comfortably.

Landlords can’t just let themselves into the property

Even if you know that the tenants won’t be at home, you can’t just go into the property without having given the tenants notice and without an agreed time for you to be there.  Similarly, you can’t just arrive when they are home and demand to come inside without giving the tenants any notice.

Landlords can’t make it difficult for a tenant to stay there

If for any reason, you would prefer a tenant to move out after they have been living in the property, you can’t just try to force them to move out.  This includes tactics such as not carrying out repairs that need doing to the property, or making a tenant feel uncomfortable in the property.

Landlords can’t use a security deposit to pay for improvements to the property

This also applies to using a security deposit to pay for any new equipment within the property, or paying for fixes to wear and tear during the tenancy period.  A deposit can only be used at the end of the tenancy and even then, it can only be used to make up for unpaid rent or to pay for repairs caused by damages or cleaning required, due to anything other than reasonable wear and tear to the property and its furnishings.

Security deposits must also be paid back to a tenant within 10 days following agreement of the amount of deposit that will be returned to them.

Landlords can’t raise rent whenever they like

The regularity and notice period for rent reviews should be specified in a tenancy agreement.  If you’ve had a bad month and need money quickly, you can’t just take or demand more money from a tenant.  If you are raising a tenant’s rent, you will need to justify the amount it’s being raised by, in line with market rates and other properties in the area.

Landlords can’t charge excessive late payment fees

Late payment fees can be a great way of encouraging tenants to pay on time every month.  However, if the amount of the late payment fee is excessive, tenants have the right to take you to court to dispute it.  Once this has happened, a judge is likely to side with a tenant, unless your late payment fee reflects true and accurate damages incurred, due to late payments.

Landlords can’t evict a tenant because they’re selling the property

If you’re intending to sell the property that’s being rented out, as long as a tenant has a fixed term tenancy agreement, you can’t just tell them to leave so that you can sell up.  Tenants also have the right to refuse viewings of the property whilst it is for sale, if the viewings are not convenient to them.

Whilst tenants have the right to stay in the property until their tenancy is legally terminated – at the end of their tenancy agreement – landlords do also have the option of coming to a mutually beneficial arrangement to terminate the tenancy agreement early (usually by paying the tenant a severance fee) in order to sell.

Landlords cannot leave longer than 12 months between gas safety checks being carried out at the rented property

This might not seem important, but landlords can actually go to prison for failing to have gas safety checks carried out annually.  Other repercussions of not doing this include fines, invalid insurance and court action from tenants, who can sue for civil damages.

For more information about the legalities surrounding what you can and can’t do as a landlord, speak to a commercial property solicitor who specialises in landlord and tenant matters.  It always pays to check with an expert before acting on a decision you’re unsure about.

See also: Documents needed when letting

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Houses in Multiple Occupation – a legal bombshell in the making

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This is the 13th post in my 2017 Legal Update series.

It’s been my opinion for some time that HMOs are an enforcement bonanza waiting to happen. If I were head of a Local Authority Enforcement Team in any large city I would be rubbing my hands with glee. Bearing in mind the issues discussed in this post.

The trouble is that many HMO landlords have no idea that they are HMO landlords. Viz:

HMO Landlord: I’m not an HMO landlord you know.

LA Officer: Do you rent to three or more tenants who are not family members?

HMO Landlord: Er, yes, I rent out to four friends. But they all signed the same tenancy agreement, we don’t use one of those individual HMO agreements. And they all eat together and live as a family.

LA Officer: Signing the same tenancy agreement does not stop the tenancy being an HMO neither does the fact that your tenants share their meals. If they are not related then they are not treated as being part of the same ‘household’. If there are three or more tenants and two or more households the property is an HMO. See s254 onwards of the Housing Act 2004.

HMO Landlord: Oh. Right. But even if we are technically an HMO – that doesn’t mean anything if we don’t need a license, does it?

LA Officer: Yes, it does. There are the HMO Management Regulations – where’s your notice under section 3? That’s a breach for a start. And who says you don’t need a license? Our borough introduced an additional licensing scheme two years ago.

HMO Landlord: I didn’t know that. How I am supposed to know that?

LA Officer: That’s your problem, mate. It’s your duty to find out.

Etc, etc.

The reason why this sort of thing does not happen more often is because Local Authority Enforcement Depts have been cut to the bone by Austerity and haven’t been able to get out there enforcing. However, with the new income from penalty charges and rent repayment orders, that’s probably going to change.

