Successful ARMA Conference

The ARMA annual conference 2019 which was held in London on Thursday last, 17th October was yet another resounding success. We thoroughly enjoyed the day and it was wonderful meeting clients and acquaintances, past, present and new.

We would like to thank ARMA for hosting this prestigious event and for providing us all with the opportunity to network and showcase our expertise to the Property Management Sector.  We would also like to thank all those who visited our stand and spent time with us during the course of the day.

 

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Join us at the ARMA Conference on 17th October 2019

We are pleased to announce that we will be attending the ARMA annual conference this year which is being held on 17th October at etc. venues conference centre, 133 Houndsditch, London EC3A 7BX.

For those of you who are attending the ARMA conference on the 17th October we would be delighted if you could join us at Stand 20 where you can enter our free prize draw to win an overnight stay for two people in a luxury hotel in the UK.  All you have to do is visit our stand with your business card and we will enter you into the free draw. Just imagine, you could be packing your bags and escaping to one of the carefully hand-picked hotels with your loved one, enjoying a city adventure, countryside retreat or seaside getaway. We also have plenty of free gifts to share with you all.

Analise Broomhall, Jon Bucknall, Kelly-Anne Taylor and Lauren Bailey will all be waiting to welcome you and to answer any questions you may have about the services we offer at SLC Solicitors.

We look forward to seeing you at the conference.

Exciting Changes to Sales and Accounts teams

SLC Solicitors are excited to announce the following changes to our Sales and Account Management Teams.  Kelly-Anne Taylor will be moving across to our Sales team in the position of Sales Executive.  Kelly-Anne joined SLC Solicitors in May of 2016 as an Assistant Account Manager, quickly progressing to Account Manager  within her first year.  We are pleased to have Kelly-Anne as part of our Sales and Marketing team, where she will continue to be a pivotal part of SLC Solicitors, growing client relationships and promoting business growth within the leasehold property management sector.

Arundeep Samra will transition to Account Manager joining the team headed by Jon Bucknall, our Senior Account Manager.  Arundeep joined SLC in August 2018 after graduating from Derby University with LLB (Hons) in Law.  Arundeep brings fresh insights into an ever evolving market, having a strong interest in continuous improvement to exceed client expectations and service levels.

There will be no immediate change for you with Kelly-Anne working alongside Arundeep over the next few months, supporting the Account Management Team and dealing with your enquiries as usual.

Should you have any questions, please do contact Kelly-Anne on 01743 260103 or at kat@slcsolicitors.com, Jon Bucknall on 01743 260134 or at jb@slcsolicitors.com, or Lorna Parchment, Head of Department on 07906 111849 or at lrp@slcsolicitors.com

Leasehold Reform- Cutting the costs of Leasehold information packs

On 27th June 2019, the Secretary of State announced a series of changes to the leasehold sector. This followed the Government’s consultation on implementing changes to promote fairness and transparency for leaseholders and to challenge unfair practices and unreasonable fees in the leasehold sector.

Amongst the many changes announced is a mandatory cap on the fees charges for producing leasehold information to customers in the form of a leasehold property enquiry pack (LPE1).

Any managing agent, management company or landlord providing these packs will need to be aware of the coming changes.

What is an LPE1?

An LPE1 is a standardised questionnaire for freeholders, management companies and managing agents to provide information regarding a property to a customer.  The use of this standardised form allows leasehold information to be provided to a customer in a consistent and uniform manner.

The division of responsibilities under a lease can often mean that form LPE1 is completed by multiple parties. For example, where a landlord collects ground rent but a separate management company deals with the service charge and insurance.  This can prove to be time consuming and costly to the customer with each party requiring payment of a fee for providing the information.

The proposed changes:

Until now, the process and fees for producing leasehold information differed vastly between landlords and managing agents, proposed new legislation will make the following a statutory requirement:

In setting the maximum fee of £200+VAT for providing a completed LPE1, the government has confirmed that in setting this fee they will include a mechanism in the legislation to take into account changes in inflation.

