Letting to Illegal Immigrants – Not in the Midlands

From 1st December 2014 the new restrictions on letting residential property to illegal immigrants come into force for Birmingham, Dudley, Sandwell, Wolverhampton and Walsall (I was going to say Birmingham and the Black Country but thought better of it.) It is a pilot scheme and the restrictions are intended to roll out across the rest of the country in due course, and subject to the result in May. Landlords need to be aware of them because if they are broken they may be subject to a civil penalty of up to £3,000, per immigrant. Hence this short piece.

ss 20-37 of the Immigration Act 2014 hold the legislation. They define

  • persons disqualified by immigration status –  who are, not terribly surprisingly, people who have no right to remain in the UK; and
  • persons with limited right to rent – who are people with time-limited rights to be in the UK, plus people exercising EU rights to be in the UK, but are not EU citizens.

and make a landlord liable to a penalty if they allow them to occupy residential property, either as tenants, or licensees, or indeed lodgers.

There are a number of exceptions for the people

  • only adults count;
  • and UK, EU, EEA and Swiss nationals are exempt.

and for the lettings

  • only residential lettings – ie which the adult will occupy as their only or main residence (even if the premises are also used for other purposes.)
  • leases of 7 years or more don’t count;
  • nor does social housing, hostels, care homes, student accommodation and a variety of other things that are set out in Sch3,

However, lettings include leases, licences, sub-leases and licences and agreements for them  (s20(3)). And the prohibition can be broken by the tenant, or any other adult authorised to live there, or any adult not named in the tenancy agreement who actually lives there unless reasonable enquiries were made and they were not disclosed.

All this starts on 1st December, and relates to lettings (etc) starting on or after then. Existing tenancies and renewals aren’t affected.

What Does the Landlord Have to Do?

Immigration law is notoriously complex, and so the Government, rather than giving all landlords a 3 year training course, and free legal assistance afterwards, has prescribed a Code of Conduct which landlords are meant to follow. If they carry out the procedure in the Code they won’t have to pay the penalties. All landlords really need to have a copy of the Code.

Some of the procedure is obvious. The landlord or agent should interview all the prospective occupants and see if they are intending to live there. If there is any doubt about the age of a child then documentary evidence should be seen and a copy kept. And all the adults should produce appropriate original documents which should be checked in their presence and a copy taken.

And for some people the documents are easy too – UK, EU or EEA or Swiss passport, or EU/EEA/Swiss identity card. They don’t even need to be current.

However, it rapidly gets a lot harder – do you know what a biometric immigration document issued by the Home Office looks like? Me neither.

And once you get onto the “acceptable document combinations” or the “Documents where a time-limited statutory excuse is established” – there is a long list of things that most landlords have never heard of, and will have no idea if they are genuine or not.

Finally, if there is an application in train at the Home Office for permission to remain the landlord has to contact the Home Office online (or by phone) quoting the reference number supplied by the applicant.

For time-limited occupants the landlord has to follow their cases up to make sure they don’t overstay their leave. And the document combinations need to be repeated every 12 months.

If a landlord finds that an occupant is there illegally they should report them to the Home Office right away. Provided of course that they have already followed the Code to the letter, or they are just going to bring down hefty penalties on themselves.

What is the Landlord likely to do?

Avoid anybody who looks even slightly foreign. So there is another Code of Practice on Avoiding Discrimination which says in effect that landlords have to document-check everybody, including in some circumstances their own adult children, and keep copies for inspection, or they can be accused of racial discrimination. So the revised expectation is that they will avoid anybody who can’t produce a UK passport, or possibly an EU one. How do you know if the other documents are real?

This is wrong, and very unfair on a lot of people who are having a hard enough time living in a strange land but are on the right side of the immigration line. But a family of four may cost a landlord £12,000 in penalties, so why take the risk? Mind you the £3,000/head level only kicks in if the landlord has already had one breach, and the occupant isn’t just a lodger.

Comment

Regrettably there is a lot of feeling that whipping up widespread discrimination against foreigners is the intention of the legislation. And that the choice of the West Midlands was the result of the row over religion in schools. These feelings may be entirely wrong, and one would certainly hope that a government would be above these sorts of things.

