The Private Rental Sector (PRS)

Are you a residential landlord or tenant?

The Housing Act 1988 is one of the leading statutes governing property law in England, laying out the rights and responsibilities of landlords and tenants. In addition to the rights within the law, landlords and tenants will be bound by the tenancy agreement which they both sign prior to commencement of the tenancy.

The right for a landlord to regain possession of their property:

The Housing Act 1988 wanted to encourage more people to rent out their properties. The Act granted landlords far greater flexibility in matters such as rent and possession. There are two ways in which a landlord can regain possession of their property:

  1. Section 8 allows a landlord to regain possession as a result of a failure/breach by the tenant in accordance with Schedule 2 of the Act such as; rent arrears (ground 8) or anti-social behaviour (ground 14). A Section 8 notice can be served upon the tenant at any time giving the tenant two weeks notice to vacate the property.
  2. A Section 21 notice is known as the ‘non-fault notice’ because the landlord can automatically regain possession of the property without having to give a reason and/or without the tenant being in breach. A landlord must give the tenant a two month notice period when serving a Section 21 notice.

If a tenant fails to vacate following a Section 8 or Section 21 notice:

Following the expiry of either a Section 8 or a Section 21 notice, a landlord is entitled to commence possession proceedings through the courts against the tenant in attempt to obtain a possession order which is legally enforceable.

Section 21 notices to be abolished:

The Government has confirmed its intentions to repeal Section 21 of the Housing Act 1988 in the May 2022 Queen’s Speech, as originally set out in the Renters’ Reform Bill released in late 2019, and “strengthen the rights of tenants.” The Government has also proposed strengthening the grounds for repossession under Section 8 of the Housing Act 1988 as a result of the removal of Section 21. This would not directly replace Section 21, but will strengthen the rights of landlords under the current Section 8 provisions.

Impact on landlords:

There is uncertainty for landlords as the proposals do not address how a landlord will go about regaining possession of their property once the fixed term of their tenancy agreement expires. Landlords may find it more difficult to evict their tenants where the tenant has not breached their tenancy agreement and landlords will have to provide valid reasoning when evicting their tenants.

Impact on tenants:

Tenants will have more security following the implementation of the proposals as the tenancy cannot be terminated through no fault of their own meaning that private renter families will have greater financial security. Tenants will be able to choose to end the tenancy, as long as they provide sufficient notice to the landlord.

For further advice, please contact Amelia Calton:

Amelia.calton@slcsolicitors.com

01743 260114.

The Building Safety Act 2022 – Will it affect you?

It is now five years since the Grenfell Tower tragedy which brought the safety of high rise blocks of flats into sharp focus. The Building Safety Act 2022 (“the Act”) received Royal Assent on 28 April 2022 and will introduce a stricter regulatory regime designed to improve standards and safety in the construction industry. It will also introduce new duties on those involved with the design, construction and block management as well as provide new protections for leaseholders.

The Act will come into force in stages over the next 12 – 18 months, but it is important that those involved in the construction industry as well as landlords, property managers and leaseholders are aware of the forthcoming changes.

Key provisions

The Act:

The Act is an important and timely piece of legislation which will impact the construction, maintenance and management of some leasehold blocks. In order to ensure compliance with the relevant provisions, as they come into force, clients will need to be aware of the new duties and liabilities so that they can make the necessary preparations.

For more information about the impact of the Building Safety Act 2022,  please contact Joanne Macdonald in our Property Team at  jem@slcsolicitors.com

Joanne has been working at SLC Solicitors since 2018 and has experience in landlord and tenant law with particular specialism in lease extensions and variations.

5 things to know about being a RMC Director

Leaseholders who acquire a flat might choose to become a Director of the RMC or RTM company that manages the block.

An RMC will only be successful if leaseholders participate in the running of the company – so what do you need to know before signing up?

1.

What is a Director ? An officer of the company  empowered to make decisions that will bind the company. A Director is responsible for making sure the company meets its obligations and ensures compliance with legislation (eg Health & Safety, compliance with Companies Act) . A Director might be responsible for selecting the managing agent to run the site or contractors or  appointing a  solicitor to provide effective credit control.

