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Landlord and tenant – residential

Service charges – summary

The onerous consultation requirements imposed on Ls under the service charge provisions of LTA 1985 are well known. But, those are only part of the overall picture.

For instance, suppose a roof is in need of repair. All of these are arguments that T could raise:

the roof did not need to be repaired at all (T can object to ‘unnecessary’ works being carried out);

if it did need repair, a patch repair would have sufficed (ie a full repair was ‘unnecessary’);

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Insulation – leaseholders

These days there is a greater emphasis on home energy conservation, and the driving down of CO2 emissions. In practical terms, many long lessees may want to introduce energy-saving measures, only to find that their leases make this impractical.

The typical long-leasehold agreement will say that the foundations, main structure, exterior and roof are the responsibility of ground L, with T being responsible only for internal repairs and decorations. But, that conventional structure creates difficulties for a T (or L) who wants to install additional loft insulation, double-glazing, or cavity wall insulation.

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Tenancy deposit – update

Two more cases illustrating the continuing confusion over the tenancy deposit rules; note that both are county court cases and thus not binding:

MyDeposits scheme does not contain all information: L registered the deposit with Mydeposits, but did not appreciate that the scheme does not provide all the information required by the Prescribed Information Order (in particular, it does not tell T what to do at the end of the tenancy if L or agent cannot be contacted, and does not explain what things L will retain the tenancy deposit against).

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Joint Ts – update

Two cases to note:

notice to quit served by one T: it is a long-established rule that one joint T can give notice to quit (without consulting the other one) and so end the tenancy. This was established by the HL in Hammersmith [1992] and remains good law.

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Tolerated trespasser – succession

The Supreme Court has finally laid to rest the whole concept of the ‘tolerated trespasser’.

If an LA tenancy had been ended by a possession order, but with enforcement being stayed by the court (or not sought by L), then the tenancy would be regarded as at an end – with T occupying as a ‘tolerated trespasser’. Legally, there would be no obligation on either side to fulfil their covenants, although there was still a requirement on the occupant to pay use and occupation charges at the same level as the rent.

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Commission – Foxtons

Last year, the High Court ruled that various commission clauses in Foxtons’ contracts with residential Ls were unenforceable. This was an important decision, since it was reckoned that there were some 15,000 letting agents using similar conditions. Accordingly, many expected a large number of claims for refunds against those agents.

In particular, the High Court outlawed a commission clause that entitled Foxtons to an estate agent’s commission if L sold the rented property to T (even if Foxtons was not involved in the sale). In the High Court’s view, such commission arrangements were patently ‘unfair terms’ under the Unfair Terms and Consumer Contract Regs 1999.

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Tenancy deposit – ambush claim

Can T wait until after the end of the tenancy to ambush L with a claim under the tenancy deposit legislation (ie that L pay the usual penalty of three times the deposit for failure to register)?

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Enfranchisement – valuation

How do you value the premium to be paid by T to L on an enfranchisement? Strictly speaking, the premium is made up of three elements: (i) the diminution in value of L’s interest; (ii) L’s share of the marriage value; and (iii) any compensation payable. In practice, of course, this is specialist valuation work and few solicitors can claim to understand the complexities involved. However, we do recommend an excellent introductory article which contains an explanation of the steps involved, together with sample calculations. It is highly recommended, [2010] 251 PLJ 9.

One point worth bearing in mind is that any enfranchisement claim will be valued as at the date that the competent L receives the claim. Accordingly, where the market values are rising and falling, it will have an effect on the premium to be paid. In simple terms, it is beneficial to T to submit the notice when values are depressed. Conversely, if the notice has been served at a time when, with the benefit of hindsight, it is near the peak of the market, then it may be beneficial to T to withdraw the claim, incur the costs, and then wait for the appropriate time (which will be a minimum of one year, and up to two years if an assignment of the existing lease has been taken and the ownership period has to be satisfied), and then serve a further notice. An exception to the ‘wait and see’ option that prices may fall, is the short unexpired existing lease term, where any potential gain through falling capital values will be offset by the decrease in the terms of the lease (and thus an increase in L’s reversionary interest). The same applies if a delay means that this will then reduce the unexpired term to below 80 years (which means that marriage value will then have to be taken into account of the valuation – which would not be the case if there was 80 years or more unexpired).

 

Forfeiture – misleading notice?

If arrears of ground rent arise on a long tenancy, then a draconian remedy for L is to threaten forfeiture of the lease. But, L must first send T a prescribed notice. However, it is now suggested that the wording of that prescribed notice is misleading and may confuse Ts.

There are special provisions for forfeiture in relation to small amounts of rent over short periods of time. Section 167 of Commonhold and Leasehold Reform Act 2002 says that L ‘may not exercise a right of... forfeiture unless the underpaid rent (a) exceeds the prescribed sum [£350], or (b) consists of or includes an amount which has been payable for more than a prescribed period [three years]’. Thus, L cannot forfeit a lease unless either the rent due is in excess of £350, or has been payable for more than three years.

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Consultation – qualifying long-term agreements

A qualifying long-term agreement is where a third party (eg a managing agent or maintenance contractor) agrees to provide services to a building for more than 12 months. If the annual cost to any individual T is more than £100, then L must follow a strict two-stage consultation (similar to the one for qualifying works, and possibly give a third notice of ‘reasons for appointment’).

L must serve a notice on the Ts and secretary of any RTA, describing in general terms the nature of the goods or services and any qualifying works to be provided under the agreement, and stating why they are necessary. Any T, or RTA, has a right to nominate contractors, from which Ls should try to seek estimates, and also has a right to make observations within a period of 30 days from the date of the notice. L must have ‘regard’ to those observations.

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Page 38 of 45

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