That beside, it is horribly complicated. There have been pieces by Nearly Legal and in Tessa Shepperson’s Landlord Law blog giving a lot more info, as ever. This piece is just a warning.

Because you have to know that you’re in a minefield before you start looking for the mines.

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Extra, Extra – Updates on Recent Posts

You never finish this blogging lark, because as soon as you’ve put out your finished and lovingly crafted article somebody comes along and changes things, so it’s out of date. And that’s why I’m here to update three of my recent posts rather than watching TV. The stresses of journalism!

Huzar v Jet2

I mentioned this case of flight delays on 4.9.14 and said that the airline had applied for permission to appeal to the Supreme Court. Well, there is now a note about this application on the SC website (here) and the application for leave will be considered on the papers together with a similar application in the case of Dawson v Thomson Airways (which is on the limitation period applicable for these claims) and a decision is expected in early November 2014. If successful the appeals will be heard probably some time in the first half of 2015. So we have to wait a bit longer for a final decision.

Robertson v Swift

This is about The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 and I commented on them on 3.6.14. You will remember that there is a new regime of information to give to consumers who enter into contracts on-premises, off-premises or by distant selling with effect from 13.6.14. Well, there has been a decision in the SC about the interpretation of the earlier regulations and in particular what happens if the trader fails to supply the cancellation information that he should have, as the cancellation period is defined in those regs as running for 7 days from the giving of the information. And not without some hesitation the SC ruled that, despite the argument that if there was no information the period never started, the better interpretation was that the period never ended, and so the consumer won.

No doubt important to the parties, although the argument was about a claim for about £3,750 and a counter-claim for £1,000, so there must be more to it than meets the eye. But irrelevant to the rest of us as the new regulations provide expressly that the right to cancel runs from the making of the contract until 14 days after the cancellation information is provided. Perhaps the draftsman had the Robertson case in view.

Best v Chief Land Registrar

Mr Best was the enterprising builder who rescued a derelict house and tried to claim it by prescription. I dealt with it on 14.5.14, when I reported that Mr Best had been allowed to take the first step in registering title at HM Land Registry. The absent owners still seem to be absent, but the Land Registry have been granted leave to appeal to the CA, presumably with a view to sorting this matter out once and for all. These appeals usually take getting on for 12 months, so again watch this space. My only worry is that with all the publicity involved the owners will come out of the woodwork in time to thwart his claim. Which may be Mr Best’s worry as well.

As soon as there is any news on these three I’ll be tapping away to let you know. Now let’s go and feed the cats, and also see if Scotland has floated off into the North Sea while I’ve been at this.

PS – For the result of the Best case in the CA see here.

Distance Selling Regulations on Steroids

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (2013 No 3134)

Now as I’ve said before, you’re a bright and well-informed bunch, and have no doubt heard about the Distance Selling Regulations (Consumer Protection (Distance Selling) Regulations 2000)  which covered Distance Selling – basically selling things to people without meeting them, normally by internet or mail order. You may also have heard about the Cancellation of Contracts Regulations (Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008) which really don’t need much explanation once you’ve read the title.

Well, you can (shortly) forget them, because from 13th June 2014 they have both been replaced by the regulations listed above, which I will call the CCR.

Now this isn’t some neat consolidating exercise, that just bundles the two sets of Regs into a new one. That would be far too easy. The CCR make important amendments to them, and adds in some new stuff too. And, most importantly, they apply to ALL contracts made between traders and consumers, in both cases as defined in the CCR, apart from the exempted transactions, which I’ll mention below. This includes transactions made face-to-face in your office or shop, and because of  the definitions some of these face-to-face transactions are treated as if they were made off-site, in a consumer’s home etc and have cancellation rights. So it matters to most of us one way or another.

I will concentrate in this piece on how this affect professional services, especially for solicitors, as it’s an area of particular interest to me. But I may come back and cover more of it later if the muse takes me.

I apologise if this isn’t one of my most engaging pieces, although I have tried my best. However, it is one of my most important, as it might affect my own income, and that of most other lawyers.

