In Willow Court Management Company (1985) Ltd v Alexander  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In Stone v 54 Hogarth Road London SW5 Management Ltd, Mr Stone had withdrawn his application for a determination of the service charge shortly before it was due to be heard by the FTT.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  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.
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:
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.
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:
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:
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 Charlotte Collins on 01743 260121.
These are incredibly interesting and tumultuous times politically and economically but also within the property sector.
Traditional markets such as those in the leasehold and ground rent world and also the residential sales and rental market seem to be about to go through some considerable changes from market pressures and also parliamentary scrutiny.
It is reported today that a fifth of estate agents could go out of business. Research from accountancy firm Moore Stephens suggests the growth of online rivals could leave one in five estate agents at risk of going out of business, with almost 5,000 agents showing signs of financial distress. It warns that with higher staff and property costs, traditional agents are struggling to compete with online challengers such as eMoov, Tepilo and Purplebricks. Mike Finch of Moore Stephens said: “Traditional high street estate agents’ profit margins are being squeezed from both sides, from cut-price online competitors to their larger counterparts on the high street who are forcing them to up their spending or give up the race.” The report comes in a week where Countrywide and Foxtons reported declines in profit.
Last week also saw an increase in reporting on the leasehold ground rent sector as evidenced in particular by parliamentary and media scrutiny of the way in recent years that ground rents have been attached to houses (and of course flats) and the formulaic way in which those ground rents increase periodically over the life time of a lease to appear to make the ground rent disproportionate to the value of the property. Only last week The Guardian reported that the communities secretary, Sajid Javid, had outlined plans to ban developers from selling new-build houses in England as leasehold, and restrict ground rents on new flats to as low as zero. The newspaper went on to describe how victims of the so called ground rents scandal are demanding ministers go further in tackling unfair abuses of the leasehold system, amid claims that as many as 100,000 existing homeowners remain trapped in properties that are “unsellable”.
Neil Shearing, legal services consultant of SLC Solicitors, says “there will need to be some out of the box thinking from a broad strand of property entrepreneurs and investors. Markets that were once a secure and long term investment and relatively recession proof are now under some pressure. Within the leasehold sector there will always be a thriving and competitive marketplace for those interested in block management and service charge work and relationships with ground rent investors will remain in place and I expect will continue to thrive. However, certainty of ground rent incomes will now be a subject of interest and scrutiny and it would not surprise me if there was to be a consolidation of the market place by very large institutional investors once a clearer idea of the returns for this sector are known. That will take time but as we have seen in the private rented sector the emergence of institutional investors replacing smaller traditional investors has taken place over a very short period.”
Whatever happens next, and all of the above is without factoring in economic and political events such as Brexit and the possibility of increased inflationary pressures and interest rate rises, SLC Solicitors will continue to support its clients across the leasehold and private rented sectors and will react to the prevailing circumstances of the time and adapt and enhance its services to maximise and protect our clients’ interests at all times.
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 were made on the 26th March 2015. They introduced a change in the law whereby from the 1st April 2018, it will be unlawful to privately let residential and commercial properties with an EPC rating of ‘F’ or ‘G’, unless one of the exemptions detailed below applies.
It is important to note that the Regulations will not apply to properties that are not required to have an EPC or where a property is let for a period of less than 6 months or for a term of more than 99 years.
What are the Exemptions?
Relevant Energy Efficiency Improvements – applicable if a landlord can demonstrate that there are no energy efficiency improvements that can be made or where all the available energy efficiency improvements have been undertaken and the property still falls below an EPC rating of ‘E’.
Third Party Consent Refused – applicable if a tenant, superior landlord or local authority refuse consent or such consent is subject to conditions that cannot be reasonably complied with.
Reduction in Value – applicable if an independent surveyor confirms energy efficiency improvements would result in a reduction of more than 5% of the market value of the property.
Temporary Exemption (Landlord Forced into a Letting) – compliance with the Regulations is postponed for 6 months where:
If one of the exemptions applies, it must be registered in the PRS Exemptions Register. Failure to register an exemption will lead to it being ineffective. An exemption must be re-registered every 5 years.