So, let’s take a step back and consider the law on HMOs. First:

What is an HMO?

There are actually four definitions of HMOs:

1 Where there are three or more tenants in two or more households who share living accommodation.

This is the ‘normal’ HMO type. The one we all think about when we think of HMOs. You can read more about the definition here.

2 Some flat conversions

This is where a building has been converted to flats and the building does not comply with the Building Regulations 1991, and ⅓ or more of the flats are rented on leases of less than 21 years.

The type of HMO is the reason why some freeholders may not give you consent sublet your long lease flat. Read more about this here.

3 The Council Tax HMO definition.

This is set out in Regulation 2 of the Council Tax (Liability for Owners) Regulations 1992. I am not going to look at it in detail but you can find out about it here.

People are often at cross purposes when speaking about Council Tax and HMOs if they don’t realise that both are governed by different definitions.

4 Planning.

Again, I am not going to go into this but you can read more about this here.

Important things to know about HMOs

HMO law and practice is a big topic and I don’t have space to do much here other than hit the highlights. However here are some important points:

Licensing

At the moment, mandatory licensing is only required if an HMO has five or more tenants in two or more households in a property which has three or more storeys.

However, mandatory licensing is not the whole picture. Some Local Authorities have introduced additional licensing schemes where other, smaller HMO properties must be licensed. There are also some areas which have introduced selective licensing where all rented properties need a license whether they are an HMO or not.

If you don’t get a license where a license is required:

• The Local Authority can issue a penalty charge fine of up to £30,000
• You can be prosecuted and fined in the Magistrates Court
• The Local Authority (if tenants are on benefit) or your tenants (if they pay rent themselves) can apply for a Rent Repayment Order
• You cannot serve a valid section 21 notice

So, it’s a good idea to make sure you have a license if you need one.

HMO Management Regulations

This is the other important thing you need to know – even if your HMO doesn’t need a license you still need to comply with these regs. They are basically health and safety regs and you are probably complying with them mostly anyway just by good practice as a landlord.

The one you probably aren’t complying with is the one mentioned in the dialogue above. This says:

3. The manager must ensure that—

(a ) his name, address and any telephone contact number are made available to each household in the HMO; and

(b) such details are clearly displayed in a prominent position in the HMO.

Probably the best way to deal with this is have several A4 pages printed with your details, get them laminated and hang them in the kitchen. Do several copies so you can replace it if it’s lost. It’s important that you do this – failure will be a breach of the regs and potentially a penalty of up to £30,000 (although in practice it would be a lot less than this).

Note that you also need to get an electrical check done every 5 years and get a certificate to prove this – as the Local Authority may ask to see it.

The future

Its best to get your HMO properties up to speed as there are plans afoot to extend the scope of licensing – so that in a couple of years or less all two storey or even all one storey properties may need a license.

It’s not known exactly when this will happen, but it is coming – so watch out.

Further information:

I did a series on HMOs on my Landlord Law Blog in 2014 with David Smith which you will find here.

The 2017 Conference included an update talk on HMOs which is well worth watching. Even if you believe you are not an HMO landlord.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16 September.

There is also quite a lot of information on my Landlord Law site plus members can always ask me questions in the members forum.

You can find out more about Landlord Law here

The next post will be on the changes in Wales.

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

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Bridging Rates at All Time Low

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The cost of bridging loans have been reducing over the last 5 years. Rates now start from 0.49% pm and therefore they are no longer seen as a lender of last resort.

Also their use has changed from just the traditional chain breaking bridging loan. Bridging loans are mainly used to provide quick, short-term capital to fund property transactions.

A recent survey shows that the use of bridging loans are changing.

• 27% were used for refurbishments. This is where the client wants to purchase an uninhabitable property. Lenders will not usually lend on a property that doesn’t have a kitchen, bathroom, central heating etc. Investors use a short term loan and refurbish/renovate the property before selling it or putting it onto a buy-to-let mortgage at the enhanced value

• 25% were for mortgage delays and chain breaking. A bridging loan enables a seller of one property to purchase another property before the sale of their existing property. Also where a purchaser is in danger of losing the house of their dreams because of a delay with their mortgage provider.

• 15% were for other purposes. These include where a property needs a lease extension. Where a property has a short lease, it is unlikely that a client would be able to obtain a mortgage. A bridging loan could be used to extend the lease, before arranging a term mortgage. Others include where an investor needs to secure a property quickly to obtain an advantageous price, or developer needs to purchase a property or land prior to getting planning permission.

