Coming Up To Speed – AST Changes from 1st October 2018

In March 2015 the rather misleadingly-titled Deregulation Act 2015 was enacted. It contained a surprising amount of regulation. As is normal with this sort of thing the sections of the Act came into force on various different dates, and provided for things to be covered by regulations, so there was no need to cover all of this at the time.

The portion that I’m interested in here, ss33-41, generally came into force on 1st October 2015 and I covered it at the time here. In order to allow landlords (and tenants) a chance to get themselves organised the provisions only took effect for ASTs which commenced on or after 1st October 2015 – specifically:

41  Application of sections 33 to 40

(1)Subject to subsections (2) and (3), a provision of sections 33 to 40 applies only to an assured shorthold tenancy of a dwelling-house in England granted on or after the day on which the provision comes into force.

(2)Subject to subsection (3), a provision of sections 33 to 40 does not apply to an assured shorthold tenancy that came into being under section 5(2) of the Housing Act 1988 after the commencement of that provision and on the coming to an end of an assured shorthold tenancy that was granted before the commencement of that provision.

(3)At the end of the period of three years beginning with the coming into force of a provision of sections 33 to 38 or section 40, that provision also applies to any assured shorthold tenancy of a dwelling-house in England—

(a)which is in existence at that time, and

(b)to which that provision does not otherwise apply by virtue of subsection (1) or (2).

So the Act applies to all ASTs from 1st October 2018 – next week, as I write this. However, it isn’t as dramatic as it looks.

You may remember that the Act covered a number of requirements:

  1. service of EPCs
  2. service of gas safety certificates
  3. service of the booklet “How to rent: the checklist for renting in England”
  4. a prescribed form of s21 notice
  5. no service of s21 notices in first 4 months of tenancy
  6. s21 notices to be valid for 6 months only
  7. an end to retalitory evictions

These all now apply for all ASTs. However,  as the requirement for Nos 1 & 2 was to serve the “prescribed” information, and as the regulations in question exclude all tenancies starting before 1st October 2015, there is, at present, no prescribed information to serve for such tenancies. It may be that something appears in the next week or so, but if not it would clearly be prudent for a landlord to provide the information and any updating gas certificates, but they do not actually have to.

The other headings have now become the new “normal”. The How to Rent booklet merely needs to be served before the s21 notice. The prescribed form is now used invariably anyway, the 4 months will necessarily have expired some 2.5 years ago, and few landlords now delay issuing proceedings once a notice has been served.

That leaves the prohibition on retalitory evictions. This seems to have been something of a damp squib, as far as I can see. They require an improvement notice to be served by the local authority. LAs are very strapped for cash and the tenancy protection officers that used to deal with this sort of thing have almost entirely disappeared, being replaced with multi-tasking staff who rarely have time to deal with anything short of an emergency. And of course the worst landlords just make the tenants an offer that they can’t refuse. It’s all very patchy at best.

Please note that the exclusion includes all ASTS whose fixed term starts before 1.10.15 AND the periodic tenancies which arise when they expire.

I don’t know how many tenancies are affected by this change. Tenants in ASTs tend to move on and change – which is one of the complaints about the system, and the spur for the current discussions on making the minimum length of the tenancies to be 3 years – but there will be a significant number unprotected by the EPC and gas certificate protection afforded to the rest.

The government might take the opportunity, when issuing the missing regulation, of sorting out the potential major problem of whether a landlord can serve a gas certificate and an EPC late, or whether they have just lost the right to use s21 for the duration of that letting – see my piece here for more details.

More information on the Nearly Legal website, as ever.

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This is No Game of Forfeits

I tell my clients that you can mess the courts about, but you cannot (and must not) ignore them. And if you do, then unpleasant things are bound to happen to you. This is a salutary tale.