Issues to Consider:

  1. Costs

Potential problems may occur where landlords and managing agents are completing form LPE1 separately, as each party will require their own fee for providing information.

The Secretary of States proposal that the fee for completing form LPE1 will be capped at £250+VAT is silent on the issue of multiple parties completing LPE1 for the same property. This means that potentially, the combined fee for a landlord and managing agents separately providing information to a customer could exceed the proposed capped fee. However, the consultation does contain the expectation that landlords and managing agents will charge a fee that reasonably reflects the cost of the work actually involved in providing the information.

Once LPE1 has been received, requests for updated information, particularly relevant when a purchase spans 2 financial years, are to be provided for a fee of no more than £50.00. The cost of providing refreshed information should be reasonable and be less than the original fee for completing LPE1. Whilst not explicitly confirmed in the consolation, it would be suggested good practice for the 15-day turnaround to also be applied to requests for updated LPE1.

  1. Routes of Appeal

The Secretary of State has also announced that further routes of appeal are to be provided for customers to challenge the reasonableness of fees.

Once legislation is enacted, customers will be able to challenge fees through the First-Tier Tribunal and via a mandatory redress scheme, which will require all freeholders to become a member.

As a result, there will be more responsibility for landlords and managing agents to justify the reasonableness of their fees, especially where they are only providing a portion of the information required, such as a landlord only providing ground rent information.

  1. Time constrains

The proposed changes place an obligation on landlords and managing agents to ensure that LPE1 is completed and provided to the customer within 15 days. It is important that landlords and managing agents now review their processes to ensure that this turnaround obligation is met in anticipation of the legislation.

Whilst it is not clear from the consultation what sanctions may result from breach of this obligation, it is expected that this will be dealt with further in the upcoming legislation.

What should you do?

At present the changes announced are just proposals, but they will become law once legislation is passed. Until this legislation is passed, landlords and managing agents can continue with their current fees and processes.

News of the Secretary of States announcement is being circulated and discussed throughout the industry and therefore landlords and managing agents should now proceed with caution and consider the increased likelihood of challenges to their existing fees if they currently exceed the proposed cap.

Going forward it is advisable for all landlords and managing agents to now implement the following to bring their processes in line in anticipation of legislation:

If you would like further information, please contact Laura Gregory at SLC Solicitors (lg@slcsolicitors.com)

Reform recommended for lease extension and enfranchisement

The Law Commission has published a summary paper of changes it recommends for the law relating to extending the leases of houses and flats and buying the freehold of buildings containing flats.

The proposals are an attempt to strike a difficult balance between reducing the price payable by leaseholders who want to buy their freehold or extend their lease,  while ensuring that Landlords (who cannot refuse an application while qualifies under the current legislation) are adequately compensated for losing their interest in the property.

Some of the main changes proposed are :

For extending leases :

and for buying a freehold containing flats :

The current law has been criticised for being complex with separate procedures applying to each of the different enfranchisement rights. The proposals recommend a single procedure for enfranchisement to simplify the process and improve transparency to ultimately provide a better deal for leaseholders .

The Commission is inviting responses from Leaseholders and Landlords to the proposals and the deadline for replies is 7th January 2019.

SLC Solicitors are experts in this area and can assist you with lease extension or enfranchisement claims. We can offer fixed fees and  value for money guidance on the complex regimes in place.  If you would like more information please contact Analise Broomhall adb@slcsolicitors.com

 

Upper Tribunal ruling on student accommodation

Upper Tribunal rules that student accommodation that shares communal areas is not a dwelling for
the purposes of section 27A of the Landlord and Tenant Act 1985.

Section 27A of the Landlord and Tenant Act 1985 provides that an application may be made to the
First Tier Tribunal for a determination as to whether a service charge is payable, if so by whom, the
amount payable and the date by which it is payable.

Under section 18(1) of the said Act a service charge is defined as being an amount payable by a
tenant of a dwelling for services of various kinds. Dwelling is defined by the Act as a building or part
of a building occupied or intended to be occupied as a separate dwelling, together with any yard,
garden, outhouses and appurtenances belonging to it or usually enjoyed with it.

