Test Case: Landlord’s consent with mutual and absolute covenants

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In this case – Duval v 11-13 Randolph Crescent Ltd – reached the Supreme court in May 2020 after a tenant in a block of flats had requested the landlord’s consent for alterations, but disputed by another tenant in the same block, objecting to the landlord giving consent.

Under the terms of all the other leases in the block, alterations similar to this one were prohibited. The wording of the leases was such that the landlord had covenanted to enforce the covenants in all the other tenants’ leases.

However, contrary to this, the landlord went ahead and granted consent for the tenant’s works. Upon hearing of this the other tenant claimed that this was a breach of the landlord’s covenant.

When challenged, the landlord having lost in the lower courts, pursued the matter by appeal to the Supreme Court which dismissed the landlord’s appeal. The Court decided that there was an implied covenant by the landlord not to do anything that would prevent it from enforcing the tenants’ covenants in the other leases. The covenant, the Court reasoned, would be useless if the landlord could modify it willynilly, or vary, or permit breaches as it pleased.

The tenant had planned to remove a substantial part of a load bearing wall in the basement of her flat. She realised that this action would be in breach of a clause in her lease, so she approached her landlord for a licence.

After studying the engineering and architectural reports provided by the tenant the landlord decided to grant that licence. However, this was objected to by the neighbouring tenant above who issued proceedings for a determenation that the landlord did not possess the power to grant the licence.

The neighbour’s argument was that because the landlord had promised (undertaken via the mutual enforceability clause*) to enforce the covenants in the leases, providing the tenant agreed to indemnify the landlord for the legal costs, the landlord must not therefore licence the breach of an absolute covenant**.

The tenant claimed that there was an implied term that the landlord would not “put it out of its power” to enforce the absolute covenant clause of the lease by licencing what would otherwise be a breach of it. The Supreme Court, as had the Court of Appeal before it, agreed.

The lease contained two relevant clauses:

“Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises” – the qualified covenant; and

“Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein….” – the absolute covenant.

The case has wide implications as mutual enforceability covenants are pretty standard clauses in modern leases. The Duval case shows that a landlord cannot grant a licence which allows something which would otherwise be a breach of covenant.

* What is a Mutual Enforceability covenant

It is usually the case that the landlord has the power to ensure that the lease terms are complied with by leaseholders. The leaseholder will then need to ask the landlord to enforce the terms of the lease against another leaseholder, usually where the lease states that a leaseholder can ask the landlord to take action, the leaseholder making the request has to cover the landlord’s legal costs.

In some cases, the lease may allow a leaseholder to take direct action against another leaseholder for breach of the lease, but only if the wording of the lease allows it.

** What is an absolute covenant

It is an absolute prohibition against doing something. A covenant not to assign the lease or carry out alterations are examples of absolute covenants. On the other hand, a qualified covenant is a covenant that requires the landlord’s consent, stating that the landlord’s consent will not be unreasonably withheld.

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Property Market Outlook For 2021

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So what’s in store for property investors in 2021?

In this video, I am joined by property entrepreneur Andrew Roberts as we take you through the threats, risks and opportunities for property investors in 2021.

Please click on the video below.

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Mould with a Covid Twist?

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I have tenants who have both been furloughed. One of the neighbours inquired if there was a leak in my flat as the internal glass door was streaming with condensation (this is an internal door leading to a small hall then another internal door)

I suspected that the tenants had not been heating enough and venting appropriately.

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Property turned out to be a Granny Flat?

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This is a long story I will cut very short. We had an offer accepted on a house we wanted to buy, we knew the people, not overly well, but enough to trust them.

We had a lot of issues from the start of Feb 2020

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Property investors Christmas message from the Palace

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Watch this special message exclusively for property investors this Christmas from Buckingham Palace.

2021 will be full of uncertainty, but this is the new norm.

I share how you can learn to prosper through the uncertainty and make 2021 your best year ever.