The Times reported on Saturday 15.9.19 the sad and unusual case of Malik v McCadden. I can’t give you a link because of their paywall. But the brief facts are that McC bought a long lease of the upper floor of a house in North London from M (who lived on the ground floor) for some £518,000 in 2016. The lease appears to have contained the usual clauses prohibiting structual alterations without consent, but shortly after completion McC seems to have carried out substantial alterations including resiting the gas boiler, removing fixtures, rendering the outside, removing floorboards and installing a new central heating system, bathroom and kitchen.  He did not ask for consent for any of this.

The building work was disruptive to M, and McC had removed carpets, in breach of the lease, making the floors noisy. He also failed to pay his share of service charges for insurance and management.

M tried to get access to the flat to see what exactly was going on but was refused on 5 occasions, and correspondence was ignored. So M had to go to court and ask the court to bring McC’s lease to an end – to forfeit it. This is the nuclear option, because it means the tenant loses the property without any compensation, and the landlord can sell it again to someone else. The law has therefore imposed a large number of restrictions on doing this.

It isn’t as easy as just issuing a summons. Before issuing the landlord has to serve  notice under s146 Law of Property Act 1925. This warns the tenant of the breach, requires them to rectify it, and to pay the landlord compensation, and gives the tenant a reasonable time to do so. The only time this isn’t needed is if the rent is in arrears, which wasn’t the case here.

But you can’t even serve a s146 notice without a determination by a court or tribunal that the tenant is in breach unless they admit it – s168 Commonhold & Leasehold Reform Act 2002. So M applied to the First Tier Tribunal (Property Chamber) – the old LVT – for the appropriate decision. The FTT sent out their directions, advising McC to take legal advice, and arranging a site-inspection. McC ignored these, and didn’t let the FTT in. They went ahead with their proceedings and decided in November 2017 that the breaches of the lease were serious, and that a s146 notice could be served. They advised McC to take advice. He continued to ignore them.

The s146 notice was served, nothing further happened and so the landlord issued proceedings in the County Court at Willesden asking for forfeiture and possession, and this was served and listed, no doubt many weeks ahead.

Now, the courts have always treated the power to forfeit a lease as being just a form of security for the landlord, and will grant relief from forfeiture if the tenant applied for it and gives suitable undertakings to put things right, or pay the arrears of rent or service charges if applicable, and pay the landlord’s costs of having to go so far. This is a very old power, pre-dating even the Law of Property Act 1925, and the courts will nearly always grant it, or possibly give an adjournment for the tenant to get themselves organised, or make an order but postpone it for say 6 months to let the tenant sell the property, because they don’t want to push the nuclear button any more than most landlords want to ask for it to be pushed. However, a tenant has to ask for relief in order to get it, and it appears that McC didn’t attend the hearing and so an order was made in August 2018  bringing the lease to an end and giving possession to M.

This is pretty disastrous for McC. He has probably* lost a flat worth some £600,000 (according to The Times article) and M has a windfall, and the prospects of a better neighbour to boot. But the case has been reported, and covered in this blog, because it is so very unusual for things to go so far. Virtually all cases of this sort come to an end after the FTT decision that the tenant is in breach, or when the s146 notice tells the tenant that the landlord is seriously going for possession, or at the very latest when the proceedings are issued, and the tenant makes an application for relief, which nearly always succeeds. But if you do nothing, don’t attend the hearings, and don’t take advice (or possibly don’t listen to the advice you are given) then it will certainly lead to tears by bedtime.

The tenant’s explanation – that he was unaware of the FTT proceedings, and unable to defend the County Court proceedings after being let down by lawyers – must be weighed against the fact that the FTT decided that he knew about the proceedings, and that the County Court would have been satisfied that he had been served with the s146 notice, and the court proceedings before making its order.  He is unfortunate in that he doesn’t have a mortgagee. They normally wade in with gusto if there is any risk to their mortgage security, paying arrears, applying to be joined into the case and asking for relief themselves, as well as harrying the tenant to get things resolved without delay.

Can you blame the landlord, M? Well, what else could they do to protect their investment, and ensure that the tenant sticks to the terms of the lease? This is the way leases work, and normally – probably in 99 cases out of 100 – you don’t get an order for forfeiture. I have never actually come across a forfeited long residential lease, although I have got pretty close on occasions, in more years than I care to remember acting for landlords, and tenants, in this field.