In JLK Ltd v Emmanuel Chiedhu Ezekwe and others (2017) UKUT 277 (LC) the Upper Tribunal (Lands
Chamber) has concluded that student accommodation in which the students had the right to share a
kitchen, lounge, shower and w.c. with every other tenant on the same floor did not amount to a part
of a building which was occupied or intended to be occupied as a separate building.

The specific facts are that the property comprised 93 units of accommodation of which all but six
had en suite facilities (the remainder sharing communal showers and toilets). Each unit was let on a
long lease comprising the unit plus the right to use communal kitchens, bathrooms, showers and
other areas. The lease included a covenant to pay a maintenance charge in respect of the sums
spent by the landlord in the maintenance of the building. A dispute arose and an application was
made by a number of the students to the First Tier Tribunal (FTT) for determination of the sums
payable.

The FTT concluded that the units were dwellings and that it therefore had jurisdiction to determine
the applications. The landlord appealed this decision on the basis that the units could not be a
dwelling as they were not a home and that they were not separate dwellings because of the
communal facilities.

The Upper Tribunal rejected the argument that to be a dwelling, a unit of accommodation must be
someone’s home. Then Act did not require this, however the Upper Tribunal accepted the argument
in respect of the units not being a separate dwelling. In reaching this decision it concluded that it
must have regard to the meaning given to the phrase “as a separate dwelling” for the purpose pf the
Rent Acts and the Housing Act 1988.

Accordingly the Upper Tribunal decided that the FTT did not have jurisdiction to deal with the
students’ applications.

This is a decision that could have ramifications for other types of property where similar
circumstances exist in relation to section 27A of the 1985 Act and for other areas of the law in
relation to long leasehold residential property which depend on the same or a similar definition of
dwelling.

Can You Recover Costs in a Small Claims Dispute?

The basic position is that for claims which have been allocated to the Small Claims Track, usually with a monetary value of less than £10,000, the Court will not order a party to pay fees or expenses to the other party, subject to certain exceptions.

One of those exceptions is if the Court thinks a party has behaved unreasonably.

The question of what constitutes unreasonable behaviour was considered recently in the case of Dammermann v Lanyon Bowdler Solicitors (2017). In short, the Court considers whether rejection of a reasonable offer by one of the parties during the course of proceedings could amount to unreasonable behaviour. Usually, a party that rejects a reasonable offer can expect to be penalised by the Court and find itself subject to an adverse Costs Order. However, in the context of this case, the rejection of what was perhaps considered to be a reasonable offer was not automatically considered to be evidence of unreasonable conduct as the Court took into account a number of other material factors to the case.

The question therefore is whether this case sets a precedent that the rejection of a reasonable offer on its own will ever justify a finding of unreasonableness. This should not be considered to be the “golden rule” and each case is likely to be determined on its own facts.

One must never ignore the general principle that the Small Claims Court procedure is designed so as not to deter individuals from pursuing claims without legal representation or for fear of receiving an adverse Costs Order.

There is clearly a difference in claims which may be considered ‘optimistic’ to claims where litigation is pursued unreasonably. On the other hand however, this does not mean that you should be put off from seeking costs if your opponent’s conduct is such that it is clearly inappropriate.

Depending upon which side of the table you sit, the threat of a costs order for unreasonable conduct can still be a useful tool in your negotiating armoury.

For further advice on small claims disputes or recovering costs, please contact our Litigation Process Team on 0333 0300 200 or email info@slcsolicitors.com.

Right Of First Refusal – The Exceptions

As we have mentioned in a prior article (link below) it is essential that a Landlord making a “relevant disposal” of a building containing flats should comply with the requirement to offer the tenants the interest first (by serving a section 5 notice on them) as they have a right of first refusal under the Landlord and Tenant Act 1987 (“the Act”).

http://www.slcsolicitors.com/news/right-of-firstds-and-tenants/

For the Right of First Refusal (RFR) to exist the building must:

  1. Contain at least two flats
  2. Not have more than 50% non-residential use
  3. Have more than 50% of the flats held by qualifying tenants

The requirements apply to all “relevant disposals” BUT the RFR only applies where the tenants’ immediate landlord is selling, so where there is an intermediate landlord, the freeholder could dispose of their interest without invoking RFR.