Please note that I haven’t always used the full definitions etc in order to make this more readable. If it matters, read the CCR. And remember this is journalism, not legal advice. If you want to know more, the Law Society have produced a very helpful Practice Note.

The exemptions

The main exemptions are set out in r6 and include many of the usual suspects – gambling, banking & financial services, conveyancing, letting residential property, construction of new buildings, delivery rounds, package holidays, timeshares etc vending machines and automatic commercial premises (the mind boggles, but I assume this is car-parks and the like). There is also exemption for certain things to do with telephones (which you will have to read of you want to know more) and for goods sold by way of execution. And there are also exemptions from some of the obligations in certain circumstances – eg there is no right to cancel for  medicinal products prescribed by a health care professional (not just Doctors, it seems). If this all matters to you you will have to read the CCR for the details.

The important point however is that the vast bulk of services provided by most professionals,  including lawyers, to consumers, will be covered, and all those of us who thought that because we saw people in our offices we could ignore all this rubbish will have to think again.

 Definitions

Trader – person acting for purposes relating to that person’s trade, business, craft or profession. This includes acting through agents/employees, and actions not exclusively for the trade etc.

Consumer – individual acting for purposes wholly or mainly outside that person’s trade, business craft or profession. So can’t be a company or partnership, but may include  transactions by sole-traders outside their trading field – eg personal tax advice.

There are lots more, mainly in r5, which are worth looking at. But some of them are so important that they need a section of their own.

On-Premises, Off-Premises and Distance Contracts

On-Premises Contracts – any contract between a trader and a consumer that is not a distance contract nor an off-premises contract. So read on.

Off-Premises Contracts – contracts that are either

  • made face-to-face off the trader’s premises.
  • where the consumer made an offer face-to-face off the trader’s premises.
  • made immediately after the trader had addressed the consumer face-to-face off the trader’s premises, and whether made on the premises or by distance communications.
  • during an excursion organised by the trader to promote his goods or services.

Note that the consumer’s offer may have been made some time previously – I’d like you to prepare my will – OK I’ll make you an appointment and we can discuss this at the office when I return from holiday. And how soon is “immediately” for the next scenario? Clearly  if you meet a client at court and ask them to come back to the office with you to discuss their problem this counts. What if they come in next week? And what is an “excursion”? Would a visit to a client in hospital count?

An awful lot of transactions that would naturally be considered as on-premises contracts may turn out not to be – especially if there is a series of discussions leading up to signed instructions. And it matters – see below.

Distance Contracts – made under “an organised distance sales or service-provision scheme”, without any meetings up to the point when the contract is made.

Note that the portion in quotes isn’t defined. It clearly covers tele-sales and mail-order, and orders via the internet. Does it include a client who gives instructions entirely by letter and telephone, or by email? Quite probably, but we don’t know.

Why this matters

Part 2 of the CCR sets out different sorts of information that the trader must provide to the consumer before the consumer is bound by the contract. The information is set out in Schedule 1 for on-premises contracts, and Schedule 2 for off-premises and distance contracts. So if you don’t give the consumer the info in Sch 2 because you think it’s an on-premises contract and you’re wrong then they aren’t bound by it, and this can be serious. Not only can’t you sue them for the price, but you may have to repay them any money paid up front. They probably have a right to cancel the contract at no cost to them. And it may even be a criminal offence – more details in Right to Cancel below.

The information for On-Premises Contracts

This information is only needed in so far as it isn’t apparent from the context. For example if you are working in an office with Bloggs & Co Solicitors on the door, you can take it that the client knows your business’s name. And there is an exemption for “day-to-day transactions entered into immediately” although this is not defined. Presumably a barber would be exempt, as would be most transactions in shops. And administering an oath.

The info which must be given “in a clear and comprehensible manner”

  • the main characteristics of the goods or services – ie what you are supplying
  • the trader’s identity (eg trading name) address and telephone number – you have to give your telephone number to all clients whether they ask for it or not.
  • the price, or if this can’t be calculated in advance, how it is calculated.
  • any delivery charges.
  • arrangements for payment, delivery and the time involved.
  • the trader’s complaints handling policy.
  • in sales contracts, confirmation that the trader must supply goods in accordance with the contract.
  • any after-sales service or guarantees.
  • how to terminate the contract.