2.

The main role of a Director is to run the company for the benefit of its shareholders or members. Directors obligations and rights are contained both at Common law and  in the Companies Act– there are 7 statutory duties such as

3.

Although a company is a legally separate entity breach of those fiduciary duties can lead to consequences for the Director personally. Insurance is available for Directors to protect against financial liability. The Directors  duties are owned to the company, not to the individual shareholders. It is possible for the company to ratify some  breaches  and the court also has the discretion to grant relief.

4.

Appointment and removal of Directors is governed by the Articles of the Company and the  Companies Act 2006. There are rules about who is eligible to become a Director.  A company must have at least one Director  or it would be in breach of the legislation and be dissolved.  We usually recommend between 2-5 Directors and having an  odd number  can avoid a stalemate when voting on issues.

The role of a Director is usually unpaid and voluntary. It is possible for a director to contract with the company in respect of remuneration, particularly if they have particular expertise.

The role of a Director is a crucial one in ensuring the smooth running of the company ,  which is crucial for enhancing and maintaining the value of your property. A malfunctioning RMC not discharging its duties  could be a potential deterrent for purchasers and so it is important for all shareholders or members to realise that the power (and responsibility) is in their hands.

A peppercorn for all – new ground rent reform

There are big changes afoot in the leasehold sector. The Leasehold Reform (Ground Rent) Act 2002 received Royal Assent on 8 February 2022 and its impact is expected to be felt by developers, landlords and leaseholders across the country.

The Act has been described by the Government as ‘’part of the most significant changes to property law in a generation’’ and will abolish the creation of new ground rents for qualifying residential long leases.

For years, escalating ground rents has been a contentious issue. This is especially true where conditions are met giving rise to the possibility that residential long leases granted could be held to be an AST (Assured Tenancy) under the Housing Act 1988.

The new Act will prevent the creation of rapidly doubling or escalating ground rent payments and aims to create a fairer and more transparent ownership system for leasehold property.

What does this mean for landlords?

Landlords will need to be mindful of the provisions of the new Act when granting new leases to ensure they are not unwittingly in breach.  The Act is not retrospective so existing ground rents are unaffected, but landlords should take care when varying existing leases as a  variation  which gives rise to a deemed surrender and re-grant  will be subject to the peppercorn ground rent cap.
Landlords who demand ground rent in contravention of the Act and fail to refund it to the leaseholder within 28 days will be liable to face of fine ranging from £500 – £30,000 per qualifying lease.

Additionally, leaseholders of qualifying residential long leases have the right to apply to the First-Tier Tribunal (Property Chamber) in England for a declaration that a term reserving prohibited ground rent is replaced with peppercorn rent.

The provisions of the 2022 Act are expected to commence within six months of Royal Assent and are only a small part of the Governments wider leasehold reform scheme and it is likely that further measures to existing residential long leases will be announced in the future.

If this decision affects your existing site or you would like advice on whether proposed variations or grants of leases will fall within the Act please contact Laura Gregory to discuss further.
lg@slcsolciitors.com

Laura has been working at SLC since 2009 and has a wealth of experience in landlord and tenant law as part of the Property Team with  particular specialism in lease extensions and variations.

Coronavirus and Commercial Tenants – Where are we now?

The Moratorium

Since March 2020, the government imposed moratorium placed limitations on landlords seeking possession for rental arrears in respect of commercial tenancies;  this was extended in June 2021 until 25 March 2022.

This extension was to allow sufficient time for new legislation to be drafted and provide landlords and tenants in England with additional time to negotiate and settle outstanding rental arrears.

