The Localism Act 2011 has introduced changes to the tenancy deposit procedure that all Landlords need to be aware of in respect of taking deposits from their tenants.

Under the old procedure, Landlords had a period of 14 days to protect a tenant’s deposit via an approved Tenancy Deposit Scheme and then provide the tenant with prescribed information as to where their deposit was being protected, how any disputes as to the return of the deposit would be resolved etc. If the Landlord failed to do either of these things, the tenant had the right to apply to the Court, requiring that the Landlord repay to them both the deposit and a penalty equal to three times the amount of the deposit.

However, the Landlord could avoid financial penalties by registering the deposit and then providing the tenant with the prescribed information at any time before a Court Hearing; or if the tenant made the application  after the tenancy had ended.

This all changed on 6 April 2012.

The new procedure is as follows:

1. Landlords now have a strict 30 days from taking the tenant’s deposit to both register it and provide the tenant with the prescribed information.
2. If either of the above have not been completed within the 30 days, the tenant can apply to the Court for the return of the deposit and a financial penalty for the Landlord. The Landlord cannot escape liability by registering the deposit or providing the prescribed information after the expiry of this period.
3. Tenants may now bring a claim as above even where the tenancy has ended.
4. The financial penalty is no longer fixed at three times the value of the deposit. It is at a Judge’s discretion to award between one and three times the value of the deposit. This is in addition to a requirement for the Landlord to repay the deposit to the tenant.
5. Landlords cannot serve a Section 21 Notice Requiring Possession if they have not complied with 1. above, even if they register the deposit out of time. This can only be facilitated if the Landlord repays all of the deposit to the tenant; if the tenant allows the Landlord to keep some of the deposit in respect of damage / unpaid rent; or the tenant has completed a claim for compensation for the Landlord’s failure to register the deposit or provide information.

A 30 day grace period was allowed until 6 May 2012, permitting Landlords one final opportunity to register their tenants’ deposits without further penalty. Now this has expired, any Assured Shorthold Tenancy in force as at 6 April 2012 is subject to the new rules – they apply to tenancies where deposits were taken prior to 6 April 2012.

All Landlords should ensure that they comply with the requirements in relation to tenancy deposits – there is now no defence for non-compliance.

If you are concerned that you have not complied with the tenancy deposit requirements, or are unsure as to your obligations in respect of taking deposits from new tenants, please contact the Emsleys Housing Law Team who will be happy to assist you.

One of the main reasons why a business can fail is that it cannot pay its bills. A business which does not collect payment from its customers, which then struggles to pay its suppliers will very quickly find itself out of business. With bank lending stagnant and in difficult trading conditions it is more important than ever that businesses have credit control procedures in place and that you take effective action to recover debt.

If you supply goods and/or services and do not require advanced or immediate payment you are giving your customer credit and you are taking the risk that you will not be paid. In each case a business is well advised to ask itself:

1. Do you know your customer before you extend them even a penny of credit? Are you dealing with a consumer or another business and do you know the difference? Do you have a record of your customer’s name, address, telephone and fax number, insolvency history and a clear idea of how much credit you are prepared to extend them?

2. Do you think you can get a deposit, money on account or a personal guarantee from a director when dealing with a limited company?

3. Do you have well prepared terms and conditions of business and are they incorporated into every contract?

4. After you send your invoice to your customer do you diarise to chase immediately upon payment becoming due (for example, within 30 days of the date of the invoice)? Do you follow up a polite chasing letter with a polite phone call? Do you follow this with a firm demand or a Letter Before Claim?

5. Do you know that in business to business contracts (as opposed to business to consumer contracts) under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest on the debt at the rate of 8% per annum above the base rate and you can also claim compensation on each debt as follows:

   Debts up to £999.99 – £40

   Debts from £1,000 up to £9,999.99 – £70

   Debts from £10,000 and above – £100

6. Do you know your options if the debt remains unpaid? Are you comfortable commencing court proceedings yourself or do you have a solicitor who you can trust who is only a phone call or email away?