There are extra requirements if there is digital content.

There is nothing particularly unexpected here, but it does mean the end of the single-visit-and-no-paperwork transaction. You will always have to supply the information which would normally be set out in any client care letter or business agreement, and may as well do so  that way, although it would be possible to set all this out in notices and leaflets, or indeed orally. But remember that these things can be difficult to prove later.

The big danger is the extra information that has to be given to off-premises contracts, and which may be missed if you don’t realise that you are dealing with one at the time. The safest course is to provide all that as well.

The information for Off-Premises Contracts

More comprehensive. Includes all the information needed for an On-Premises contract plus:

  • any fax or email addresses.
  • if trader is acting on behalf of another trader, the other trader’s details.
  • the other trader’s business address if different.
  • details of cost per billing period or any monthly charges .
  • details of any increased phone or other communication charges.
  • where a right to cancel exists, details in accordance with regl 27-38.
  • cost of returning any goods if cancellation.
  • if there is no right to cancel, information about this, or how it has been lost.
  • details of any codes of conduct and how copies may be obtained.
  • any minimum duration for the contract
  • any deposits required or other financial guarantees to be paid by the consumer
  • where applicable, any technical requirements or compatibility problems for digital content
  • any relevant  out of court complaints schemes and how to access them

Much of this won’t apply for a legal business. But the cancellation rights may, and are set out below. And if they do then you must give the consumer a prescribed cancellation form. All this information and a copy of the signed contract (or confirmation of its terms) must be given to the consumer on paper, or another durable medium” (eg email) if the consumer agrees, before any services are provided under the contract. And the burden is on the trader to prove that they did all this, in any dispute with the consumer.

The Right to Cancel

This generally applies to all Off-Premises and Distance Contracts, although there are a number of exceptions, such as medicinal products, products trading on financial markets, and a number of exceptions relating to goods, repairs, auctions, holidays and so on. The only relevant one for a (cheap) lawyer is that there is an exception for transactions when the total to be paid by the consumer does not exceed £42 (or the current equivalent to €50).

Otherwise the consumer has a right  under r29 to cancel any distance or off-premises contract, without giving any reason, at no basic cost to the consumer at all, apart from some delivery charges, or when the consumer requests early supply. The cancellation period starts when the contract is made and normally runs for the next 14 days  ie 15 days including the day of the contract (an increase from the 7 days previously). However, the period is extended until 14 days after the cancellation information is supplied, or 12 months  and 14 days after the contract if sooner.

To cancel, the consumer has to give the trader “a clear statement setting out the decision to cancel the contract”. This does not have to be in writing, but as it is for the consumer to prove that they gave it clearly the best option. It doesn’t have to be on the form supplied by the trader but it can be. And if it is sent it only has to be sent within the cancellation period – it can arrive later.

Once the contract is cancelled all obligations come to an end and the trader has to return all monies paid by the consumer within 14 days. Any ancillary contracts are ended too. Any goods have to be returned or collected, and there are complicated provisions for the cost of this. More relevantly, nothing need be paid for any services supplied in the cancellation period unless

  • the consumer has requested the trader to do so beforehand in a durable medium, and
  • the consumer has been informed that they would have to pay the reasonable cost of this, and
  • the consumer has been given proper notice of their right to cancel.

The amount must be a proportionate part of the total cost, and the right to cancel is only lost if the service has been fully supplied and the consumer has been informed that this would happen.

It is a nightmare. Fortunately Schedule 3 consists of an approved form of notice giving details of the right to cancel, and the prescribed cancellation notice  which can be adapted and completed and given to the consumer, although the information can be provided elsewhere if you want to take the risk.

If this isn’t bad enough, failing to give the consumer details of all the cancellation rights on an off-premises contract is a criminal offence under r19 punishable with a fine of up to £5,000, both on the trader and any individuals concerned, including directors of corporate bodies.