• 13% were re-bridges. These occur when there is currently a bridging loan in place that is about to expire or move on to punitive rates of interest.

• 11% were for business purposes. There are a variety of business uses for bridging finance. These range from having to pay an urgent tax bill to expanding the business.

• 9% were for auction finance. Here completion needs to take place within 28 days and traditional financing is not normally available within this time frame.

The above demonstrates the wide and varied use of bridging. Just as wide and varied are the number of bridging lenders out in the market and the criteria that they work to as well as the costs. Some of the factors that determine this are:

• Regulated or non-regulated transaction. Is it a personal or business transaction?

• Closed bridge (guaranteed exit route) or open bridge (less firm exit)

• Loan to Value

• Type, condition and location of the property

• Rolled up interest. This is where the interest doesn’t have to be paid each month and is added to the loan

• Client’s credit history

• Duration of the loan

With all of the variables and associated costs it is always prudent to seek the advice of a FCA regulated broker, before embarking on any type of bridging loan.

If you need assistance with any type of property or commercial finance please do not hesitate to ask for my help using the form below.

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Free Webinar on commercial property

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A CPD accredited briefing for property lawyers, commercial agents and local authorities on regaining possession of commercial property.

Wednesday 27^th September 12:30-1:30

The Sheriffs Office is a leader in the field of regaining possession of commercial property, including the removal of squatters and trespassers. We provide nationwide coverage and have worked on many high-profile cases. We have specialist teams of Enforcement Agents who are highly skilled and trained in specialist methods of entry.

All you will need to do on the day to take part is to log on to the online webinar via the link (this will be email to you). Don’t worry if you can’t make the date, if you sign up you will receive a recording of the webinar and presentation slides the next day so that you may watch it at you leisure.

 Click here to sign up: https://attendee.gotowebinar.com/register/8633207356712617475

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Mayor of Newham claims half the landlords there evade tax

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Last month a couple of unsubstantiated statistics were published in the papers.  They both came from the Labour mayor of Newham, Sir Robin Wales, who has an axe to grind.  He is fighting the government over the continuance of the mandatory universal licensing scheme that was introduced in 2013 and will end in December.  He wants to extend it – at the cost to landlords of £400 a property, instead of the current £150.

Sir Robin joined the Labour Party when he was 15.  He was knighted in the 2000 Birthday Honours for services to local government.

In a letter to Philip Hammond, Sir Robin wrote: “It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”

Newham Recorder Click Here

This begs the question – what is his figure based on?  The only organisation that could know how many landlords may have failed to declare rental profits is HMRC.  And HMRC rejected the figure.  “HMRC said it did not recognise the figure of 13,000 landlords put to it by the council.” according to the Newham Recorder, and the Independent.

Independent Click Here

So where did his “understanding” of up to 13,000 come from?  The local paper gives the exact number of landlords: 26,254.  Was it based on anything more than “I bet half of those landlords are not paying tax you know”?

Note that he wrote “up to 13,000”.  So that if even one landlord was not declaring all of his or her rental profit, then Sir Robin’s claim would be correct.

If he had an accurate figure he would have used it.  The fact that he did not casts doubt on the “up to 13,000”.

The story was also published by the Guardian.  In the latter, Patrick Collinson even claimed that the miscreants had been identified.  His article started with “Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.”

The Guardian Click Here

He did not acknowledge that HMRC did not recognise the figure.  He merely wrote that “HMRC would not confirm the figure”.  This could be taken to mean that the figure was right but that HMRC refused to admit it, rather than the figure being wrong and rejected by HMRC.

He continued “The council estimated that unpaid tax by landlords is costing the public purse nearly £200m in London – and far more nationally.”

How did he get from 13,000 landlords in Newham to nearly £200 million across London?  Again, the local paper comes to our aid.  It said “The letter also highlighted data carried out by Institute for Public Policy Research (IPPR) in 2014 which estimates that the amount of undeclared tax in London totals more than £183 million.”

The source of the £183 million is described in an article from March 2014 by InsideHousing, with the title “Rogue landlords in London avoiding £183m in tax”

It said “Following a pioneering mandatory register of private landlords, Newham Council has built up a database of 20,000 landlords in the borough.

Using these figures it estimates landlords are avoiding £183.1 million in tax across the capital. The data, verified by the Institute for Public Policy Research, suggests £508 million in rent is paid to landlords cash-in-hand in London.”

