What if Section 24 is applied to recently incorporated landlords?

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I see this question posted on Facebook every few weeks, so I have decided to write an article on the topic, which I can share a link to whenever it pops up again.

It wouldn’t matter if Section 24 was applied to LTD Companies

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From Scam Artists to Family Feuds

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In this week’s episode of Channel 5’s ‘Nightmare Tenants Slum Landlords’ (Monday 17th June), Landlord Action tackles two very different eviction cases, one involving an illegal sub-let by a ‘professional’ scam artist, the other which sees a favour turn into a family feud.

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Landlord prosecuted for illegal eviction

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Eviction:

A Mostyn, Flintshire landlord Mr Gruffydd Edwards has achieved
the dubious distinction of becoming the first landlord in Flintshire to be
prosecuted for unlawfully evicting a tenant.

Flintshire County Council’s Environmental Health Officers brought
the prosecution against the landlord for illegally evicting his tenant.

Edwards pleaded guilty to the offence which took place at
one of his properties in Llys Y Wennol, Mertyn Downing Lane, Mostyn and was
fined £1,040 at North East Wales Magistrates Court.

In this case it would seem the landlord was lucky to receive
a relatively low fine as fines have been much higher in other similar cases and
the offence carries a potential 2 year prison sentence.

The Protection from Eviction Act 1977 makes it a criminal
offence to harass or unlawfully evict a residential tenant, so Edwards receives
a criminal record for his pains. Penalties for a breach can be quite severe.

Assured shorthold tenancies (ASTs) are covered by the 1977
Act which protects tenants from harassment and forced eviction. Specific legal procedures
must be followed before a tenant can be evicted illegal which involves a court
order and where necessary a court bailiff eviction.

An illegal eviction can take many forms including removal by
physical force or threat of force, denying re-entry, changing locks to deny
entry, or denying access to a part of the property to which the tenant previously
had access or needs access such as toilets etc.

Flintshire County Council’s Cabinet Member for Planning and
Public Protection, Councillor Chris Bithell, said:

“I am pleased that the Council has been successful in
pursuing the prosecution of this landlord for an unlawful eviction. It is most
important that tenants’ rights and interests are protected and that landlords
respect them.

“This prosecution sends a clear message that Flintshire
County Council will protect residents against unlawful private landlords. It
reflects Flintshire’s commitment to ensuring homes in the private rented sector
are properly managed.�

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlord prosecuted for illegal eviction | LandlordZONE.

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Can we Save You Money on Landlord Insurance?

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Property118 could save you money on your landlord insurance. Whether a single property, portfolio, HMO, landlord contents, sub-let, flood risk, renovation, unoccupied property or even your own residential home, we have access to some of the best rates in the UK through The Home Insurer and have tasked them to save you money on your existing or new policies.

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From Scam Artists to Family Feuds – ‘Nightmare Tenants Slum Landlords’ continues

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In this week’s episode of Channel 5’s ‘Nightmare Tenants
Slum Landlords’, Landlord Action tackles two very different eviction cases, one
involving an illegal sub-let by a ‘professional’ scam artist, the other which
sees a favour turn into a family feud.

In the first case, young landlord Han Yip discovers his West
London flat is being illegally sublet to three unsuspecting students. They have
been paying thousands of pounds to live in an exclusive part of London, but
their rent is being pocketed by the man who posed as the legitimate tenant.
Flaunting his seemingly ‘flashy’ life on Instagram and showing off about his
‘property business empire’, he is in fact a scam artist, who has spent time in
a US prison on fraud charges.

Calling on the help of Paul Shamplina, founder of Landlord Action,
Han Yip is determined to expose the rogue tenant and reclaim his debts. Paul comments:
“Han Yip was very unlucky. He had done everything correctly, from using a
professional letting agent to carrying out thorough referencing. Unfortunately,
this particular fraudster had changed the spelling of his name among other tricks
to slip through referencing.  Illegal sub-letting
is becoming something of an epidemic in London and more needs to be done to
prevent cases like these.�

In the second case, Landlord Action is called upon to help
end an unusual family disagreement.  Three
years ago, Sade Ademoye took pity on her cousin Kirk, who was in dire straits
after his divorce. Agreeing to temporarily let a room to him in her elderly
mother’s home, Sade also gave him a cheap rate. But after her mother passed
away, he refused to leave. With this family feud turning acrimonious, Sade also
turns to help from Paul and his team to evict her cousin.