Timescale for Compliance – Residential Properties
From the 1st April 2018, Landlords cannot grant a new tenancy or let the property as a result of an extension or renewal of an existing tenancy.
From the 1st April 2020, Landlords cannot continue to let the property.
Timescale for Compliance – Commercial Properties
From the 1st April 2018, Landlords cannot grant a new tenancy or let the property as a result of an extension or renewal of an existing tenancy.
From the 1st April 2023, Landlords cannot continue to let the property.
Penalties for Non-Compliance – Residential Properties
The total penalty imposed must be no more than £5,000.00.
Penalties for Non-Compliance – Commercial Properties
The Regulations do not provide for the minimum EPC rating to be reduced at any time in the future however it is likely to be considered to meet the UK’s carbon reduction targets for 2020 and 2050. The Secretary of State is under an obligation to review the operation and effect of the Regulations at intervals of no more than 5 years i.e. the first review must be conducted by 2020.
Advice for Landlords
It is imperative you begin an immediate review of your portfolio to identify any properties that fall into the ‘F’ and ‘G’ EPC ratings.
Once the relevant properties have been identified, it must be considered whether any exemptions will be applicable. If not and energy efficiency works are required, you will need to consider whether the terms of the tenancy allow the landlord to enter the property to carry out works. Careful planning is essential to ensure works coincide with regular maintenance or void periods.
SLC Solicitors is ready to provide expert advice and assistance in minimising the potential impact of these Regulations on your portfolio of properties.
If you would like to discuss the changes further, please contact us on 0333 0300 200 or email firstname.lastname@example.org with your queries.
On 1st October 2017, a Pre-Action Protocol for debt recovery claims will come into force.
The Pre Action Protocol applies to any business, including sole traders and public bodies, claiming payment of a debt from an individual, including a sole trader.
The Pre Action Protocol does not apply to business to business debts, that is unless the debtor is a sole trader.
What is the aim of the Pre Action Protocol (PAP)?
The aim of the PAP is to:
What do you need to know?
The impact of these changes could have a dramatic impact on a business’s cash flow. You may need to re-consider your credit control policies to prevent any unnecessary delay. This may include the ‘tightening’ up of your procedures and enforcement of stricter time limits.
We would recommend an early referral to solicitors so that the clock can start to run sooner rather than later as this will inevitably assist cash flow if the debt is paid promptly following receipt of a Letter of Claim from solicitors.
For further guidance on this pre-action protocol, please do not hesitate to contact our Process Litigation Team on 0300 0200 300, or email us on email@example.com.
It is not uncommon for tenants to want to make changes to their property during their ownership perhaps to maximise the space available or to accommodate changes in family life. The extent to which tenants can make those changes will depend on whether the lease contains absolute or qualified covenants; absolute covenants prohibit alterations completely and qualified covenants relate to alterations which are not allowed save with the landlord’s consent. Our bulletin dated 14 February 2017 deals with this more fully.
If you do want to make alterations to your flat, obviously the first step should be to check whether such alterations are allowed under the lease and whether you need your landlord’s consent. If you undertake work on your property without the requisite consent then you are exposed to a breach of lease claim.
Work such as internal redecoration does not usually need the landlord’s consent. However, alterations involving changes to the fabric or structure of the building, external redecoration or changing around of rooms which involve plumbing changes (eg bedroom to a bathroom/kitchen) will usually require landlord’s consent which is provided for in a Licence to Alter.
The Licence to Alter should protect the interests of both the landlord and the tenant. As such, some of the points it should cover are:
The Licence to Alter will often require the involvement of both the landlord’s and tenant’s own solicitors to agree a final draft. However, from a tenant’s point of view, obtaining a Licence will mean that a breach of lease for unauthorised alterations can be avoided and it will also provide security to a new buyer should the tenant wish to sell. If you have any further queries, please contact one of the team on firstname.lastname@example.org.
We often get asked by clients “How long should we retain documents?” Obviously, no one wants the bother of keeping boxes and boxes of obsolete paperwork, unless it is absolutely necessary.