Inside Housing Click Here

You have to admire the accuracy of the made-up figure for undeclared rent to the last £8 million, and the accuracy of the tax on this rent to one decimal place.  It makes the figures seem genuine, rather than invented.  Unfortunately there is no indication of where the £508 million for rent paid in cash was plucked from.

But the tax at 36% of rents seems high.  If the assumed tax rate had been 40%, that would only have allowed £50 million of costs (10%), including mortgage interest.  If the tax rate was 45%, the allowable costs would have been only about £100 million (20%).

But the IPPR was presumably happy with it, showing comradely solidarity with the mayor.  It is a Labour Party think tank.

“Setting up IPPR was a conscious attempt by Labour leaders and Labour sympathisers to promote their party’s modernisation beyond what was discussed by party-internal policy-making bodies e.g. during the Policy Review process.”

Sourcewatch Click Here

The Institute for Public Policy Research has been criticised by the Charity Commission, which said it “had “exposed itself to the perception that it supported the development of Labour Party policy”.

Telegraph Click Herel

What does it matter if the figures of 13,000 and £200 million are wrong if it means that Newham can extend mandatory licensing – at more than double the price?

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Stamp Duty for Armed Forces serving overseas

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I currently own a rental property in the NE that I’m looking to sell. I am a serving member of the UK armed forces and posted overseas.

The new property that I’m looking to buy would, in all likelihood, be rented (initially) until I’m posted back to the UK.

What stamp duty would the HMRC expect me to pay ?

Although I intend to live in the property (at some point when my military career allows) I will be selling one buy-to-let and buying another.

Can I convince them that I should pay standard rate ?

Many thanks

Jack

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The complex law surrounding property condition and disrepair

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This is the 12th post in my 2017 Legal Update series.

One of the chief complaints made by tenants against landlords is the poor condition of their rented property and the difficulties they face in getting anything done about it.

And one of the chief problems for both landlords and tenants is the multiplicity of laws relating to this area – which makes this whole topic difficult and confusing. Although basically the laws fall into two types:

• Those based on the civil law, and
• Those based on the criminal law

The difference between the two is that

• For civil law breaches a tenant can sue for an injunction to get the work done and claim compensation.
• Criminal law breaches are not normally enforced by tenants (although this is possible for some claims for example claims under the Environmental Protection Act 1990). In practice, these laws are mostly enforced by local authorities (NOT as a rule the Police) ultimately by bringing a prosecution in the Magistrates Courts. Although as we saw in this post there are a number of other things they can do now too.

The Civil Law and Disrepair

This is basically the statutory repairing obligations set out in section 11 of the Landlord & Tenant Act 1985 plus whatever you promise to do in your tenancy agreement.

S11 basically says that landlords are responsible for keeping in repair

• The structure and exterior of the property (including drains, gutters and external pipes) and
• The installations for the supply of gas, electricity, water and sanitation and
• The installations for space and water heating

Note that the rules are basically about things going wrong or being ‘broken’. A tenant has no right to request a court to order that something be improved. Even if that would be the better solution.

So, landlords can only be ordered to repair leaky roofs, not replace them. And to repair broken windows rather than replace them with double glazing.

The procedure for bringing these claims, for a tenant, is not easy and they have to first comply with the Pre-Action Protocol for Disrepair claims. However, it is something which many solicitor’s firms are offering ‘no win no fee’ agreements to tenants for, although this is mainly for tenants of social housing, not those in the private sector (yet).

Criminal law and the HHSRS

The starting point here is generally when the Council sends out an Environmental Health Officer (EHO) to do a Housing Health and Safety Rating System Inspection of properties (HHSRS) – usually when tenants contact them to complain.

As part of this exercise the property is assessed against 29 hazards – for example excess cold, damp and mould, fire, and excess heat. If this inspection throws up a ‘category one’ hazard then the Local Authority have a duty to do something about it.

What they will generally do is contact the landlord and ask them to sort the issues out, then serve an improvement notice if this is not done.

The next stage, if the work was still not done, used to be prosecution in the Magistrates Court. However, as we saw in my earlier post in this series, Local Authorities now have additional powers to serve Civil Penalty notices and also to apply for Rent Repayment Orders – if landlords fail to comply with Improvement Notices. When Banning Orders come in, this will be another option.

So, you need to make sure you are compliant.

This is a legal update series, I am a housing lawyer and don’t have the practical knowledge to be able to tell you, for example, how to configure your boiler or comply with Building regs. However, the HHSRS is a health and safety standard. Therefore, so long as you comply with all health and safety requirements, use properly qualified contractors, and try actively to ensure that your properties are safe, you should be OK.