“This tenant took advantage of his cousin’s late Mother
and took over the property, even though the agreement was only to rent a
room.  He then refused to leave. These stories,
and others throughout the series, demonstrate the diversity of cases that we have
to deal with at Landlord Action and the reasons landlords look to gain
possession.  It is rarely non-fault but
often landlords feel powerless and turn to eviction as an absolute last resort.�

Watch Nightmare Tenants Slum Landlords on Channel 5, Mondays
at 9pm

About Landlord Action

Landlord Action is a UK based organisation helping landlords,
letting agents and other property professionals. As a champion for landlords,
it has campaigned extensively and was instrumental in getting the law changed
to make squatting a criminal offence.

It was founded in 1999 as the first ever fixed-fee tenant eviction
specialist, they revolutionised this area of legal practice. They have now
acted in more than 35,000 problem tenant cases and are considered the authority
in this field.

Landlord Action run a free advice line to help landlords and
property professionals understand their rights: 0333 321 9415

www.LandlordAction.co.uk

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – From Scam Artists to Family Feuds – ‘Nightmare Tenants Slum Landlords’ continues | LandlordZONE.

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Tenants can reclaim excess on their deposits…

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Tenant Fees Act:

The ban on letting fees and excess tenancy charges in
England came into force nearly two weeks ago. This is a new set of regulations
affecting landlords and letting agents which the Government estimated will cost
(in aggregate) landlords up to £83m and letting agents £157m.

The new rules apply to new or renewed tenancy agreements signed
on or after 1 June 2019.

Similar legislation was imposed in Scotland a couple of
years ago, and are on the cards for Wales from this September. A ban will not
be brought in Northern Ireland until there is a sitting assembly able to pass
the relevant legislation.

So, in some case tenants will be entitled to a partial deposit
refund should they renew a tenancy that commenced before the 1^st of
June, and where a deposit was taken which exceeded the 5 week rule. As it has
been commonplace for landlords and agents to request at least 6 week deposits and
sometimes more, there could be a considerable number of tenants entitled to
refunds on renewal in the future.

The new law prevents landlords or their agents requesting
most types of fees associated with letting a property in the private rented
sector in England, fees that were previously taken as a matter of course, not
so much by private landlords but most certainly by agents.

Unless payments appear in a statutory list (Schedule 1 of the Act) of permitted payments no fees can now be taken and penalties for transgressions are quite sever. A breach of the legislation will usually be a civil breach with a financial penalty of up to £5,000, so it’s very important that landlords and agents understand the rules on this. Tenant Fees Act

If a further breach should be committed within five years of
the imposition of a financial penalty or a conviction for a previous breach,
this will be a criminal offence. Upon conviction, the penalty is an unlimited
fine and a banning order offence under the Housing and Planning Act 2016.

As with some other transgressions however, enforcement
authorities can now impose a financial penalty of up to £30,000 as an
alternative to prosecution. In such as case the local authority will have
discretion over whether to prosecute or impose a financial penalty. Where a
financial penalty is imposed it will not amount to a criminal conviction.

The ban includes fees for viewings, credit checks,
references, inventories and the drawing up of a tenancy agreement, all of which
have traditionally been charged and in some extreme cases have led to upfront
costs for tenants of up to £800.

Other than rent, in practice the only fees that landlords or
letting agents can charge tenants are refundable security deposits capped at no
more than one weeks’ rent (annual rent divided by 52), providing the total
annual rent is less than £50,000, or six weeks’ rent if over this. However,
there are some other costs that can be charged – see the links above.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tenants can reclaim excess on their deposits… | LandlordZONE.

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New form 6A – Date format confusion?

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Last week I had to serve notice on a tenant and I noticed the Form 6A had changed.

The new Form 6a must be used from 1 June 2019: Click Here to download the new form.

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10% report same problem 10 times in social homes!

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Two years on from the Grenfell Tower fire, Shelter is warning the government must listen to the third of families with children in social housing who feel less safe in their homes and take urgent action to prevent further tragedies.

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St Helens really is a fantastic place for investors right now

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Six of our clients recently purchased new build 2 & 3 bed houses at Newton Road, St Helens, with prices starting from only £117,500.

Rental demand for quality, new build properties is so high in St Helens that professional tenants were lining up prior to completion. 

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Privity of Contract – Authorised Guarantee Agreement

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Commercial Lease:

It is an established rule of English law that a person can only enforce a contract if he is a party to it or a lawful assignee of the benefit of the contract.