Distance Contracts

I won’t go through these in detail as anybody who is intending to do serious business in this way will have to read the words in the CCR and the guidance very carefully anyway, and the rest of you will just get confused, or bored.

However, briefly, the trader has to provide the same information as for an Off-Premises  contract, adapted for distance/electronic mediums. This includes any “Accept” button being labelled “ORDER WITH OBLIGATION TO PAY”  “or a corresponding unambiguous formulation”. And again the burden is in the trader to prove that they have complied with all this.

Other Provisions

Just in case this wasn’t enough, the government took the opportunity of tacking on some amendments to the law on the delivery of goods to consumers, (within 30 days unless otherwise agreed) and the passing of risk on sales of goods to consumers (on delivery to consumer, or their own delivery service) in rr42 & 43. Plus some more provisions on inertia selling, additional payments under a contract (consent needed and a pre-ticked box won’t do) and prohibiting telephone help lines at premium rates – rr39-41.

Will it do any good?

Well, it will be good for paper manufacturers, and the likes of Brother, Canon, Epsom and HP. Clients will have lots more information, some of which will be useful to them. Some of the sharper practices will be banned, and some of the worst operators will be dragged up to the level of the better ones. But there will be more box-ticking and things to trip over, and I have my doubts on how much good this does in the end. We’ll have to see.

What do we do now?

We need to look at our way of working and not just our terms of business.

  • Consider your clients. Are they ALL businesses, and attending for business purposes? What about the will for the MD, or the tax advice for the partner?
  • Do you always see any consumers in the office and never elsewhere? Or discuss things with them elsewhere and ask them to come in?
  • What about the consumers who live at a distance and who you don’t see at all, but handle by email/post/Skype/phone?

Unless you are certain that all your consumers are going to enter into On-Premises contracts then you need to get lots of paperwork organised and supply it at the appropriate time. You are going to have to get used to the right to cancel and not starting work until the paperwork is in order and the client has requested you to do so in writing. You may choose to treat all clients as being off-premises consumers for safety, or rigorously divide them up into the different sorts. But you need to start NOW as you have 10 days left as I write this.

There is useful advice from the Law Society as mentioned above (here’s the link again) and two helpful and comprehensive pieces by Kerry Underwood here and here. There are many more out there so look at some of them because it’s very important.

And the Regulations apply for all contracts entered into on or after 13th June 2014.

 

UPDATE – for details of a case on the old regulations see here.

 

How do we Pay for the Repairs? – Two Recent Decision

Like with buses, there are often large gaps when there are no interesting developments in an area and then two come along at the same time. In this case the particular area is the recovery of service charges by landlords , and the two cases are Phillips v Francis [2012] EWHC 3650(Ch), a decision of the Chancellor in the High Court in December 2012, and, much more recently, Daejan Investments Limited v Benson and others [2013] UKSC 14, a decision of the Supreme Court on 6th March 2013.

They are both of considerable interest, although operating in essentially opposite directions. However, before I get into things properly we need to set out the broad outlines of the problem that they tackle in their own ways.

The Law

Under s 20 Landlord & Tenant Act 1985 landlords of residential premises that levy a service charge are required to consult with tenants before contacting for qualifying works, or a qualifying long-term agreement. If they don’t do this then they can only recover £250 per tenant (or £100 per tenant if it is a QLTA). Unless the Leasehold Valuation Tribunal (LVT) gave dispensation, either before or after the event. The requirements for public sector housing are slightly different and I won’t cover them specifically in this article, so as to keep it a sensible length. And although the obligation is to consult and not necessary to agree with the tenants, in practice the landlord has to be prepared to justify his decision before the LVT if the tenants ask them to find that the service charge, including the cost of the works, is unreasonable, under s27A of the 1985 Act. So the provisions have real teeth.

Now the consultation procedure is quite a lengthy one as set out in the Act and prescribed regulations, lasting at least 2 months and requiring the landlord to give 30 days’ notice of the proposed works and to invite observations and nominations for invitation to estimate. Then once the estimates are in the landlord has to give another 30 days to allow for observations on the estimates, and finally they must give notice that the contract has been awarded and justify the choice if it isn’t the lowest estimate, or a contractor nominated by the tenants. The procedure for works under a QLTA is slightly different, and only involves one consultation, once the QLTA has been entered into at the outset. In either case there is a lot of scope for getting things wrong, and if there are many tenants the cost of all the consultation, tendering and so on can be considerable.