Summary of the current position

In the recent decision of London Trocadero (2021) LLP v Picturehouse Cinemas Ltd, the Judge granted summary judgment to the landlord in respect of rent arrears and dismissed the tenant’s application to adjourn the summary judgment application on the basis of the government’s announcement that it intends to legislate for a binding arbitration scheme relating to rent arrears. This is the third case this year where the arguments advanced by the tenant to avoid paying rent during the pandemic have failed and the decision comes on the back of  Commerz Real Investmentgesellschafft mbh v TFS Stores Ltd [2021] and Bank of New York Mellon (international) Ltd v Cine-UK Ltd [2021], in which the tenants’ arguments were rejected by High Court Masters, including the argument that the rent cesser term in the lease applied because the premises had been ‘damaged’ by coronavirus, which was an insured risk.

The decision will be welcomed by landlords and will serve as a reminder for tenants who have been either unwilling or unable to reach an agreement with their landlord regarding payments due whilst they were unable to trade during the pandemic.

The Commercial Rent (Coronavirus) Bill

The Government has now announced, in the form of the Commercial Rent (Coronavirus) Bill, proposed new laws and a further Code of Practice with the objective of resolving remaining commercial rent arrears accrued during the COVID-19 pandemic. The proposed plans, if enacted,  will “ringfence” Covid related rent arrears and establish a binding arbitration system for those debts that cannot be resolved by agreement in accordance with the new Code.   The new regime applies only to rental arrears on business tenancies relating to any period between 21 March 2020 and 18 July 2021 during which a tenant was obliged under Covid regulations to close the whole or part of its business. It will include  service charges, interest and sums payable to top up rent deposits. However, is limited to sums which relate to the Protected Period.

It cannot be used to re-open existing rent concessions/settlements which have already been agreed between the parties and parties are encouraged to seek settlement where possible. Where it does apply, the arbitrator will be able to write off or defer (for up to 24 months) payment of arrears which relate to a Protected Period, in line with the updated Code of Practice, which can be found on the government website.

This will mean a return to normal contractual arrangements for those tenants able to pay rent debts in full and not affected by closures, and for any debts accrued outside of the Protected Period.

Court Proceedings

Landlords who issued before 10 November 2021 may continue proceedings. In claims where landlords issued on or after 10 November 2021, the tenant is entitled to have the proceedings stayed pending arbitration, and if judgment in such proceedings is given, the judgment cannot be enforced until the six month window for invoking the arbitration scheme has passed or, the conclusion of any arbitration referred within the six month window.

Next Steps

The draft Bill is expected to come into force by March 2022. However as noted above, tenants will be entitled to a stay of any court proceedings for recovery of coronavirus arrears, to which the arbitration scheme applies, issued on or after 10 November 2021.

Either the landlord or the tenant may refer arrears which relate to a protected period to arbitration during a period of six months starting on the date the legislation comes into force. It appears there will be no further protections for tenants who fail to apply for arbitration during the six month window.

Since the legislation shall not affect existing agreements, our advice would be for parties to come to agreements on their own terms, before mandatory arbitration is forced upon them.

SLC Solicitors litigation team can assist with all types of rent and service charge arrears, contact Justine Oliver Ward for more information  – jow@slcsolicitors.com

The Renting Homes (Wales) Act 2016:

The Welsh Government is implementing The Renting Homes (Wales) Act 2016 as of the 15th July 2022. The Act will bring in new rules and and provisions about renting a home in Wales.

The Act seeks to make renting a home simpler and easier by making amendments to current tenancy laws in Wales.

Tenancy Types:

The Act is bringing in changes to tenancy types by replacing current tenancies and licences (including assured shorthold, assured and secure tenancies) with the following:

Landlord Types:

Landlords will be categorised into one of two groups:

Occupation contracts:

Community landlords, as defined above, will be those that provide secure occupation contracts which will include standard terms. Contract holders (AKA tenants) must be supplied with a written statement from the landlord within 14 days of moving into the property, which details the rights and responsibilities of both the landlord and tenant. Should the landlord fail to provide the same within the time specified, they will be subject to penalties.

Bringing occupation contracts to an end:

The rules to bring an occupation contract to an end are changing, these include the following:

The Renting Homes (Wales) Act 2016 is implementing many changes for residents in Wales and if this affects you and you would like advice on your rights, please contact Amelia Calton to discuss further on:

Amelia.calton@slcsolicitors.com

Estate Services and RTM companies – a new approach announced by the Supreme Court.