Creation of a new head lease, sale of the reversion and a disposal of common parts of the property ALL constitute a “relevant disposal” for the purposes of the Act.

Where the disposal is subject to a contract the disposal occurs on the date of the contract and NOT on completion of the sale.

The legislation does however provide for some disposals to be exempt including (but not limited to)

  1. The grant of a tenancy of a single flat
  2. A disposal by way of security for a loan
  3. Some disposals relating to inheritance or matrimonial provisions
  4. A disposal by a company to a company that has been associated with it for at least two years.

WHERE LAND IS HELD BY A COMPANY

In respect of the last point, a company is “associated” with another company within the meaning of the Companies Act if one company holds a majority of the voting rights in it OR is a member of that company and has the right to appoint or remove the board of directors.

A tenant who receives notice that a disposal is exempt for this ground should investigate at Companies House whether the companies are in fact “associated”. Simply having the same directors will not be sufficient.

Currently if a landlord in a qualifying building wants to avoid the provisions of the Act he must:

  1. Create an associated company and wait for at least 2 years
  2. Transfer the property to the associated company
  3. Sell the shares in the associated company

If these steps are followed, the disposal will not be a “relevant disposal” for the purposes of the Act as transaction (2) above was exempt and in transaction (3) only the shares in the company, not the property itself was transferred.  However, this must be treated with extreme caution. Transfer (3) must take place after the transfer of the land. A landlord must take particular care that – where they have entered into an agreement with a purchaser for the sale of the shares conditional on the purchase of the land – at the time of the transfer the landlord must not be deemed to hold the shares in a fiduciary capacity for the purchaser. If this fiduciary capacity exists then the disposal would not be to an associated company and would be a “relevant disposal” for the purposes of the Act.

SLC solicitors have recently been involved in a case where a landlord company transferred a qualifying property to an individual “on trust” for an associated company and argued that this met the exemption criteria.  Unfortunately the case settled before being tested at court. However, if the landlord has an associated company available to it, then it would seem a safer option to transfer the property directly to that company, rather than risk reliance on the provisions of a trust to ensure that the transaction fell within the exemption to the Act.

A landlord who does not comply with the requirements of the Act commits a criminal offence and is subject to a Level 5 fine on conviction. The tenants’ remedy is to compel the new landlord to transfer the property to them for the same terms as the original sale – including the purchase price -and time only starts to run from when the tenants became aware that the RFR applied to the transaction.

The purchaser of a freehold property where RFR is likely to apply should therefore insist on evidence that RFR has been complied with and serve notice on the tenants as soon as possible stating that RFR applied to the transaction  or risk being compelled to give up the property to the tenants later.

If you would like advice on the Right of First Refusal please contact us on 0333 0 300 200 or email info@slcsolicitors.com

Costs and Unreasonable Conduct in the First Tier Tribunal (Property Chamber)

In Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 290 (LC) the Upper Tribunal (Lands Chamber) (UT) gave guidance on Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. In three conjoined appeals the UT considered, for the first time, how the Tribunal should exercise its discretion to award costs pursuant to Rule 13 and in particular when costs should be awarded where a party has acted unreasonably in bringing, defending or conducting proceedings.

In each of the appeals the First-tier Tribunal (FTT) had found unreasonable behaviour and awarded costs pursuant to Rule 13(1)(b). In Willow Court Management Company (1985) Ltd v Alexander, the management company had not properly implemented the contractual procedure for determining the service charge, notwithstanding this having been explained in previous tribunal decisions. The FTT found this to have been unreasonable and Mrs Alexander was awarded £13,095 plus VAT as a contribution towards her costs.