However, things are even worse if there are only a few tenants, because it means that even small maintenance projects get caught in the net. If there are 2 tenants anything over £500 has to be subject to the procedure , and you can’t get much done for that, especially in London. There is no way for tenants to waive their rights or to abbreviate the generous time-limits. So it becomes important to know what counts as a project: if repairing 2 doors is going to cost £750 can you split this into two projects of £375 each and save time and effort all round? What about minor works such as repairing a downpipe, changing light bulbs, and so on that add up to more than £250 a head over a year but individually cost a lot less than that?  And it also matters to know whether the LVT will dispense with the requirement, either if you go there first, or if you do the work first and then have to go and seek permission afterwards, possibly because you have messed up the procedure in some minor way.

It is important to note that although we normally call them “building works” the Act describes them as “works on a building or other premises” ie anything that is not purely the provision of services. So touching up the paintwork is covered as well as replacing the roof.

In practice landlords consulted on major projects , or faced the consequences, but didn’t if the cost worked out at less than the £250/head figure, and the tenants, and the LVT went along with this, more or less – the individual LVT members are well known for providing a wide range of views to the same facts. But you could very rarely get the LVT to agree to dispense with the procedure beforehand, unless the project was large and urgent, and virtually never get them to dispense with it afterwards. It was a far from ideal situation but al least we knew where we were, and could advise accordingly.

The Problem

Well, things have changed. Phillips v Francis was an appeal to the High Court from Truro County Court about the service charges payable on a holiday estate near Padstow. The landlords embarked on what appears to have been a rather disorganised scheme to improve the facilities, where one thing lead to another without any overall plan. But as it was a large site, with over 150 houses on it, the £250/head limit came out at about £41,000. And the county court judge had decided that no individual part of the scheme cost more than that in any year, so it wasn’t caught by the limit.

The Chancellor wasn’t having any of this. He looked at the CA decision Martin v Maryland (1999) which the landlord relied on and which indicated that you looked at the individual projects to see if they needed consultation, and said that he wasn’t bound by this because of changes in the scheme brought in by the Commonhold and Leasehold Reform Act 2002. You  no longer had to look at the overall cost of the project but had to look at the annual cost to each tenant. There is no “triviality threshold”:

Accordingly, I see nothing in the present legislation which requires the identification of one or more sets of qualifying works. If the works are qualifying works it will be for the landlord to assess whether they will be on such a scale as to necessitate complying with the consultation requirements or face the consequence that he may not recoup the cost from the tenants’ contributions. As the contributions are payable on an annual basis then the limit is applied to the proportion of the qualifying works carried out in that year. Under this legislation there is no ‘triviality threshold’ in relation to qualifying works; all the qualifying works must be entered into the calculation unless the landlord is prepared to carry any excess cost himself.

Commentators are unsure what exactly this means, but the most natural meaning is that if there is qualifying work in a year that adds up to more than £250/head then the procedure has to be complied with, even if each individual project is under £50. The decision by a High Court Judge is binding on the LVTs and on County Courts, but not other High Court Judges, and so until the CA clarifies things it stands, albeit subject to the possibility of alternative interpretation by other judges. But the parties have apparently confirmed that they are not going to appeal, so the matter is not going to be clarified soon.

ARMA and other landlord organisations are horrified. It means that not only are landlords probably going to have to consult at the beginning of every year if they want to do virtually anything, but also that tenants may now be able to claim back all excess service charges that they have made over the last 6 years, by going to the LVT under s27A(2) of the 1985 Act.

Commentators are puzzled, and some of them are looking forward to a raft of decisions in the LVT and the UT(LC) when the detailed implications are thrashed out. Many just say that the decision is wrong. The best summary is, as ever, in the Nearly Legal blog. The answer may be come in the form of legislation, or an amended regulation defining the limit for qualifying works, although given the present government’s track record this cannot be relied on with any certainty. Or a greater use of QLTAs to cover smaller maintenance, which would reduce the consultation but not remove it entirely.