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The Property Investors Network, Simon Zutshi’s ‘pin’ group, is to be sold

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Founded by Simon Zutshi in 2003 the “PIN” group runs a series of property investors’ meetings and training events across 50 towns and cities throughout the country. It’s stated aims are to “connect new and experienced property investors”, and enable their sharing of knowledge and experience.

The PIN claims to be the UK’s largest property networking group, operating across the UK since 2003. It has agreed a US $15m buyout by the Singapore-based Genius Group.

Simon Zutshi is to remain CEO of the company following a successful acquisition process, and he has said:

“With property investors network having consolidated its market leading position in the UK over nearly two decades, I look forward to working with Roger Hamilton and the team at Genius Group to leverage this success within the global market to empower property entrepreneurs all over the world.”

The Singapore-based Genius Group claims to have “turned the tide on the coronavirus pandemic” and successfully pivoted their business model to go digital when their usual events could no longer take place.

The Genius Group says it includes a number of educational and entrepreneurial companies across the globe including Entrepreneur Resorts, a group of luxury resorts and lodges, beach clubs and city co-working hubs running entrepreneur events and accelerators, with locations in Singapore, Bali, South Africa and the Czech Republic.

Its programmes, that would normally have been conducted with entrepreneurs face to face, have been redesigned and delivered digitally, and globally for the first time the Genius Group claims. However, it says the majority of its usual locations are now open again and the international team is supporting new education programs at its various locations, while ensuring the safety of both staff and visitors.

Roger James Hamilton, Founder & CEO of Genius Group, says:

“The COVID-19 crisis has resulted in record job losses and bankruptcies. However, we are also seeing many small business owners and investors finding opportunity and growth in the crisis. We share pin’s mission of providing education and resources to business owners and investors at a time when people need it most.”

Following the acquisition, Genius Group and property investors network aims to expand its monthly pin meetings across many of the 20,345 cities in which the Genius Group says it has students.

The company says it will also provide financial literacy and property investing courses to students through Genius Group’s secondary school and university programmes, as well as the GeniusU edtech platform.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The Property Investors Network, Simon Zutshi’s ‘pin’ group, is to be sold | LandlordZONE.

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EXCLUSIVE: Leading lights tell LandlordZONE what 2021 will bring for landlords

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The UK’s 2.5 million private landlords will be forgiven for wondering what 2021 has in store for them.

Even the most optimistic will admit that the previous 12 months are a period of their landlording career they’d rather forget.

LandlordZONE asks some of the sector’s leading lights what they think the next year could offer them. Here are their answers.

The housing benefit expert

Bill Irvine, of Universal Credit Advice

“I don’t think 2021 will get any easier for landlords and letting agents when it comes to tenants relying on Universal Credit and housing benefit – the number of claims has doubled since March and DWP staff are still largely working from home which doesn’t help.

“I expect to be doing more chasing of the DWP to minimise landlords’ losses, particularly on behalf of those who have applied for the alternative payment scheme. Some landlords have lost thousands of pounds while they wait to hear back, and have applied many times without success.

“The ongoing pandemic means tenants continue to get into debt and many of those who hadn’t claimed before are now starting to experience difficulties and will decide to hold onto their money rather than pay rent.”

The commercial property agent

Adam Diamant, MD of Land Commercial

“There’s no demand for offices at the moment and I hope that will come back but as this country has long leases, even if a company wants to move tomorrow it might have to wait for years until the lease expires, meanwhile some premises are getting converted to residential.

“It’s surprising that retail still remains strong but we’ve done a lot of lettings in this sector. This has been helped by the change to use class E which has provided flexibility for properties to be used for a wider range of businesses.

“Looking forward, the current rules around forfeiture are a big problem as there are a lot of people still not paying rent, which needs to change.”

The property licensing tech chief

Joe Webb, chief marketing officer at Kamma Data

“The pandemic has put a huge strain on councils, while also putting standards of accommodation under the spotlight.