In Sinclair v 231 Sussex Gardens Right to Manage Ltd, the FTT found that Miss Sinclair had behaved unreasonably by failing to pay her service charges, defending herself on what was considered to be spurious grounds, unsupported by sufficient evidence, and in general, behaving unreasonably. She had been ordered to pay £16,800 towards the costs incurred by the right to manage (RTM) company.

In Stone v 54 Hogarth Road London SW5 Management Ltd, Mr Stone had withdrawn his application for a determination of the service charge shortly before it was due to be heard by the FTT. The FTT was satisfied that he had had reasonable grounds for commencing his application but nevertheless considered that he had acted unreasonably in not withdrawing the application at an earlier stage, after concessions had been made by the landlord and when fewer costs would have been incurred. Mr Stone was ordered to pay £2,260.80 towards the costs incurred by his landlord.

The UT allowed all three appeals (setting aside the order for costs in each case), stating that the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. The Tribunal then proceeded on giving general guidance on how the tribunal should approach Rule 13 applications.

The UT held that when exercising any power under the 2013 Rules, the tribunal had to give effect to the overriding objective, namely dealing with cases justly and fairly. The UT set out a three stage test:-

Firstly, the tribunal must first assess (as an value judgment and not as the exercise of its discretion) whether the conduct complained of is objectively “unreasonable”.;

Secondly, if the conduct meets the “unreasonable test” threshold, the tribunal must consider whether, in the exercise of its discretion, and taking account of all relevant factors, it is appropriate to make a cost order.

Thirdly, if the tribunal considered that it is appropriate to award costs the tribunal must, as a further exercise of discretion, consider the form and quantum of the costs award.

The UT stressed that each case would turn on its own facts. However, “rule 13(1)(a) and (b) should both be reserved for the clearest cases and that in every case it will be for the party claiming costs to satisfy the burden of demonstrating that the other party’s conduct has been unreasonable”.

The UT held expressly that a party does not have to show “causation”; thus a party would not have to establish a causal nexus between the costs incurred and the behaviour to be sanctioned.

The UT held that the standard of reasonable conduct between represented parties and unrepresented parties would differ, recognising that legal advice was often only available at a disproportionate cost to litigants in the tribunal.

The behaviour of an unrepresented party with no legal knowledge should be judged by the standards of a reasonable person who does not have legal advice. The fact that a party “acts without legal advice” is therefore relevant at the first stage of the inquiry. This may also be relevant, to a lesser extent, in the second and third stages.

Parties, especially unrepresented parties, should be assisted to make sensible concessions and abandon less important points, or where appropriate, their entire claim. Such behaviour should not be discouraged by the fear that it will be treated as an admission that the abandoned issues were unsustainable and ought never to have been raised (and thus would arguably be justification for a claim for costs).

In a more recent case, Matier v Christchurch Gardens (Epsom) Ltd [2017] UKUT 56 (LC), the Upper Tribunal (UT) considered whether to uphold a cost order under rule 13(1)(b) of the Property Chamber Rules 2013 (Rule 13) against a litigant in person (M) on the basis that he acted unreasonably in conducting proceedings.

The First-tier Tribunal (FTT) determined proceedings between M and M’s landlord (C) concerning payment of a service charge. It then granted C a cost order against M under Rule 13 on the basis that M had acted unreasonably in conducting proceedings by:

The UT upheld the costs order. In doing so, it was heavily influenced by M’s failure to follow the FTT’s directions about the preparation of submissions and hearing bundles. The UT held that:

The UT made clear that similar cases will turn on their facts. It noted that where a litigant in person acts in good faith in their defence (even if misconceived), this would rarely amount to unreasonable conduct. However, this case is a powerful reminder to litigants that acting inconsistently with tribunal directions may lead to an adverse costs order.

For more information, or to discuss in more detail, contact us on 0333 0300 200 or email info@slcsolicitors.com

Our Plans for The New Debt Pre-Action Protocol

As you will now be aware the new PAP comes into effect on 1st October 2017 and applies to any business claiming payment of a debt from an individual.