I’m not sure whether you can say that the decision is wrong, as the previous interpretations certainly did some violence with the wording, and were open to abuse. But it cannot be disputed that the judgement did not consider the extremely wide implications of what was being said, or spell out the consequences in enough detail. And for a decision that expressly disagreed with the CA decision in Martin v Maryland

save in its reference to the need to use common sense

this is at the least disappointing.

The Answer

None of the above. For yet again the Supreme Court ride to the rescue. I am immensely impressed with the way that the SC looks at a problem, works out the sensible answer, and then gives it to us, by a combination of energetic distinguishing of inconvenient authorities, or if need be just overruling them. I have commented previously on their efforts in Day v Hosebay (on enfranchisement) and in Berrisford v Mexfield (on leases without terms), when they rescued the law from the inconvenient and downright idiotic position that a long succession of entirely logical but cumulatively daft decisions have left it in, by going back to basics.

In Daejan v Benson the court, lead by Lord Neuberger, looked at the provision in s20ZA of the 1985 Act allowing the LVT to dispense with the need to consult on qualifying works, as set out above. The provision itself is a simple one:

Where an application is made to a leasehold valuation tribunal for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.

It would appear to give the LVT a wide discretion if it is satisfied that it is reasonable, and normally you would expect such a power to be exercised fairly frequently. However, a succession of cases had built up guidance that meant that it was virtually impossible to get dispensation beforehand, unless the matter was extremely urgent, and impossible to do so in practice after the event. The CA in Daejan itself had said that consultation in itself was what the Act was trying to achieve and so if consultation had not been carried out in full (in this case the decision to award the contract was made shortly before the consultation ended, rather than afterwards as it should have been) then the tenants had suffered prejudice, and the landlords could therefore not show there was none. The financial consequences (£280,000 here) were not even relevant.

Lord Neuberger made pretty short shrift of that. He said that

Given that the purpose of the Requirements is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements

And so if the quality, extent and cost of the works haven’t been affected by the failure to properly consult then dispensation ought to be granted in virtually all cases. If there is some prejudice, such as additional cost, this can normally be compensated for by imposing conditions, such as payment of compensation, or more usually restricting the amount the landlord can recover. In Daejan itself the landlord proposed a reduction of £50,000 in the amount that they were seeking, to cover any potential losses. And if need be the landlord could pay the tenants’ reasonable legal and surveyors’ costs in investigating the matter, and being represented at the tribunal.

There was no benefit in itself in having a consultation. It was just a mechanism for achieving the end of only having to pay an appropriate amount for appropriate works. And virtually all applications for dispensation should succeed, subject to the grant of compensation in cases where the works have cost more than they should because of the failure to consult properly.

Which, given Phillips v Francis, is just as well, because there are going to be an awful lot more applications in future.

Some commentators say this is a bad decision, that openness and transparency are good in themselves, and the result means that s20 adds very little to the existing power under s19 to disallow inappropriate costs. But I disagree. Law is the servant of man, not his master, and our laws must work in practice. This law was no longer working in any useful way, and has now been brought back to life. The management of blocks of flats on long leases is difficult enough without making the escape clause impossible to use. Tenants often don’t want to pay for repairs, and landlords often charge more than they ought. You have to have an effective mechanism for resolving these matters, and thanks to the Supreme Court the useful tool that is s20ZA(1) has now been dusted off and restored to the front line.

Too Many Rules – Not enough Guilt

Every few weeks, it seems, there are cries that individuals in one field or another are behaving badly and that the area needs to be regulated, with guidelines, a code of conduct, a complaints system, qualifications, a disciplinary structure and a Regulator. People in the field will be required to tick boxes vigorously, send out lots of (pretty incomprehensible) information to their clients/customers and a bit later some academic, or a committee will be asked to report on how things have changed. And often enough, they have changed, but aren’t really any better.

Why does this happen? The intention was to root out a few bad apples, shine light into some dark corners, and improve transparency, yet it sometimes seems to have the opposite effect. Why?