And the reason for the probably*? Well, it is still possible to apply for relief even after the order has been made, although the tenant will need to get on with things, and admit that they are in breach in the ways that the FTT decided, and give credible undertakings to put things right. Given McC’s history, this doesn’t look too promising.

There is a good, and more detailed, piece on this by Nearly Legal, and lots of comments on Twitter and elsewhere. It is really one for the records.

 

Can I Come In? – important change

In 2016 I posted a piece on enforcing suspended possession orders, following the CA case of Cardiff CC v Lee which confirmed that following the changes in the CPR in 2014 you had to apply to the court for permission to enforce a suspended possession order before applying for a warrant of possession. The development caused quite a stir at the time, as many landlords weren’t doing this.

Well, from 1st October 2018 they won’t need to bother in the most common case – the non-payment of arrears of rent or service charges – because there is a new clause being inserted into CPR r83.2(3)(e) which reads:

after “has been fulfilled” insert “(other than where non-compliance with the terms of suspension of enforcement of the judgment or order is the failure to pay money)”.

It is still necessary if there are other terms – the noisy dog for example – but no need if it’s just non-payment of money. You certify the breach on the application for a warrant – form N325 – and that is it.

 

More Problems for Landlords – Gas Safety

You may remember that from 1st October 2015 landlords of ASTs have had to give certain documents – Energy Performance certificates, Gas Safety certificates (if the premises have gas appliances) and the Government’s leaflet How to rent– to their new tenants and unless they do then they cannot serve a s21 Notice bringing the tenancy to an end.

The legislation is here – s21A Housing Act 1988, AST Notices etc regls 2015 (r2), AST Notices etc regls 2015 (r3), Energy Performance etc Regls 2012, and the Gas Safety etc regls 1998. 

The important part is in s21A Housing Act 1988:

(1)A notice under subsection (1) or (4) of section 21 may not be given in relation to an assured shorthold tenancy of a dwelling-house in England at a time when the landlord is in breach of a prescribed requirement.

Now, as far as the How to rent leaflet is concerned, if the landlord omitted to hand it out when the tenant moved in, all they had to do to correct things was to serve it late, and then they could serve a s21 Notice without any problems. In fact, as the form of the leaflet changes from time to time it is probably as well to re-serve it before a s21 Notce in any event –  see my piece on it here.

Many people thought that the same rule applied to the enargy and gas certificates, although there were rumblings from some commentators that this might not be right, and it might be a once-and-for-all  requirement. The others however pointed out that this might mean that if a landlord was a day or two late in serving the certificates they would lose the right to serve a s21 notice for all time – and theoretically the tenant could stay put for ever, provided that they kept paying the rent and keeping the terms of the tenancy. Although this is the normal state of affairs for an Assured Tenancy it wasn’t for an Assured Shorthold Tenancy, and can’t be what the government intended.

Those taking the more relaxed view pointed out that the AST Notices etc Regls say in respect of the gas regulations that

(2) For the purposes of section 21A of the Act, the requirement prescribed by paragraph (1)(b) is limited to the requirement on a landlord to give a copy of the relevant record to the tenant and the 28 day period for compliance with that requirement does not apply.

So all will be well.

Not so, according at any rate to HHJ Jan Luba QC , sitting in the Central London County Court on 2nd February 2018 on a appeal from DJ Bloom in the case of Caridon Property v Mony Schooltz (unreported as yet).  He pointed out that the specific reference in the Gas regulations to 28 days is for checks carried out after the commencement of the tenancy:

(6) Notwithstanding paragraph (5) above, every landlord shall ensure that—

(a)a copy of the record made pursuant to the requirements of paragraph (3)(c) above is given to each existing tenant of premises to which the record relates within 28 days of the date of the check; and

(b)a copy of the last record made in respect of each appliance or flue is given to any new tenant of premises to which the record relates before that tenant occupies those premises save that, in respect of a tenant whose right to occupy those premises is for a period not exceeding 28 days, a copy of the record may instead be prominently displayed within those premises.