Landlords and RTM companies who have struggled to reach agreement on shared estate services  in accordance with the concepts established in the Gala Unity* case of 2012 will be happy with the decision of the Supreme Court in the Settlers Court** case in which judgment was given this month which brings certainty to shared services upon the acquisition of RTM.

The Supreme Court has determined that RTM extends only to the management of the building and such appurtenant property over which the occupants of the building have exclusive rights and not to estate services which are shared by the RTM company and other blocks. Those estate management functions  are to remain under the control of the previous Manager who has the continuing  power to recover those estate costs through the existing leases.

When the Gala Unity case was decided,  the court advised RTM companies and Managers that they would need to work together to avoid duplication of estate services as they concluded that the RTM company would acquire the shared management functions  in relation to their leaseholders  but the previous manager would still owe a duty to the other parties on the estate to continue the services. The natural conclusion was an issue of recoverability for whichever party provided the services unless the parties could reach agreement.

The Supreme Court has now determined that Gala Unity was wrongly decided and so this new approach is not a change to the legislation itself,  just  how that is to be implemented.

The court acknowledged that because of the Gala Unity case,  there are many estates where the RTM company and freeholder are working together  to manage those shared spaces and those look set to go back to the control of the previous managers.

If this decision affects your existing  site or you would like advice on whether property or services are  “exclusively enjoyed”   please contact Analise Broomhall to discuss this further on

adb@slcsolicitors.com

The top 5 things to know about extending the lease of a flat

You might already know that a leasehold interest is a decreasing asset which will need to be extended but what else  do you need to know ?

1. Statutory right

A Leaseholder who has owned a flat for more than 2 years has a statutory right to a lease extension and a landlord cannot refuse to grant an additional 90 years and to reduce the ground rent to a peppercorn (ie NIL). The process and timetable is fixed by the legislation.

Alternatively the parties can reach an informal agreement outside the statutory process.

2. Reform is coming

The government have announced reform is coming and it is generally expected to be leaseholder friendly possibly permitting 900 additional years  but the exact details  are not yet known.

SLC solicitors can help you decide whether it is better to extend now or wait until the reforms are confirmed.

3. Premium

A Leaseholder pays a premium to the landlord for extending the lease. Calculators are available online to give a ball park idea of the premium likely to be paid but a surveyor’s advice is usually crucial to understand if the proposed premium is a good deal.  The Leaseholder is also responsible for the landlord’s costs in extending the lease.

4. Why does 80 years matter ?

Under the current regime, lease extension becomes more expensive when there are less than 80 years remaining on the lease as marriage value is included as an additional valuation basis in calculating the premium.  You should check the remaining term on your lease or leases and,  if you are a leaseholder  approaching 80 years  remaining (ie a 99 year term granted in the mid 2000s),   you should be seriously considering making an application before it becomes more expensive.

5. Applying to the first tier tribunal

The First Tier Tribunal can determine any aspect of a statutory lease extension which is not agreed between the parties such as the costs or premium payable.  Each party usually bears their own costs at Tribunal so there are not the same cost implications as with the court.

SLC Solicitors act both  for leaseholders in extending the term of their lease and landlords in granting extended terms. We can provide advice on all aspects of the statutory process or extension by agreement to determine which is right for you.  Contact us below.

Court fees to increase

Earlier this year, the Government launched a consultation on ‘Increasing selected court fees and Help with fees income thresholds by inflation” which investigated the opinions of a number of sectors as to the appropriateness of the current charges to understand if they had kept pace with inflation and inherent costs.

There was significant objection to the cost increases, many citing it was too soon after the pandemic crisis to impose such increases, and even a number of respondents who agreed with the concept of inflationary increases nevertheless noted that now, during the pandemic, may not be the right time to implement these changes. Notwithstanding these responses, the Government has decided to press ahead with the fee increases, saying: “…there is strong justification…”.

What does this mean for you?