If you do not have the right answer to any of these questions, as part of Emsleys’ Free Business Health Check we are happy to talk to you about your credit control procedures. Please do not hesitate to contact Robert Bates on 0113 232 1030 or email robert.bates@emsleys.co.uk.

From everyone at Emsleys we hope you enjoy the Jubilee celebrations. God Save the King.

What may surprise some people is that even when you make a will you may not be able to leave your Estate entirely as you wish and it is important to take early professional advice from a solicitor.

Sadly life does not always work out as we would hope and in unfortunate circumstances you can imagine a person wishing to disinherit a child, their spouse, former spouse or some other dependant. For over a hundred years the law has been prepared to step in. The current legislation is the Inheritance (Provision for Family and Dependants) Act 1975 which allows the court to intervene upon an application where a will and/or the law of intestacy fails to make reasonable financial provision for the applicant.

Now just because you are, say, a child who has been left out of a parent’s will does not mean the court will intervene. You only have a short timeframe in which to make an application and in each case the court will ask itself whether there is reasonable financial provision and if not whether and how to exercise its powers. The courts will carry out a balancing act, weighing (amongst other things) the financial resources and needs of the applicant, with those of other applicants/beneficiaries against the size of the Estate. Every case is decided on its facts and the facts in each case are always different.

The recent case of Ilott v Mitson and others [2011] EWCA Civ 346 has gained some media attention. Briefly the facts were that Mrs Ilott was estranged from her mother when she eloped and married someone her mother thought unsuitable. Various attempts were made at reconciliation without success. Her mother died leaving her Estate, worth in the region of £486,000, to various animal and bird charities to which she had little interest in or connection to in her lifetime. Her mother wrote a letter of wishes which contained inaccuracies and was generally unfairly critical. Mrs Ilott’s financial position was not good, with her having 5 children, a low income (mainly benefits), no savings or pension and with few future employment prospects.

If you were the Judge hearing the case what would you do? Would it be just to intervene to overturn the will of the parent to benefit the child – Yes or No?

Whatever your answer you may be right.

The first instance Judge who heard the case considered the law and applied it to the facts and said “yes” when he awarded Mrs Ilott £50,000 from the Estate. The appeal Judge who then heard the case considered the law and applied it to the facts and said “no” when she found that there should be no payment to Mrs Ilott from the Estate. When the case reached the Court of Appeal the original decision to make an award to Mrs Ilott was upheld. However in reaching its decision the Court of Appeal said that on the facts there was room for a legitimate difference of opinion. It is a value judgment and two different judges could apply the law to the same facts, reach two different decisions and both would be right (so to speak). The point made by the Court of Appeal was simply that an appeal Judge should not interfere with the decision of a first instance Judge unless the decision was plainly wrong.

The lesson from this case is not that there is no point in making a will. The opposite is true. If Mrs Ilott’s mother had not made her will out of anger, if she had considered a realistic gift, if she had included a proper letter of wishes, then the original Judge’s decision may have been very different.

It has never been more important to make a will and take professional advice from a solicitor when doing so. If you do not have a will or you need to update your existing will speak to one of Emsleys Wills and Probate team on 0113 201 4900, or email the team direct if you would like more information on making a will or complete our online will quotation form for a confidential expert advice.

A break clause is a provision in lease which enables either the landlord or the tenant (or both) to end the lease early.  It may arise on one or more specified dates or be exercisable during any time during the term (often after a specified period of time has elapsed) on a “rolling” basis.

It sounds simple enough but in practice a tenant wishing to exercise a break clause which is subject to pre-conditions may find it anything but straightforward.

Landlords in today’s market and with the potential of facing an extended period of loss of rent and vacant premises will examine carefully the provisions of the break clause and seek to use the tenant’s failure to comply fully with any pre-conditions as a way of preventing the tenant from ending the lease early.  It is therefore not surprising that with so much at stake, this has become a fertile source of litigation between the parties to a lease.

Notice Requirements

Sometimes a break clause will specify the precise form which a break notice must take and may impose specific requirements as to the method of service.  If the break clause does not contain express provisions dealing with the service charge, the lease should be checked carefully to establish precisely how notice must be served under the general notice provisions.