So every new tenant has to be given a copy of the latest certifcate before they move in.

A landlord who doesn’t do this is in breach of the requirement and will always be in breach of the requirement and so is for ever barred from serving a s21 notice in respect of that tenancy. HHJ Luba was a prominent housing QC before his appointment and his view is likely to be widely respected, although technically it isn’t binding on anybody outside the Central London County Court.

Now, it is clearly a good idea to keep tenants safe from faulty gas fittings, but this can’t be what the minister meant when he made the regulations in 2015. What is more, the same argument can be applied to the energy performance certificates, because the 2012 regulations say

(2) The relevant person shall make available free of charge a valid energy performance certificate to any prospective buyer or tenant—

(a)at the earliest opportunity; and

(b)in any event no later than whichever is the earlier of—

(i)in the case of a person who requests information about the building, the time at which the relevant person first makes available any information in writing about the building to the person; or

(ii)in the case of a person who makes a request to view the building, the time at which the person views the building.

(5) The relevant person must ensure that a valid energy performance certificate has been given free of charge to the person who ultimately becomes the buyer or tenant.

So if they don’t do this then the landlord is in breach of the 2015 regulations and no s21 notice for him. Note the deadline for the certificate – no later than the first viewing.

Matters may get worse, because the 2015 regulations only apply to tenancies that start on or after 1st October 2015 at present. They will apply to all ASTs from 1st October 2018, so tenancies going back to possibly 1998 may be covered.

It is Superstrike all over again – see my piece here for a reminder of that fiasco.

There are only two good points to cling on to

  • this only applies to ASTs in England, because the 2015 regulations don’t apply to Wales, and Scottish tenancy law is quite different;
  • after the Superstrike fiasco surely the Minister will make some corrective regulations without undue delay.

But who knows. At any rate it will make the housing lists in the busy County Courts even more fraught than usual. Keep your fingers crossed.

[That said, there is a quite respectable case for abolishing s21 notices entirely and requiring landlords to justify regaining possession to a judge or other tribunal. But if this is going to happen it ought to be brought in intentionally, and with warning and safeguards, not by accident like this.]

For more on this see the ever excellent Nearly Legal or Tessa Shepperson’s Landlord Law.

 

New How-To-Rent Guide

The government’s How to Rent Guide has been updated. The changes are trivial – the removal of the references to the London Mayor’s London Rental Standard, which was abolished 6 months ago. But the change is important because an AST landlord has to serve a copy of the Guide on each new tenant, and if they don’t do so then they can’t serve a s21 notice. The new version is available here. It took effect on 17th January 2018, and if you serve the old version (very similar) then it is invalid.

So get it right if you are a landlord, and check your landlord has got it right if you are a tenant (or advising either of them).

The new booklet has to be served on every new tenant, and on every tenant whose fixed-term tenancy converts to a statutary periodical one, or who is granted a fresh fixed-term tanancy, if the booklet has changed in any way since the original copy was supplied. Until the landlord does this they can’t serve a valid s21 notice.

Cynical landlords may also serve the current version on any tenants shortly before they serve a s21 noticeanyway, just to be sure (don’t do it at the same time – that won’t work).

All a load of nonsense really, as there are likely to be more changes in the booklet soon to take account of other changes in housing law, but there we are. Job done.

Let’s Unwind – Leases and Consumer Law

This blog was originally aimed at housing and landlord and tenant law. It has expanded, as the list of topics down the side will show, but I still tend to avoid consumer law because it is suprisingly complex for a field that is directed at the consumer and becase it is difficult to make a living doing it, so I don’t want a long line of readers beating a path to my door with your consumer problems. However, sometimes the areas overlap, and this is one of them.