In the context of a business tenancy, the “privity of contract” doctrine means the first (original) tenant can assign his interest in the tenancy (presupposing the lease permits assignment), but not his relationship with the landlord.

Before the Landlord and Tenant (Covenants) Act 1995, the first tenant remained liable for the rent, etc throughout the term of the tenancy, regardless of assignment. An assignee default at any time meant the original tenant could suddenly be presented with a demand for rent at any time.

Also, privity of contract did not then include any right for the original tenant to take over the remainder of the tenancy. How far down along the line the landlord could pursue an original tenant was brought home to a friend, a beneficiary of a will where the deceased had been the original tenant.

After 1 January 1996 when the 1995 Act came into operation, the change in the law introduced what is known as an Authorised Guarantee Agreement, or “AGA� for short. Now, and assuming completion of an AGA, the first tenant on assignment only remains liable for the duration of the first assignee’s interest in the tenancy. When that first assignee assigns, the first tenant bows out and the first assignee becomes liable for performance of the second assignee’s interest, and so on.

Along with the right for the outgoing tenant to take over the remainder of the tenancy should its incumbent assignee default, the Act also introduced a formality into what had been largely dependent upon case law whereby a landlord can specify in the lease the criteria that a proposed assignee has to satisfy to avoid any claim the landlord is being unreasonable in refusing consent to the assignment.

Any joy that landlords may have jumped for dissipated when it was realised that draconian criteria could have a deprecating effect at rent review. Consequently, the criteria have been softened and case-law has added to the tort measures of Landlord and Tenant Act 1988 by providing an indicative time limit on how long may be allowed before it could be said the landlord is unreasonably withholding or delaying consent.

Unlike a new letting in the market where the landlord can refuse offers without having to give reasons, a tenant wishing to assign is presenting the landlord with a substitute tenant whose financial or investment covenant status the landlord may have little or no choice but to accept. Even so, landlords are not obliged to ‘rubber stamp’ a tenant’s application to assign.

There is no reason why detailed enquiries may not be made and actually it is prudent to do so. Not only for the landlord’s benefit, but also for the outgoing tenant for whom the added protection of the landlord’s carefulness might prevent the outgoing tenant’s performance as guarantor from ever being called upon.

To the landlord, what matters is not whether the assignee could afford the rent out of the business, whether or not the business at the premises is also being disposed of, but whether the tenant could afford to pay even if the business failed.

Although few tenants are of independent means, business tenancy law assumes all tenants to be so; generally, rent and compliance with other terms and conditions of the tenancy is nothing to do with how the tenant chooses to use the premises.

Amongst larger companies, there is a preference for either underletting or surrender if possible. Assignment is to be avoided because of the risk of privity bounce-back through assignee default. Underletting enables the tenant to keep tabs but has its own problems from procuring a reliable tenant to one that does not mind, should the tenant or lease require, the underlease being contracted out of the Landlord and Tenant Act 1954.

The value of an AGA to the landlord depends upon whether the outgoing previous tenant can be traced if need be. But what an AGA does not have any control over is whether the outgoing tenant would have any money or assets for the landlord to call upon for the AGA to be honoured.

Where the outgoing tenant is a weak covenant or shrewd, the success in whether better for the landlord to ask for a deposit in exchange for scrapping the AGA depends upon how canny the outgoing tenant.

Where a premium for the lease is being paid, or the leasehold business as a going concern at the premises is to be sold, in my experience, few tenants seem too concerned as to the long-term risk of assignee default.

The trend for tenancy term 10 years even with a tenant break clause at the 5th year is nevertheless a long period of time in which anything could happen. On the face of it, outgoing tenants that are individuals or partnerships may not be able to do much about minimising the liability but outgoing tenants that are limited companies with no guarantor may be in a stronger position to dump the liability.

As for pro-active management to capitalise on any opportunity to enhance the value of the reversion, landlords should not unwittingly limit the potential in the AGA cushion by varying the terms of the tenancy for an assignee, because that could limit the outgoing tenant’s guarantor of the assignee’s performance to the date of the variation.

To be on the safe side, it may be better to vary terms of the tenancy before the AGA is entered into, provided any variation would not fall foul of any unreasonable criteria in the lease, or invoke the wrath of the Landlord and Tenant 1988. Treading carefully at every stage is the name of the game. There are no easy answers, it all depends on the circumstances.

Michael Lever
The Rent Review Specialist
Established 1975

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Privity of Contract – Authorised Guarantee Agreement | LandlordZONE.

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