Tenants ignore the precise requirements relating to service of the notice at their peril.  In Mannai Investment Co Limited -v- Eagle Star Life Assurance Co Limited (1997) AC749, Lord Hoffman stated that:

“if the [                   ] notice clause had said that the notice had to be on blue paper it would have been no good serving it on pink paper . . .”

Great care must also be taken by the tenant to ensure that the correct amount of notice is given as time is always of the essence in respect of time limits in a break clause (United Scientific -v- Burnley Corporation [1978] AC904) regardless as to whether or not this is expressly stated.

Pre-Conditions

Typical pre-conditions attached to a break clause include:-

1. The tenant must have paid all of the rents (or payments) due under the lease:A condition that the tenant must have paid all rents due may be problematical where the break date does not fall on a quarter date when rent is payable quarterly in advance as the whole of each quarter’s rent is due on the relevant quarter date.  In order to comply with such a pre-condition the tenant would have to pay the whole of the rent on the quarter date immediately preceding the break date such that the whole of the rent due up to the quarter date following the break date has been paid.Where the condition is not limited to the principle rent, it will include an obligation to pay any service charge, buildings insurance premium and other payments due under the lease.  In these cases extreme care must be taken to ensure that all payments are made in full and on time failing which the landlord may defeat the tenant’s right to break.
2. The tenant must have complied with all of its covenants under the leaseAn absolute condition such as this will prevent a tenant from exercising a break clause if there is a subsisting breach of covenant or condition at the relevant time no matter how trivial the breach.  No well advised tenant would accept such a pre-condition as no matter how well a tenant believes that they have complied with their lease there is always likely to be an element of breach which the tenant may not be aware of and unless it can be established from the landlord in advance what breaches need to remedied it may not be possible to comply with such a pre-condition.
3. The tenant must give vacant possessionSuch a pre-condition requires the tenant to remove all of their fixtures and fittings, belongings and rubbish and to secure the departure in time of any subtenants or other occupiers.  It may also require removal of any alterations made and the reinstatement of the premises so that they are returned to the landlord in the condition required by the lease.  The code for leasing business premises in England and Wales 2007 (Lease Code 2007) recommends that:“the only pre-conditions to tenants exercising break clauses should be that they are up to date with any rent, give up occupation and leave behind no continuing subleases”

Tips for Tenants

A break clause is an important agreed commercial provision of a lease.  The tenant having agreed a break with the landlord at the heads of terms stage should not be prevented by breaches of covenant or other conditions attached to the break clause.

Tenants should:-

1. take expert legal advice before agreeing the heads of terms with the landlord’s agent and insist that the exercise of the break clause not be subject to the pre-conditions;
2. instruct a specialist to take specialist legal advice on the negotiation of the terms of the lease;
3. if the tenant wishes to exercise the break clause the tenant must not leave this to the last minute to ensure that there is plenty of time to consider the precise requirements of the break clause and comply fully with its requirements;
4. the tenant should check carefully and note any deadlines for service of notices as well as the break date itself on completion of the lease.

Given what is at stake for tenants, taking early expert legal advice could save a lot of money and secure the immediate future of your business.

Eminent Housing Lawyer Jan Luba QC -  who surely needs no introduction in this blog – has kindly agreed to speak at the Yorkshire Housing Law Practitioner Association’s meeting in Leeds next month: details can be seen in the flier below.

YHLPA Flier for 17 May 2012

There’s no need to book (though it does promise to be a “hot ticket” in the Housing Law world)  - you can turn up and pay on the evening.

However, it’s pretty important if you’re about to carry out work on a  shared wall or structure – whether at home or the workplace, and you’d ignore it at your peril.

Following it can save you time, money, and extensive damage to neighbourly relations – which can prove harder to repair than the wall you’re knocking down.

A ‘party wall’ is a structure which separates one person’s property from another. The wall can either sit on the centre of a boundary line; or the wall can be entirely on one person’s land but be situated tightly up against a neighbour’s boundary line. A party wall can include a free standing wall; or a wall of a building, for example if a wall of your house touches the boundary line of your neighbour’s garden.