The Consumer Rights Act 2015 has all the recent publicity, but I am looking at its less prominent cousin, the Consumer Protection (Amendment) Regulations 2014. These have their snappy title because they amend the now middle-aged Consumer Protection from Unfair Trading Regulations 2008, which do what they say on the tin – protect the consumer from various unfair commercial practices. To save my typing I’ll refer to this lot by their dates from now on.

Most of these don’t normally apply to land or leases, but the 2014 regs do apply to “a relevant lease” which is defined in Regl 27C.

Unpicking the legalese, it means that ordinary ASTs or holiday lettings are covered, but not ones provided by social housing organisations, or as part of shared ownership schemes, or equity release schemes, or provision by local councils for homeless people.

For those who need chapter and verse:

(2) In this regulation “relevant lease” in relation to England and Wales means—

(a)an assured tenancy within the meaning of Part 1 of the Housing Act 1988(1), or

(b)a lease under which accommodation is let as holiday accommodation.

(3) But none of the following are relevant leases for the purposes of paragraph (2)(a)—

(a)a lease granted by—

(i)a private registered provider of social housing(2), or

(ii)a registered social landlord within the meaning of Part 1 of the Housing Act 1996(3);

(b)a lease of a dwelling-house or part of a dwelling-house—

(i)granted on payment of a premium calculated by reference to a percentage of the value of the dwelling-house or part or of the cost of providing it, or

(ii)under which the lessee (or the lessee’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house or part;

(c)a lease granted to a person as a result of the exercise by a local housing authority within the meaning of the Housing Act 1996 of its functions under Part 7 (homelessness) of that Act.

There are similar provisions for Scotland and Northern Ireland, but I will leave you to follow them up yourselves if you wish. So far so good.

What is Prohibited?

The 2008 regs prohibit unfair commercial practices, which are defined as being

  • misleading actions (regl 5)
  • misleading omissions (regl 6)
  • agressive behaviour (regl 7) or
  • behaviour listed in sch 1.

The 2014 regs give consumers a right of redress (reg 27A) if, among other things,

  • a consumer enters into  a contract with a trader for the sale or supply of a product to the consumer; or
  • a consumer makes a payment to a trader for the supply of a product; and
  • the trader engages in a prohibited practice in relation to that product, ie
    • misleading actions (regl 5) or
    • agressive behaviour (regl 7); and
  • the prohibited practice is a significant factor in the consumer’s decision to enter into the contract.

It’s not clear why the misleading omissions or the sch 1 actions are excluded, but they are for these purposes. And note that the practice has just got to be “a significant factor”, not necessarily the crucial one.

And then there is aggressive behaviour. This also allows the same remedies if decisions have been caused by harassment, coercion or undue influence. See Regl 7 of the 2008 regs for more details.

How can this affect a Lease?

Surprisingly easily. Prospective tenant looks at flat and asks agent “is it noisy/damp/expensive to heat/secure?” and is told no (or yes) as applicable when this is untrue. Tenant signs lease and then finds out that it is noisy etc and complains. This is misleading and so a breach of regl 5. The definition of “misleading” in regl 5 means “contains false information” – there is nothing about whether the giver believed it, or indeed had reasonable cause to do so. The only test is whether it

causes or is likely to cause the average consumer to take a transaction decision he would not have taken otherwise, taking account of its factual context and of all its features and circumstances. (Regl 5(3))

There is a long list of features that may be covered and you can see them in the 2008 regs if you need to. They include “the main characteristics of the product.”

The point is that it is easy to imagine a claim arising over an AST, and even easier for a holiday letting.

A trader is defined as being  a person acting for purposes in relation to that person’s business, whether in person or through an agent, and a consumer is somebody acting wholly or mainly outside their business. Virtually all landlords operate businesses, and most tenants are consumers.

What are the Consequences?

Well, they can be pretty dire form a landlord’s point of view. Because the principal remedy of the right of redress is the right to unwind (regl 27E and 27F) which is the right within 90 days of the start of the lease (or supply of goods etc) to bring the arrangement to an end by rejecting it, which in the case of a lease means, as far as I can see,

  • ending the lease,
  • repaying any deposit, and
  • repaying any rent paid, (although if the lease is rejected more than one month after the start date then the landlord can retain the appropriate part of the rent paid, less any deduction caused by the misleading action.)