The PAP will require far more information to be provided to debtors in the initial Claim letter, together with an Information Sheet and Reply Form.

The main impact of the PAP will be the fact that it potentially has a very detrimental effect on debtor days as it sets out timescales to which we have to adhere before taking recovery action through the Courts.

If the Protocol is not adhered to there will no doubt be penalties imposed by the Courts. At present the nature of any such penalties is unknown but they could strike out the claim, reduce or disallow interest or disallow costs.

Initial Information to be Provided in Letter of Claim:

The Letter of Claim should contain the following information where it arises from a Lease:

  1. Amount of debt.
  2. Whether interest or other charges are continuing.
  3. The date of the Lease, the parties to it and the fact that the debtor can request a copy.
  4. If instalments are being paid, an explanation of why the offer is not acceptable and why a court claim is being considered.
  5. Details of how to make payment (methods, address for payment) and how the debtor should proceed if he wishes to discuss payment.
  6. Address to which Reply Form has to be sent.

In practical terms this means that the Land Registry title will be required before the initial letter is sent to identify the date and parties to the Lease.

The Letter of Claim will be far more detailed in terms of the information provided and it has to be accompanied by the Information Sheet and Reply Form. These are standard form documents. The Information Sheet sets out what steps the Debtor has to take upon receipt of the Letter of Claim and the timeframes for doing so and the Reply Form gives various options for responding to the Letter of Claim, offering payment or raising a dispute.

Time frames:

This is the part of the PAP which is likely to cause most difficulty to our clients in terms of recovery of arrears.

The time frames which apply are as follows:

  1. The debtor has 30 days in which to reply to the Letter of Claim. No proceedings can be started until this 30 day period has expired.
  2. If the Debtor replies and indicates that he is seeking debt advice, he is permitted 30 days from the date of receipt of the Reply in which to do so. If he replies on the 29th day after the Letter of Claim, this, in effect, gives him 59 days before any further action can be taken. There is also a mechanism for the Debtor to request extra time and this should be permitted if it is a reasonable request, but there is no absolute requirement to allow extra time.
  3. If, after receipt of the Reply Form, the parties are still at odds as to the existence of the debt, the amount due or any payment plan, they should take steps to engage in Alternative Dispute Resolution. This applies currently to all court proceedings so this alters the current position very little. In many small debt matters this is simply impractical or disproportionate to the amount being claimed.

Our Proposals as to Recovery Process:

We are seeking to put in place the PAP by the end of August so that there is a seamless transition to this process within our existing process.

The main issue here is how the PAP affects each client’s debtor days and recovery process.

Our suggestion to minimise the impact of the PAP is as follows:

  1. You send one chaser to the leaseholder 7 days after the debt falls due, adding on their first administration charge.
  2. If payment is not made following this chaser (within a maximum period of 7 days) the matter is referred to SLC, with your referral charge added.
  3. SLC review Lease, obtain Land Registry title and send out the Letter of Claim and accompanying documents.
  4. After 14 days we will also contact the mortgagee if payment has not been received.
  5. We will not send an LBA 2.
  6. If no Reply Form is received we will look to issue a claim on the 31st
  7. If a Reply is received, we shall refer to you for instructions with our recommendation of how we think we can best recover.

This process should minimise the impact on debtor days. Obviously, where we receive a dispute at present this increases debtor days so we do not consider that the receipt of a dispute will increase debtor days above their current level.

The PAP states that we should give a further 14 days notice to the debtor of our intention to issue a claim if no agreement has been reached after a Reply has been received. We do not yet know whether the Court would penalise the creditor if this 14 days final notice is not given. It is not, at this time, our intention to give this further 14 days notice prior to issuing a claim but we are happy to do so if you would prefer to give the debtors a final notice before issue.

These are our initial thoughts as to how the new PAP can be implemented with the least impact on debtor days fro clients but we will be working closely with all our clients to ensure that a process is in place which suits their requirements.

If you have any queries or comments, please do not hesitate to contact us on 0333 0 300 200 or email info@slcsolicitors.com

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