The Party Wall Act (the Act) applies when certain works are planned as follows:

a)      Works to an existing wall or structure;

b)      Building a new structure across a boundary line; or

c)       Excavations (e.g. digging new foundations for a new building) within a certain distance from neighbouring property.

Obviously, not all works concerning party walls are governed by the Act, for example if you plan to drill into a party wall for the purpose of putting up shelving. However, the following are included:

• Substantially cutting into the wall
• Raising the height of the wall or increasing its thickness
• Demolishing and / or rebuilding the wall
• Underpinning the entire thickness of the wall
• Protecting the wall with flashing

If you plan to carry out any of these works, your neighbour who shares it is entitled to two months’ written notice as to your plans. This notice must contain certain information required by the Act and it is important that this is correct.

If your neighbour does not respond to you or disagrees with your plans, the Act provides for a means of resolving the dispute through the appointment of surveyors who will determine what work should be carried out, how and who will pay for it. Generally, the surveyors’ decision is legally binding.

Even if your neighbour agrees to your planned works, they can still insist that you put safeguards in place, such as:

• Ensuring you protect their property at your cost
• Ensuring you cause no unnecessary nuisance
• That you compensate your neighbour for any damage you cause

It is important that you comply with the very specific requirements of the Act. Failure to do so could result in your neighbour applying to the Court for an Injunction, which could require you to pay them compensation and / or stop whatever work you have carried out and restore the party wall to its original state. This could be particularly costly, depending on what work you have already carried out.

The Emsleys Property Litigation Team are experienced in dealing with all manner of party wall queries and disputes. If you are in any doubt as to your obligations if you are planning to work on a party wall; or your rights if a neighbour has started working on a party wall without consulting you or has deviated from what you agreed, please contact a member of the team on 0113 260 3115.

As a brief recap,  Introductory and Starter Tenancies might be used by Registered Providers so as to assess a tenant’s behaviour during a probationary period before deciding whether to grant them a fully Secure or Assured Tenancy.

During the probationary period, the tenancy may be brought to an end by serving a Statutory Notice Requiring Possession on mandatory grounds, subject to a right of review of that decision by the Landlord themselves.

In two such cases the procedure was challenged and the Court of Appeal has today released it’s  judgment in the jointly heard cases of Corby BC v Scott  and  West Kent Housing Assocation v Haycraft.

The Judgement can be found here.

http://www.bailii.org/ew/cases/EWCA/Civ/2012/276.html

Corby BC v Scott  

In the Corbycase, the Defendant was also granted an introductory tenancy, this time by a Local Authority.  She fell into arrears, (which fluctuated) and caused noise nuisance. The Judge at trial was persuaded that her drink problem, and an assault against her were sufficiently “highly exceptional circumstances” to permit the Judge to refuse to order possession. The Judge said:

1. ‘The circumstances … are exceptional because of the gravity of the assault and that is my principal reason for finding these circumstances to be exceptional. They are also exceptional because the arrears had in fact been paid. I have taken into account, although I do not regard it as an exceptional circumstance, that [Ms Scott] has had an opportunity to consider her position while in custody … [and] that she has a loving mother and grandmother who have supported her …’.

The Court of Appeal did not endorse the Trial Judge’s view, with Lord Neuberger stating that the Judge in proportionality cases

“(i) should be rigorous in ensuring that only relevant matters are taken into account on the proportionality issue, and (ii) should not let understandable sympathy for a particular tenant have the effect of lowering the threshold identified by Lord Hope in Powell [2011] 2 AC 186, paras 33 and 35.”

West Kent Housing Assocation v Haycraft

H was granted a starter tenancy in May 2009 by West Kent Housing Association (WK). WK  received a number of complaints regarding anti-social behaviour concerning H. Following a review, WK informed H that they would seek to end the Starter Tenancy at the end of the probationary period. H utilised WK’s appeal procedure, arguing the legitimacy of the complaints and that it was for a Court to decide their truth.