To be able to prove this if challenged by the authorities you need to keep records – for example:

• Receipts for work done and any certifications
• Receipts for furniture, fixtures and fittings. New furniture sold by a reputable company for example must comply with the furniture regs or it cannot be sold.
• Records of any work such as PAT certificates that may be obtained in respect of your appliances
• Photographs showing your property in good condition – for example as part of your inventory.

Most landlords are proud of their properties and take care to keep them in good condition. If this is you, you should have little to fear.

Further information:

We did not have any talks at our 2017 Conference on these topics. However, recordings of Peter Marcus’ talk on Disrepair and Giles Peaker’s talk on the HHSRS from our 2016 Conference in Manchester, are both available as ‘bonus’ items in our 2017 Conference Course.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16 September.

Peter also did a day’s workshop for us on Landlords Repairing Obligations last November which was filmed and this is now an online course and available as part of our Summer Training courses. It carries 4 hours CPD.

In this talk Peter looks mainly at landlords contractual repairing obligations (in s11 onwards in the Landlord & Tenant Act 1985) and the court processes you need to follow both to bring and defend a disrepair claim. However, he also considers landlords obligations under their tenancy agreements, the Defective Premises Act 1972, private and statutory nuisance claims and the Gas Regulations.

You can find out more about this online course here plus you will find a short video here.

There is also a certain amount of information on my Landlord Law site plus members can always ask me questions in the members forum.

You can find out more about Landlord Law here

The next post will be on HMOs.

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

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Lawyer warns of Section 21 confusion

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Eviction:

Section 21, the possession procedure in England, which has been a lifeline for landlords with bad tenants since the introduction of the Housing Act 1988, has undergone changes recently which have the potential to stymie an eviction attempt, if the rules are not followed to the letter.

No landlord wants to evict a good rent paying tenant who is looking after the property, but sometimes a limit is reached: rent arrears start to build, damage is occurring which shouldn’t be, or the tenant is causing neighbour problems.

In this situation a landlord owes it to himself and others to commence the eviction process, which, even in the best case scenario, can take around 3 to 6 months.

Danielle Hughes from Kirwans has written that landlords are issuing incorrect Section 21 notices, resulting in thousands of pounds being wasted on aborted possession claims and extensive delays in recovering a property.

In any case, a high proportion of Section 21 claims are thrown out by judges because of technical errors such as incorrectly served or defective notices, no proof of service, deposit protection errors, no property licence where it’s required, the list goes on.

But under the new rules, a new notice (the Form 6A Notice) applies (tenancies commencing post 1st October 2015) and additional tenancy requirements mean that the chances of error are far greater.

Landlords and agents will now struggle to get a successful eviction if they don’t have a rigorous system in place when they set-up new tenancies, making sure that all the documentary requirements have been met.

The old Section 21 notices – Notice Fixed-Term s21(1)(b) and Periodic s21(4)(a) – should still be used for AST tenancy agreements commencing before 1^st October 2015.

The older notices do not require the tenancy to meet the new requirements, so unless you are sure you can fully meet the new requirements, don’t use the new notices (Form 6A) for older tenancies.

Pre – 1 October 2015 Tenancies – Section 21 Requirements

With old tenancies this is what you need:

• A valid Section 21 Notice
• Proof of Service
• A valid Tenancy Agreement
• Deposit protection details and proof of service of (s213) notice
• Details of any licence requirements – for HMOs or in Selective Licensing areas

Post – 1 October 2015 Tenancies – Section 21 Requirements

• A valid Section 21 Notice
• Proof of Service
• A valid Tenancy Agreement
• Deposit protection details and proof of service of (s213) notice
• Details of any licence requirements – for HMOs or in Selective Licensing areas
• Energy Performance Certificate (EPC) served on tenant
• Gas Safety Certificate served on tenant
• The current version (at time of tenancy commencement) of the government’s “How to Rent Guide”

From 1^st October 2018, the new Form 6A will apply to all tenancies, new and old, so beware.

When applying to the court for accelerated possession (Court form N5b) or the standard route (Court Form N5 – where a hearing and a money claim are involved) landlords and agents should supply 3 copies of all the above documents to the court.