There is no hard and fast rule as to this. The general recommendation, where there could possibly be tax implications, is that documents should be stored for a minimum period of 6 years. Anything less than this would be subject to criticism as not only can HM Revenue and Customs seek documents going back 6 years but also, any claims in contract or tort have a 6 year Limitation period.
Let’s look, however, at 2 specific areas which fall outside this general rule:
If you have any questions arising we will be only too happy to answer them. Please contact Charlotte Collins at any time for further advice on 01743 260121.
Under Section 20 ZA(2) of the Landlord & Tenant Act 1985 and The Service Charges (Consultation Requirements) (England) Regulations 2003 landlords must consult leaseholders before entering into contracts for more than 12 months under which relevant costs incurred in respect of any accounting period (in principle one year) exceed an amount which results in the relevant contribution of any tenant being more than £100 in respect of that period.
Examples of qualifying long-term agreements (QLTAs) can include managing agents’ agreements.
While the principal purpose of the consultation process is to seek the leaseholders’ views on the landlord’s proposals, the effect of the provisions is to limit the landlord’s ability to recover if he does not comply. If the landlord fails to carry out the full consultation procedures in the correct manner, he is not able to collect or recover service charges above the level of the statutory minimum amounts – £100 per leaseholder per year in respect of a long-term contract.
A recent case has addressed the issue of when a management agreement will satisfy the requirements for a qualifying long term agreement. In Corvan (Properties) Ltd v Maha Ahmed Abdel-Mahmoud  UKUT 228(LC) the dispute concerned the interpretation of the length of term of a management agreement and whether this was a long term qualifying agreement.
The appellant was the freehold owner of a residential building, containing 154 flats. The respondent was the leaseholder of one of the flats, which was held on a long lease. The lease contained standard service charge provisions, requiring the leaseholder to contribute towards expenses incurred by the freeholder in providing services including repair and maintenance, together with other heads of expenditure. The building was managed by a set of managing agents.
The initial dispute arose in respect of service charges totalling £24,420.83, claimed by the freeholder. This included sums in respect of a contribution towards the fees of two firms of managing agents, the current one having taken over from a previous firm.
The First-tier tribunal (Property Chamber) (FTT) disallowed part of the fees of both sets of managing agents on the grounds that the agreement between the freeholder and the first set of agents (and which also governed the services of the second set of agents) was a long term qualifying agreement and the consultation requirements had not been complied with.
It was common ground between the parties that the consultation requirements had not been complied with. In the management agreement made between the freeholder and the first set of managing agents, the ‘Term’ was defined as being: ‘for a period of one year from the date of signature hereof and will continue thereafter until terminated upon three months’ notice by either party’.
The FTT placed particular importance on the words ‘and will continue thereafter’, which it considered meant that the agreement could not be terminated before 15 months. On appeal, the Upper Tribunal found that the agreement was intended to continue until after the end of the initial period of one year. The continuation was not conditional on the absence of a notice, but was a continuation ‘until terminated’. As the agreement was for a term of more than twelve months, it was therefore a qualifying long term agreement and the fees remained disallowed.
Each case depends on its facts but the case provides a useful summary of some of the previous decisions regarding the interpretation of length of term. It also serves as a reminder of the need for clear drafting, to ensure that the length of term of an agreement accurately reflects the parties’ intentions. It has become increasingly common for managing agents to enter into management agreements for no more than 12 months, typically with an annual renewal. Such contracts; for no more than 12 months, renewed annually are clearly not qualifying long term agreements and avoid the consultation requirements.
If you need any assistance with Regulations or S.20 Consultation, contact a member of our team on 0333 0 300 200 or email email@example.com with your query.
SLC Solicitors wishes to convey its deepest sympathies to all those who have been affected by the recent tragedy in West London.
Clearly the awful and tragic events of last week’s fire, and the years leading up to the tragedy, have raised numerous concerns and questions about the structure, design and renovation of Grenfell Tower and many, many more blocks in the UK which are of similar design, age and will have been the subject of major renovations or upgrades. This will affect local authority housing stock as well as such stock sold off under mixed private and public ownership and now solely private ownership. Those involved in the management of such blocks will have been looking at their portfolios to ascertain whether any of the issues that appear to have affected the safety of Grenfell Tower will potentially affect those blocks under private management.