H’s appeal was unsuccessful, with the WK panel deciding that it was satisfied the alleged incidents had taken place and it was appropriate to end H’s tenancy. A Section 21 Notice was served, with possession proceedings commenced in June 2010.

The County Court made an Order for possession and H appealed on the grounds that it was disproportionate for the Court to make the Order under Article 8 of the European Convention on Human Rights. The appeal was dismissed by the Court of Appeal.

The Court of Appeal found that the allegations of anti-social behaviour had been properly investigated byWest Kentduring its review and that WK had come to its conclusions in a well reasoned manner.

The Court of Appeal also found that H had not put forward a strong enough argument to warrant a full hearing on the issue of proportionality and that the County Court Judge had been correct to dismiss this argument.

These cases demonstrates the importance for Registered Providers to have robust  and well documented review and investigation procedures

They also confirm that the Courts should not be too quick to find the Very Highly Exceptional Circumstances discussed in the Pinnock case.  The Courts must strike the balance between one tenant’s human rights and the need to protect innocent residents who are the victims of any anti-social behaviour.

If you would like any advice in relation to your tenancy review procedures, please contact John Murray or Simon Thirtle on 0113 260 3115.

There are many reasons why you should make a will, and if you already have one why it should be updated.  It is a document which sets out your wishes following your death and it is wrong to think that it is only necessary if your estate is substantial.

What happens if  you die without a will?

If you do not have a valid will you will be known as dying “intestate” and your estate will be frozen until appropriate documents have been obtained to authorise your relatives to deal with your estate.  Your estate will be divided in accordance with the rules of intestacy which are set out in the Administration of Estates Act 1925.

Don’t assume your spouse or partner will automatically inherit your assets…

You should not assume that your spouse or civil partner will automatically inherit all your assets.  As from 1 February 2009, under the rules of intestacy if you have children, your spouse or civil partner is only absolutely entitled to the first £250,000.00, the statutory legacy, and a life interest in half the remainder.  If there are no children the entitlement increases to £450,000.00.  It the estate is worth more than the statutory legacy the position is more complex.

What happens if you are married with children and die intestate?

If you die intestate, are married with children and your estate is worth more than £250,000.00, your spouse would, as stated above, receive £250,000.00 and a life interest in half the remainder.  On the death of the spouse or civil partner this would pass directly to the children.  The children would receive the remainder of the estate when they reach the age of 18, however if any of your children predecease you then their share would be distributed amongst their own children (your grandchildren).

What happens if you are married without children and die intestate?

If you die intestate and are married without children then your spouse or civil partner is entitled to receive a statutory legacy of £450,000.00 plus half of the remainder of your estate.  The other half would be distributed amongst other members of the deceased’s family in accordance with a strict order of preference.  This order is as follows:   parents, brothers and sisters or their children, half brothers and sisters or their children, grandparents, uncles or aunts or their children, half uncles and aunts or their children.  Only if there are none of these will the surviving spouse or civil partner receive everything.

You will see therefore that it is wise to have a will to ensure that your estate will be distributed in accordance with your wishes.  If you are a married couple it is necessary for you to have a will each.

What happens if you are not married and die intestate?

If you are unmarried and living with a long term partner – unless you have a will your partner will not be entitled to anything from your estate unless you have a will to ensure that they do. There is no such thing as a “common law spouse”.  If you have children between you then the children would share in the deceased’s estate.  If you do not have children between you then the deceased’s estate would be shared amongst the surviving relatives in the order as detailed above. The intestacy rules do not allow step children to inherit – only natural (including illegitimate) and adopted children.

Speak to one of Emsleys Wills and Probate team on 0113 201 4900, or email the team direct if you would like more information on making a will or complete our online will quotation form for a confidential expert advice.

By way of a brief re-cap, and as you all know only too well by now – in Manchester CC –v- Pinnock,  it was established  that the County Court could review whether a public authority’s decision to seek possession of a home on an otherwise mandatory ground was “proportionate” in light of Article 8 of the European Convention on Human Rights.

In Pinnock, the Supreme Court made it clear that the issue of proportionality was one for the tenant to raise and there was no requirement on the public authority to give positive arguments on proportionality in its possession claim, (although it might be helpful in some cases).