If the tenant doesn’t reject the lease in the first 90 days (and the rejection does not have to be in writing but has to be “clear”) then they have a right to a discount (regl 27I) calculated according to the seriousness of the prohibited practice. There is a scale:

  • more than minor – 25%
  • significant – 50%
  • serious – 75%
  • very serious – 100%

This discount can apply to sums already paid or payable in the future. However it is expected that if the lease has not been rejected a court will take this into account in deciding how serious the practice was in misleading the tenant.

What is more, there is even a right to damages (regl 27J) if the tenant has suffered other financial loss, or even alarm, distress, or physical inconvenience or discomfort, although the landlord has a defence to these claims if they can prove that the matter was caused by a mistake etc and that they took all reasonable precautions and exercised all due diligence to avoid the occurrance.

All of this is enforcable in the County Court, which can grant injunctions etc to enforce the consumer’s rights. Or local councils can prosecute for various offences in the 2008 regs.

And the Moral is?

Well, I’m surprised how little effect this has had on things so far, which I must assume is due to consumer lawyers keeping away from landlord and tenant work, and vice versa. It must also be a reflection of the generally weak position that AST tenants have in disputes with their landlords, because of the ease of eviction under s21, and the need to give a reference for their next property. So this will only come to light when everything else has gone wrong already and there is no need to hold back. Perhaps a bit unlikely in the first 90 days of the lease.

Anyway, if you are a landlord or advising one, be very aware of what your agents are telling people, and if you are a tenant then there may be a way out if you respond early enough.

If you want more information there is a surprisingly good guide produced by BIZ  – link here. And there are the usual culprits of Landlord Law and Nearly Legal.

 

And Another Thing….

I wrote a piece on the Pre-Action Protocol for Debt Claims yesterday – link here. I took the title at face value and assumed that it was about Debt Claims – by businesses against customers or possibly others for sums of money that were owed by individuals.

However, the definition of scope is surprisingly wide:

1.1 This Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including sole traders).

A number of people have pointed out to me that most claims for possession or forfeiture of leases include a claim for payment of  a debt – the rent or service charge arrears – and so the Protocol appears to apply to them.

Now the Protocol doesn’t apply when the debt is covered by another protocol (para 1.4) but the only possession claims that are covered by their own protocols are mortgage possession claims and possession claims by social landlords. The other claims  – for ASTs based on rent arrears (Grounds 8 or 10 or 11), for long residential leases based on arrears of rent or service charges, and even for business tenancies  where the tenant is a sole trader – are not, so the Protocol presumably applies. In all of these cases the Landlord invariably asks for a money judgment against the Tenant for the amount of the arrears, and this is clearly a “debt” in the normal meanong of the word.

I haven’t thought it all through, but I can’t think that this was entirely intended. The timescales in the Protocol don’t really fit in at all well to the normal commercial timescales in possession claims. Is the tenant really going to be given up to 90 days before possession proceedings can be brought against them, when the rent is normally payable monthly, or even weekly? Is the Landlord going to have to ask for possession but not a money judgment until a lot later, when the tenant has possibly moved out?

And what about the complicated procedure for claims for service charges, with all their applications to the FTT, or the rules on payment for maintenance, complete with the mechanism for consultation beforehand, payments of estimated sums on account, followed by balancing charges, and so on? This really doesn’t tie in with the Protocol procedure.

I just don’t know, because it was only drawn to my attention by James Attew of Brethertons today (here) and I had previously thought that as the Protocol has been around in draft form since late 2015 somebody would have thought of this by now.

Now it may be that there is going to be a new protocol covering all this, although I haven’t heard anything about it. Or the courts are going to say that “debt” doesn’t mean “debt” for these purposes, or something. I just hope that it isn’t another mess-up on the lines of the deposit protection fiasco, because that is rather what it looks like at present.

Any views would be most welcome.