The answer came to me the other day when I was watching the excellent and amusing programme When Bankers were Good by Ian Hislop on BBC2 .  He was explaining that in Victorian times, and indeed until quite recently, banking and stockbroking was largely unregulated by the law. There were some complete sharks and con-men, but most people behaved well, and those who didn’t were known, and heavily disapproved of by the others. Reputations mattered enormously, because that was all you had to go on.  People couldn’t rely on certification by some quango, and so had to make their own judgements, based on reputation, and the opinions of others in the field.  If you didn’t know somebody and they couldn’t put forward somebody who you did know to speak for them then you dealt with caution, if at all.

The system was underwritten by a strong sense of a shared morality, and an ethos of truthfulness, hard work and being bound by your word. You behaved like gentlemen, or else. The fact that the number of participants was comparatively small, and they often had been to the same schools or universities, meant that reputations were generally well-known, and that bad conduct would normally get back to those dealing with you pretty rapidly. If you lost your “name” then that was basically it, and you would probably have to go to the colonies, because you would get little further business here.

I began to think – is the problem that we now have too many rules, rather than not enough? Do extra layers of regulation actually do any good?

When I was in training there were no regulators for the professions, and indeed the idea would have been regarded as incomprehensible. The whole idea of being a profession was that you regulated yourself. The Law Society, the Institution of Chartered Accountants, the Bar Council, the various medical organisations, the surveyors and so on all had their own rules and enforced their own discipline among their own members. They decided who could be a member, and who couldn’t, and how members should behave, up to a point. Beyond that it remained the province of reputation.

If you were dealing with another professional you knew that a certain minimum standard of behaviour was a given. You would not be lied to, agreements were generally adhered to, and the client’s interests were predominant. A breach of any of this would result in serious displeasure from the senior members of the firm involved, because their reputations would be tarnished by the shortcomings of their staff. Threats to complain to the profession were generally unnecessary. Reputation and shared morality were too important to risk.

But you knew that you were on your own beyond there. You could expect a basic level of competence, but it was pretty basic. It was an important part of your skill to build up a list of suitable experts and contacts who you could rely on. And a list of those to avoid. You got to know the opponents you could trust and those who fought their corners only just on the right side of the rules. You learned the horses for the courses, and the wolves in sheep’s clothing. It was a matter of judgement, and as time went on it became one of the most valuable parts of you, what made you a professional.

Nowadays of course every profession or quasi-profession is regulated up to the eyebrows. An amazing number of things are prescribed, or prohibited. And you can’t be an expert unless you have been on the training course, passed the exam, got on the list and kept your CPD points up to date. You have to tick all the boxes. But has it actually made things any better?

Now I’m not saying that checklists are, in themselves, a bad thing. They are an excellent way of reminding the forgetful or harassed of the things they need in order to achieve the desired result. And they mean that people without the education or experience to work out the requirements for themselves can be allowed to handle something in a manner that will produce the intended result on the majority of occasions. But somebody has always got to be allowed to apply brain to the final answer. No check list is perfect. And it is the result that has to be correct, not just the procedure. Correct procedure makes the result more likely, but not certain. Look both ways before crossing the road, except in one-way streets. But what if somebody is coming the wrong way?

The danger, as I see it, is that people no longer feel responsible for what they do. I taught my children not to lie and steal, not to just avoid being caught. A professional ought to know what the right thing to do is, and expect to be held accountable if they don’t do it. If you over-regulate things then this feeling is lost. I expect, and deserve,  to be hauled over the coals if I mislead my client over their chances in a forthcoming case. But if I am disciplined for failing to ensure that the clients is sent an evaluation of risks every x months, contrary to rule abc I just feel irritated. I don’t feel guilty.

Now the old days were far from perfect. Unsophisticated lay clients could have a very hard time if they fell among thieves. And the enormous increase in the numbers in all professions, coupled with the loss of local and increase in national or internet businesses,  means that it is much harder for reputations to spread in the way they one did. So we can’t go back.

But we, and our regulators, always ought to bear this in mind.  If you have too many rules, and too much regulation, then we don’t feel guilty if we fail. And we should.