A further complication which could potentially stymie a claim involving new (Post 1^st October 2015) tenancies, is the new retaliatory eviction legislation. This applies where a tenant has made a report of the need for repairs and maintenance in a property. If the landlord does not respond quickly (within 14 days), and/or the local authority issues an appropriate repair notice, then a valid Section 21 notice cannot be served for 6 months after.

Also, whereas the old section 21 notices were of unlimited duration, the new notices cannot be served within the first 4 months on an AST tenancy, and they now have a limited life of 6 months – you must start a claim within the six months, or start again.

As the current court fee (July 2017) is set at £355, it is not in anyone’s interest to keep paying fees and delay the claim for 2 months while a new notice is served.

The whole process is manageable by landlords and agents so long as they can pay strict attention to the rules and process all documentation correctly – do this and all your possession claims will be successful. You can of course request that the judge to issue an order in damages against the tenant, but whether he or she can pay is another matter?

See also: New Section 21 Rules: www.landlordzone.co.uk/content/new-section-21-rules

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Should we initiate collective enfranchisement or is it too late?

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A few months back the freeholder of our building wrote to all the leaseholders (via his solicitor) giving us ‘Section 5B’ Notice of his intention to sell the Freehold via auction with a deadline for the majority of qualifying leaseholders to make him an offer.

So the first thing we leaseholders did was make sure there was enough qualifying interest to purchase the freehold among us and conduct a full survey to get an idea of the value for the freehold.

We then responded with the full names and signatures of all the qualifying leaseholders of our acceptance of offer under the Landlord & Tenant Act 1987 Part 1 and requesting receipt of this notice and advising them of the solicitor who would be acting on our behalf for this matter.

They responded to this requesting an offer for which we duly replied.

Since them they have responded advising that they wish to continue to auction. Is this the normal process? We have made an offer and would negotiate, but this seems to have stopped us in our tracks. If we have first right of refusal then why would he want to proceed to auction? If someone does make an unrealistic offer at auction how can we contest this?

We are desperately seeking some additional guidance as to our rights and how to proceed. Should we initiate collective enfranchisement, or is it too late?

Many thanks

Mark

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Leaseholder Landlords and the Law

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This is the 11th post in my 2017 Legal Update series.

In most landlord & tenant situations where the landlord is a freeholder it is comparatively simple. You have a landlord. And a tenant.

However, if the landlord is himself a tenant under a long lease, it gets a bit more complicated. You will also have:

• The freeholder, and often
• The freeholder’s management company

How does this work in practice?

The answer is, not always as anticipated. If you rent a property under a long lease you have to be aware that you cannot always deal with it as if you were the freeholder. You are bound by the terms of your lease.

For example, your lease may prohibit subletting the property to tenants!

So, before you buy a flat as an investment property you need to check carefully the terms of the lease.

There has been a case, for example where the lease had a clause saying

“To use the flat as a private dwelling for the lessee and his family and for no other purpose”

Which, the First Tier Tribunal held, meant it could not be rented out to tenants.

Another lease had the wording:

“Not to use the premises hereby demised or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.”

Which had a similar effect.  So be careful about this.

Then, even if you are using it as your home, you may find, like Ms Nemcova did in another case at the First Tier Tribunal, that you can’t let it out for weekends on Airbnb, because of the wording of the clause in the lease.

The problem about all of these is that, ultimately, if you carry on doing the prohibited thing, your landlord can forfeit your lease. Not something you will want to happen.

A question of repairs

Then there are issues about who is responsible for repair work. And can a landlord be held liable by their tenant for things which are actually the responsibility of the freeholder?

This issue came to a head in the recent case of Edwards v. Kumarasamy.

The Court of Appeal in that case basically found that the landlord was responsible for repairs to the exterior of the property even if the landlord had not been given notice and the repair in question was down to the freeholder.

To the relief of landlords and agents everywhere this decision was reversed by the Supreme Court who more or less re-instated the rule that landlords have to have been given notice of repairs before they are liable if they don’t do them.

However, that is not to say that problems will not arise in the future. So, make sure you keep yourself informed.

Further information:

Our 2017 Conference Course featured a talk by housing barrister Robert Brown specifically on leaseholder landlords and he discussed in greater detail the issues I have outlined above.

If you sign up for the course you will also get his comprehensive notes which include information about other issues he did not have time to discuss – in particular on service charges.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16th September.

There is also a certain amount of information on my Landlord Law site plus members can always ask me questions in the members forum.

You can find out more about Landlord Law here

On Monday, I will be looking at landlords repairing obligations.

To see all the articles in my series please Click Here

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

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