The proposed increases come into effect on 30 September 2021 and will include a number of court fees. For example, the Application Fees for Attachment of Earnings Orders, Charging Orders and Third Party Debt Orders will be rising to £119.00, and the fee for issuing a £2,000 debt claim will rise from £170 to £180. A full list of all the current court fees and their recommended increases in the report can be seen in full https://consult.justice.gov.uk/digital-communications/increasing-selected-court-fees-income-thresholds/results/court-fees-increasing-consultation-response.pdf

The Ministry of Justice has acknowledged that Covid-19 has had an impact not only on individuals but also businesses, but has stated this would be offset by proposed extended thresholds for offering help with fees for those on low income,

For further information in respect of the increase to Court fees, please do not hesitate to contact our Mrs Lakhvir Bassi on 0333 0 300 200 and/or email lakhvir.bassi@slcsolicitors.com.

Landlords and tenants – where do you stand now the moratorium on evictions has ended?

The last couple of years has been tough for everyone, emotionally, physically, and financially. Thousands of people in rented accommodation have been left wondering if they’ll be able to keep a roof over their heads as their jobs either disappear or they’re put on furlough on less than their usual wage.

For small businesses, the situation has been even bleaker. With doors shut for months on end and custom slashed to zero during the height of the pandemic, there were thousands of businesses who still had overheads such as rent and business rates but no income whatsoever. The hidden cost of the pandemic could go on for years.

In the immediate future, though, another worry has raised its head. For months, the government mandated that evictions were to be halted in both the domestic and the commercial sectors. Then, as the crisis started to ease and our lives opened back up, the concern was that thousands of domestic tenants and business tenants alike would be forced out of their homes and business premises.

Business tenants – an extension until 2022

Business tenants currently have a little bit of breathing space. The government has extended the ban on evictions of businesses who stopped paying rent during the crisis until March 2022, to give them a chance to try and rebuild their businesses, and, hopefully, clear their arrears.

However, while business owners are perhaps breathing a little sigh of relief over the extension of the moratorium, landlords are deeply unhappy that it could allow some businesses to withhold paying their rent for a further nine months. The bill to landlords could be astronomical, leading in some cases to financial hardship and even bankruptcy.

The somewhat-optimistic government plan is for businesses to ‘trade their way out of debt’, but with such a dramatic change in the way people shop, is that even possible? Landlords think it’s not, and are increasingly concerned about the prospect of tenants racking up even more rent arrears all the way through to next March.

Landlord associations are accusing the government of ignoring the plight of the sector, and while the ‘orderly resolution’ of debts will be tackled by a raft of new legislation, there’s no guarantee that it will help either business tenants or, in particular, landlords facing financial hardship as a result.

What about residential tenants?

For residential tenants, things are not so secure. While evictions were banned under the Coronavirus Act 2020, as of the end of May, landlords were allowed to start serving eviction notices as long as they gave tenants a minimum of six months’ notice. In cases of domestic abuse, violence or anti-social behaviour, or where tenants had accrued over six month’s rent arrears then landlords could evict sooner.

From June 1st 2021, the notice period shortened to four months, and from 1st October 2021 the notice period for cases where there are less than four months’ arrears drops to two months. As of 31st May, bailiff enforcement (which had previously been suspended) was re-introduced, but with the proviso that bailiffs must give 14 days’ notice of an eviction enforcement.

A legacy of debt and misery

Nobody has come out of the pandemic as a winner. For landlords, they’ve seen their rental income slashed to the bone, and face the prospect of costly court cases to try and recoup some of the arrears they’re owed by both domestic and commercial tenants.

For residential tenants struggling to pay their rent, the threat of eviction is now once again very real. And for businesses currently on their knees, they face the prospect of ploughing every penny they earn not into developing their business, but paying off months of rental arrears with no guarantee that they’ll still be able to carry on trading at the end of the pandemic.

Covid-19 has killed hundreds of thousands of people in the UK. But another underlying tragedy of this pandemic is only just starting to emerge. If you’re a tenant facing eviction, or a landlord desperately trying to get your tenants to pay their arrears, talk to one of our property law team today.

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