“These two factors create a perfect storm for legislation which will mean growth in both the number of licensing schemes and, crucially, enforcement. There are 44 live local authority consultations currently taking place; in a normal year we’d see 20-25 over a full 12 months, so, in essence, we’ve got two full years’ worth of schemes being planned for the start of next year.

“At its worst, licensing is a tax on high standards as those landlords who already look after their properties and tenants pay for inspections and licence costs, while those who don’t, ignore the regulation. Kamma wants to change this in 2021 with a tenant-focused directory making it easy to see who is complying and who isn’t, at the click of a button.”

Two regional landlord leaders

Giles Inman, EMPO business development director

“EMPO will be requesting that local councils come together to establish a universal approach over licensing schemes so we don’t continue to experience confusion around different fees, conditions and inspection expectations across council enforcement areas.

“We will continue to promote the message that it’s not acceptable for councils to threaten landlords with revoking licenses and large fines for not taking responsibility for dealing with tenant rubbish issues, bins on streets, drug dealing, vehicle damage and tenants riding Quad bikes around their rented properties.

“We will also attempt to encourage a conversation with social housing providers where we create an appreciation and understanding that these issues exist in both sectors and that both sectors should come together for an open discussion and to share best practice.”

Ruth Clarke, chairman of the Cornwall Residential Landlords Association:

“The business of being a private landlord can be stressful at the best of times but this year has been particularly trying.

“We’ll continue to produce monthly newsletters and I’ll be available at the end of the phone to listen to landlords’ problems and to try to help. “We’ll hold our bi-monthly meetings online as well as with Cornwall Council officers and MPs to discuss housing generally and the challenges of the PRS in Cornwall, and will respond to consultations and calls for evidence.

“We are urging members to take up any funding available; with the consultation to make EPC requirements more stringent over the coming years, there’s the usual problem for Cornwall with few local companies registered with TrustMark.

“We will encourage members to lobby their local MP to try to have more trade bodies included as acceptable and to encourage their preferred contractor to consider joining TrustMark.”

The property redress scheme boss

Sean Hooker, Head of Redress at the PRS

“At the turn of year a mere 12 months ago, experts stuck their necks on the line and made various predictions on what the change of decade was to bring.

“And then all the educated guesses when out the window with Covid19 and its aftermath.

I am therefore caution about sticking my neck on the line and forecasting anything more than a continuation of uncertainty and a Government in a reactive mode in terms of policy and direction.

That said, a few things will need to be dealt with as a matter of priority.

Read Sean’s blog on LandlordZone to find out more.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: Leading lights tell LandlordZONE what 2021 will bring for landlords | LandlordZONE.

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Test Case – The power of Restrictive Covenants

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You may own a property outright (freehold is as good as outright as you can get in England) but that doesn’t mean you can do with it exactly as you choose – not if there are any restrictive covenants attached to it.

Restrictive covenants are binding conditions that are written into a property’s deeds or sale contract as you will see in the Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd case below.

They are set by a seller to determine what a new owner can or cannot do with the land or buildings in question, under particular circumstances. They can cover a wide range of issues, but the most common examples include preventing certain actions such as:

• the making of alterations to a property – for example, extending or converting a house into multi-occupied (HMO)
• building or erecting substantial structures on the land
• operating trades or businesses on the land
• the parking of commercial vehicles, caravans, boats, trailers.
• the keeping of chickens or other livestock
• the neglect of gardens etc.

Covenants are often designed to uphold certain standards or amenities for all residents. Developers and property management companies often add restrictive covenants to prevent owners from undertaking work or other practices which would change the uniformity or otherwise have a negative impact on a neighbourhood.

Covenants may also be applied to protect value, minimise damage and retain a degree of control by the seller.

A recent case, Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd (6 November 2020) came before the Supreme Court for a judgement by Lord Burrows and with whom Lord Kerr, Lord Lloyd-Jones, Lord Kitchin and Lord Hamblen agreed.

This is the first case in which the highest court in the land (whether the House of Lords or Supreme Court) has been required to decide an appeal on section 84 of the Law of Property Act 1925. That section confers on the Upper Tribunal a power, in specified circumstances, to discharge or modify restrictive covenants affecting land.

