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Landlord and tenant – residential

Multiple Occupation – planning

Since April 2006, certain types of Houses in Multiple Occupation (HMOs) have had to be licensed by LAs (under HA 2004). These include properties that are let to three or more Ts, who form two or more households. Note, however, that there are now planning issues to be considered – and some Ls who may have already incurred costs in converting their properties to meet HMO licensing standards, may now find that they cannot obtain planning permission if they live in an area with a high concentration of HMOs.

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Sale of reversion – notice to Ts

When selling the freehold (or long leasehold) interest in a property subject to short residential tenancies, the T’s right of pre-emption under LTA 1987 must be considered. In particular, notices may have to be served on ‘qualifying Ts’.

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Assured shortholds – £100,000

If the annual rent is more than £25,000 pa, then it cannot be an assured shorthold. But, that figure increases to £100,000 as from 1 October [2010]. Whilst this change is not retrospective, it will affect all tenancies already in place on 1 October. Thus, a tenancy started before 1 October for rent of more than £25,000 pa, but less than £100,000 pa, will automatically convert to an assured shorthold on 1 October. But, commentators have highlighted a number of potential problems:

tenancy deposit: tenancies that convert to assured shortholds on 1 October will have had deposits taken on them prior to that date. Those deposits will not have been protected under a tenancy deposit scheme within 14 days of receipt. It is arguable that the deposits will not need to be protected, since they were taken at a point when protection was not required (and it is usually the act of taking the deposit that is seen as the trigger for protection).

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Discount rate – Sportelli

In Sportelli [2008] the discount rate for leasehold enfranchisement calculations was fixed at 5% for prime central London locations and all other locations.

It is worth noting that in Zuckerman [2009], the Lands Tribunal allowed a discount rate of 6% for some flats in Birmingham. However, a detailed article in Property Law Journal makes the point that it would be wrong to interpret this as a general retreat from Sportelli. What can be said, however, is that:

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Leasehold reform – ‘house’

LRA 1967 allows long lessees to acquire the freehold or be granted a lease extension, provided they occupy a ‘house’ – which is defined as ‘any building designed or adapted for living in and reasonably so called’. Some examples:

a property that had originally been a house and its associated mews (which were linked by a shared basement) was not a single ‘house’ (Malekshad [2002]);

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Tenancy – dates

Suppose you have an assured tenancy for a year from 19 January. The agreement provides for a monthly rent payable in advance on the first of each month. On the expiry of the fixed term, a statutory periodic tenancy arises. But, are the monthly periods of the tenancy from the 19th to the 18th, or from the first to the last day of the month? The answer is unclear. There are two conflicting county court cases. In Baynes [2005] it was said the actual date on which the rent falls due is irrelevant, it makes no difference to the date on which a valid s21 notice should require possession. On this basis, the period of the tenancy would be from the 19th to the 18th. But, Vodecca [2005] took the opposite view.

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Housing Act – £100,000

The threshold for tenancies to be within the scope of HA 1988 will be increased from £25,000pa to £100,000 (as from 1st October).

This change will apply to currently existing tenancies (ie not just new tenancies after that date). Thus, the bulk of tenancies already in place where the annual rent is above £25,000 but below £100,000 will automatically become assured shorthold tenancies (unless they are otherwise excluded from HA 1988 – such as company lets).

Some obvious problems seem to arise:

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Service charge – right to buy

Another interesting case on the strict application of the consultation provisions under LTA 1985. Long lessees (who had bought under the right to buy legislation) challenged various service charge items raised by Leicester City Council. In particular, Leicester had self-insured (ie it had not obtained insurance on the open market but had self-insured by taking on the insurance risk). The Upper Tribunal held that the wording of the leases did not cover any charge that Leicester made for self-insurance and thus was irrecoverable.

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Tenancy deposit – breach

We now have the first High Court judgment on the Tenancy Deposit Scheme.

What happened was that T entered into a 12-month assured short-hold. A deposit was paid to the agents who held the money as stakeholder. That deposit was not registered with the authorised scheme (DPS) until six weeks later. Subsequently, T brought a claim against the agents, on the basis that the deposit had not been registered (and information given to T) within 14 days of the money being received by the agents. Accordingly, T claimed the statutory penalty (three times the amount of the deposit). There were two issues to be resolved:

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Lease extension – assignment?

Long lessees have the right to claim an extended lease under Leasehold Reform, Housing and Urban Development Act 1993. T must serve a notice on L, and in response L must serve a counter-notice within two months.

Once T has served a notice, the T can assign that right to an extended lease to a successor in title (ie an assignee of the lease). This is important, because there is a two-year qualifying period before being able to claim the lease extension; accordingly, any potential purchaser of a flat may well want the vendor to serve a notice of claim before the sale, and then transfer the benefit of the claim along with the ownership of the flat itself (which means the buyer does not have to wait for two years, and will hopefully get an earlier valuation date and a reduced premium).

However, all this does presuppose that the lease, and the benefit of the notice, are assigned simultaneously. This may sound straightforward, but in practice there is a major pitfall. This is because the deed assigning the benefit of the claim will usually be completed at the same time as the assignment of the lease, and will often state that the legal title to the claim passes immediately. But, the key point to remember is the conveyancing principle that the beneficial title to the lease will pass as soon as the deed of assignment is completed, but the legal title will only pass when the purchaser is registered at the Land Registry. Accordingly, on the date of completion the purchaser will have full title to the lease extension claim, but only beneficial title to the lease. Ls have used this situation to argue that there has been a separation of the legal titles to the lease extension claim and the lease itself (and thus the lease extension claim is automatically deemed withdrawn under s43(3) of the 1993 Act).

The judicial authorities are confusing: ?Aldavon [1999] supported the argument put forward by Ls, but that was subsequently challenged by ?Typeteam [2007]. The answer is for the deed that assigns the benefit of the lease extension claim to clearly state the parties’ intentions, with the transfer of title to the claim being expressed to take effect on the registration of the purchaser as proprietor of the existing lease of the Land Registry. This will then ensure that the assignments of the legal and beneficial interests in both the claim and the lease take effect simultaneously. For commentary and authorities see article in [2010] 243 PLJ 20.

 


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