Major works consultation is a necessity within landlord and tenant law and whilst there is a distinction under legislation between public and private landlords in relation to the consultation process it is hugely important to ensure that leaseholders are consulted with and concerns legitimately, carefully and sensitively dealt with. Whilst the remit of the public enquiry will be wide-ranging and include concerns of leaseholders to works carried out perhaps one of the outcomes of all the questions that are now being asked is whether leaseholder consultation before, during and after major works will be more exhaustive.
Managing agents around the country will be reviewing major works carried out on buildings that have similarities to Grenfell Tower and will require support from a range of public and private bodies, as well as a variety of professional services including engineers, surveyors, health and safety advisors, solicitors and more to understand how best to protect tenants and observe absolute best practice.
Agents will also look to see what emergency procedures they can follow and how best they can alert leaseholders and sub-tenants, subject to the obligations of their management contract with RMCs and others. Communication between management and leaseholders is key as is being able to respond quickly. Agents and self-managed RMCs will now look closely at how tenants are contacted urgently in the event of an emergency whether minor or major.
SLC Solicitors has a specialist team that advise on the S20 consultation process. We are able to provide assistance on prescribed notices that must be served to tenants in advance of works, advice on how to effectively communicate with leaseholders and can guide you through this complicated and important process. We ensure that the best practice is carried out for both managing the block and also for the safety of your tenants.
SLC are able to support you from start to finish, to discuss the Section 20 process in more detail or for advice on how to approach major works with leaseholders, contact Natalie Tellis-James on 0333 0 300 200 or email firstname.lastname@example.org with your query.
BlockMedia, a provider of resident management company websites for individual or portfolios of blocks supplied directly to managing agents or self-managed RMCs, has SMS, email and other facilities that can send alerts to registered leaseholders and sub-tenants who are registered users of their own block’s website of any reported activity that requires urgent notification to residents whether this relates to suspected on-site petty theft activity, anti-social behaviour or more serious causes of immediate concern. It also has facilities to report and log urgent and non-urgent repairs and maintenance issues to agents and directors of RMCs. Such websites are a support to block managers but clearly reviews of how management and tenants communicate in emergencies will be a key feature for many over the coming weeks.
To speak about how BlockMedia can support the management of your sites please call Claire Tellis on 0333 0 306 060.
On 1st October 2017, the Government will be introducing a Pre-Action Protocol (PAP) for debt recovery claims. We think it is worth warning our clients about the PAP as it is likely to impact on their credit control procedures and our own processes and thought needs to be given to the PAP so that it does not have a negative impact on your cashflow.
The PAP applies to all businesses which are seeking to claim payment of a debt from an individual, including a sole trader. It does not apply to debts due from another business but will apply to claims for unpaid rent and service charge due from leaseholders
The thinking behind this is that introduction of a special protocol may lead to early settlement of matters between the parties without the need to resort to formal court action and to reduce costs.
It will, however, have the effect of potentially making the recovery process longer. Under the PAP the following procedures will apply to all debts:
Failure to comply with the above conditions could have the effect that any subsequent Claim being stayed to allow time for compliance of the PAP. Alternatively, the Court may impose sanctions on the party bringing the claim, such as depriving them from recovering costs or greatly reducing the costs awarded.
Whilst this is still a few months away, it may be worth bearing this in mind now and starting to consider your internal processes for chasing unpaid demands and the stage at which debts are referred to solicitors so that the extra time afforded to the debtor after issuing a letter of claim and before a claim can be issued does not result in a large increase in debtor days and impact upon the cashflow available to a management company or landlord.
It may be that you want to put in place your own PAP compliant letter of claim at an early stage or you may prefer to refer debts for collection at an earlier stage. Obviously, each management company and Landlord will have a slightly different requirement and view as to the way in which this new protocol will need to be integrated.
We shall be working hard with all of our clients to give training and advice as to this protocol and to ensure that the steps put in place meet your requirements whilst also meeting the PAP criteria. If you have any queries relating to the new PAP, or how this may affect you, contact a member of our team today on email@example.com or call 0333 0300 200.