The party in the dispute entitled to the benefit of a restrictive covenant, preventing the development of an area of open land, was the Alexander Devine Children’s Cancer Trust. The party seeking a discharge or modification of the restrictive covenant under section 84 of the 1925 Act was Housing Solutions Ltd which is a property company concerned with the provision of affordable housing.

Housing Solutions Ltd the developer owned the land which was subject to the restrictive covenant.

The covenant was in favour of the adjoining children’s hospice owned by the Trust, that stipulated that the land could only be used as a car park. The covenant was to ensure that the hospice remained private and was not overlooked for the sake of the children.

However, in full knowledge of the covenant and of its breach, the developer nevertheless went ahead and built 13 affordable homes. It then applied to modify the covenant under section 84 of the Law of Property Act 1925 to permit in retrospect the new development on the covenanted land.

Although the affordable housing development was deemed to be in the public’s interest, and the developer had obtained planning permission for the affordable housing, the Supreme Court held that all this did not outweigh the hospice’s contractual rights.

The court refused the application to modify the covenant – the Supreme Court reasoned that a developer should not be entitled to rely on its own unlawful conduct as a justification for the modification of a covenant.

This case demonstrates the narrowness of the ‘public interest’ test. Lord Burrows in his judgement did not place any greater weight on the fact that planning permission had been granted. The ‘public interest’ and the waste of so many dwellings was “overpowered” by the fact that the houses need not have been erected, and the contractual rights of the respondent.

This result, and the likely demolition of the affordable homes, puts out a wake-up call to anyone who thinks that covenants may be antiquated and of no account in today’s dealings. The case confirms the continuing relevance of contract law restrictions on the development of land, to be ignored by property developers, and any subsequent purchasers at their peril.

Alexander Devine Children’s Cancer Trust (Respondent) v Housing Solutions Ltd (Appellant)

You Tube Summary by Lord Burrows https://youtu.be/sjo3BlKtX8I

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Test Case – The power of Restrictive Covenants | LandlordZONE.

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Covid disputes: 13,132 rental deposits led to problems, reveals housing minister

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Latest figures from the government show that only 0.3% of all tenancies in England and Wales led to a rental deposit dispute between them and either their landlord or letting agent during the worst of the Covid pandemic months.

During the six months up until September some 13,132 private rental sector tenancies led a dispute among the 4,174,988 deposits lodged with the three approved schemes – TDS, DPS and MyDeposits.

The figure have been released by housing minister Christopher Pincher in answer to a parliamentary questions by Labour MP Apsana Begum.

Insurance vs custodial

Pincher’s reply revealed not only the small number of tenancies that end up in dispute, but also how a majority of tenancy deposits – 52% – are protected through an insurance scheme rather than kept as cash in the bank via custodial scheme, to use the industry jargon.

But who is complaining about whom and are landlords in the dock? Research by MyDeposits for LandlordZONE shows that the vast majority of disputes arise from complaints about letting agents by a factor of three to one.

MyDeposits says it dealt with just shy of 5,000 disputes during the same period covered by the housing ministry’s data, of which 71% were about letting agents, with 21% concerning private landlords and the rest corporate landlords.

MyDeposits chief Eddie Hooker (pictured) says his company’s figures aren’t surprising because the agents “works for the landlord not the tenant” so disputes are, arguably, more likely to occur.

His scheme’s figures include closed and live cases which could have resulted in either a settlement, being declined, gone to arbitration dispute resolution or court.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Covid disputes: 13,132 rental deposits led to problems, reveals housing minister | LandlordZONE.

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Percentage of tenants in rent arrears dropped to 11.8% in November

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The percentage of tenants in rent arrears decreased during October and November, according to research from PayProp. Payment data from also shows that the typical percentage of rent in arrears fell consistently from August to November.

 However, with further COVID-19 restrictions across large parts of the country set to remain in place for the foreseeable future

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