At a recent Housing Court User Group meeting at Leeds County Court meeting, the District Judge presiding over the meeting said that in his court, where a tenant is not legally represented, he would expect a public authority (Council or Housing Association)  to mention Pinnock in its arguments. If the public authority is represented by a Solicitor or a Barrister, the Judge said he would absolutely expect Pinnock to be mentioned – even if just to briefly explain why the Pinnock principles do not apply.

County Court Judges are obviously familiar with un-represented tenants being unaware of their full legal rights and are therefore looking to the public authority to at address the Court to the issues in Pinnock rather than leaving it for the Defendant to raise, taking matters on a step from the Supreme Court’s expectations in Pinnock.

Be aware public authorities – be prepared to raise positive arguments on proportionality in possession proceedings at the first hearing, to demonstrate to the Court that the point has been considered, and avoid the possibility of adjournment, or the risk of an appeal.

Should you have any queries, please feel free to contact the Emsleys Housing Law Team.

The Property Showroom, in Farsley, Leeds, was run by Ayrton Properties Ltd. and owned by Mark and Samantha Hamilton–Smith.  No warning was given that they were closing their business, and whilst their website is still visible, nobody is picking up the phone.

Their client landlords have been left completely in the dark as to the whereabouts of their rental and deposit monies;  tenants have been left with no one to contact to carry out repairs – and nowhere to pay their rent.

Only last month, a lettings agent in Oxford, Zulfiqar Hussain, trading as Charles Lawson Lettings, was sentenced to nine months in prison (suspended for two years), and ordered to pay more than £300,000 by way of a confiscation order, compensation and costs, following a guilty plea  to eight offences of consumer protection  and money laundering.

He had withheld rent from landlords and deposits from tenants over a sustained period of time.

These cases are further examples of how the lack of regulation in this area leads to unacceptable risk.

The Property Showroom professes to be a member of the Property Ombudsman scheme – but if they are no longer in business, any complaints or requests for compensation to that scheme will go unanswered, and if they hold no insurance over client monies both landlords and tenants could lose substantial amounts.

In the Oxford case over sixty people had complained about losing money before Trading Standards investigated and prosecuted.

It goes without saying that a lettings agent is in a position of enormous trust, receiving large amounts of money from tenants, in terms of deposits and rental payments, which they hold on behalf of their client landlords.

When things go wrong, whether by dishonesty or financial mismanagement innocent people stand to lose a lot of money.

The government refuses to regulate lettings agents despite calls from those within the sector – particularly reputable agents – to do so. The Property Ombudsman called on the Government in 2010 to regulate the sector noting that disputes involving agents had grown from 28 to 49% of his workload in the preceding year. The Rugg report published in late 2008, an extensive independent review of the private lettings sector, strongly advocated regulation of lettings agencies to drive up standards and protect both landlords and consumers.

Whilst the Government at the time supported it, no legislation followed, and current Housing Minister Grant Shapps made it clear in the early days of this government that any plans for regulation would be shelved.

So in a wholly unregulated field, how would you choose a lettings agent that’s not going to disappear or leave you out of pocket?

Some lettings agents are members of ARLA – the Association of Residential Lettings Agents.  Membership of this scheme is voluntary and it is self-regulating. They will insist on insurance protection for client monies and have standards of client care.

Or choose a solicitors’ lettings agency. We would say this wouldn’t we – but as solicitors we are regulated by the Solicitors Regulation Authority (SRA), and are subjected to the highest standards of client care and consumer protection, ensuring peace of mind and complete financial probity.

In the legal profession, our regulation is a statutory requirement – and this extends to our estate and lettings agencies. We have complete financial transparency – unlike other agencies, we take no ‘secret’ commissions or payment from third parties, and our client monies are rigorously protected and audited with annual reports being sent to our regulators.  We follow the highest professional standards.

Until regulation becomes a legal requirement – and there seems to be no chance of that happening any time soon – landlords must select their agent with care, based on trust, reputation, and regulation that matters.

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