Rent review clauses - be careful, be very careful ...

Landlords, be very careful when increasing rent using a rent review clause in your tenancy agreement. Registered Social Landlord Riverside came a cropper a while back when tenants challenged the validity of four sucessive rent increases they had made under a rent review clause, because they had not used the rent review date given in the tenancy agreement.

The Court of Appeal agreed with the tenants, reluctantly, that the 'rent increases' were invalid and Riverside lost the claim they were bringing for possession based on rent arrears. Because most of the arrears were attributable to the invalid increases and therefore not payable.

It looks as if this decision is set for review by the House of Lords. But I suspect that their Lordships will still expect landlords to follow the wording of their rent review clauses to the letter, and if the Riverside decision is set aside it will be on the basis of some other special reason (such as that full consultation was carried out with tenants groups, they otherwise followed proper procedure and acted in good faith, it is going to cost them £7 million odd if the decision is not overturned ...) Which will not apply to private landlords.

Plus of course the Court of Appeal decision has not as yet been overruled.

Small landlords dominate PRS

Reading an article in the Landlord press, I was interested to see that the median number of properties owned by private residential landlords is 4, and that some 30% have just a single property. The private rented sector, which makes up around 10% of the housing market, is dominated by small scale private individuals who rent property as a sideline activity. Apparently only about 15% of these belong to any trade or professional body.

No doubt it is partly as a result of this, that increasing regulation is being introduced, starting with the mandatory licensing for HMOs mentioned in yesterdays post, with more to follow in due course. Landlords need to be aware of these developments or they could find themselves in difficulties.

SIs change HMO laws

Most lawyers think that the 2004 Housing Act is all about HIPS (Home Information Packs), but well informed landlords know different. It is also about the mandatory licensing of and new standards in HMOs (Houses in Multiple Occupation), and the dreaded tenancy deposit scheme, a monstrous slur on the integrity of honest landlords.

Some of these new measures came one step nearer yesterday, I am reliably informed by the government's 'alerts' service, when statutory instruments were laid in parliament.

"What is this?" I hear you say. "What instruments? What does this mean?" Well the passing of an act of Parliament is not the end but rather the beginning of a what is often very long process. The Act is rather like a statement of intent, as it frequently does not actually come into force until some time after it has been passed, after numerous consultations on how it should be implemented have been carried out, and until further secondary legislation has been passed setting out exactly how things will be done. Although there may be a big fanfare when the Act is passed (all the excitement of those three line whips), statutory instruments often sneak in unnoticed. This can cause problems as sometimes people do not know when the law has changed and unwittingly break it by carrying on with the old procedure. "Statutory instruments being laid in parliament" is not really exciting enough to get into the news, not when compared with shrines being blown up in Iraq and massive currency robberies in Kent.

What these (Housing Act 2004) statutory instruments will mean is that if you rent out HMOs, which "comprise 3 or more storeys and are occupied by 5 or more occupiers in 2 or more households" you will have to ensure that they are licensed by your Local Authority or face a huge fine and be unable to recover possession from your tenants under the section 21 procedure. They also replace the current management regulations for HMOs with new regulations, and provide powers to Local Authorities to take over the management of rented properties where there are anti-social behavior problems. SIs were also laid to allow Local Authorities to take over the management of empty properties. So now you know.

All these new measures are due to come into force on 6 April, with the dreaded tenancy deposit scheme scheduled for October. You read about it first here, but you can read more on the massive ODPM web-site here.

Murphys law

My client I wrote about yesterday contacted me today. It looks as if the tenants are moving out after all. Too late though to save him the cost of my drafting up his paperwork. But of course if we had waited, they would have stayed there forever and he would never have got his property back.

The Abandonment problem

Its tough on landlords. They provide the property, for which they are normally still making mortgage and other payments, and they are responsible for its upkeep and maintenance (for which they can be sued if they fail to comply), but what can they do if the tenant fails to keep his part of the bargain and pay rent? The answer is, incur lawyers fees for proceedings for possession and wait several months for the court case to be concluded, while the rent arrears mount up and up. Nice for the lawyers of course, but a bit unfair on the landlord.

Of course it is even more frustrating if you think that the tenant may actually have gone. But if the keys have not been returned and at least some of the tenants possessions are still in the property, you cannot count on this. If the landlord goes in and changes the locks when the tenant has not really left, then not only is he liable for prosecution, but also the tenant can sue him for unlawful eviction. And claim compensation. A nice way to wipe out those rent arrears.

I mention all this because I was discussing this very problem with one of my clients this morning. Sadly (for him that is) the keys have not been returned and the tenants still have clothes and other stuff inside. We decided that it was really too risky for him to even consider going in, so I have now drafted up the paperwork for the court claim and we will be issuing shortly. But its such a waste if the tenant really has gone after all. Not only of my clients time and money, a property left vacant when someone else could be living there (he has tenants waiting to go in), but also a waste of court time which could probably be better used for something else.

The Law Commission have been reviewing housing law generally, and I understand that it is planned to bring in a new procedure to cover cases of abandonment, similar to that currently used in Scotland. But the promised reforms are taking a long time (the Law Commission were due to bring out a final report and draft bill last summer) and in the meantime landlords are faced with a choice between bringing time consuming court proceedings or risk being sued for unlawful eviction.

Still, looking on the bright side, its all more work for me.

Legal bloggers unite

Many thanks to my legal blogger comrades from Family Lore, Human Law, and Infolaw (to visit them see links to the right) for their kind comments yesterday. Plus also I would not be blogging now had it not been for their inspiration. Blog on!

Norwegian blue

Computers are so fussy! I spent a large part of this morning drafting the landlord and tenant law newsletter I do for solicitors, only to find, after I had loaded it up to the email program on my web-site and sent out a test, that all sorts of weird things were happening, including part of the newsletter going blue (that’s colour blue, not the other blue, its not that sort of newsletter).

Anxious enquiries of my web designer, who put it through a validating program, brought forth the answer that I had been using the wrong kind of apostrophes. The wrong kind of apostrophes!! What kind of talk is that?

I think I have managed to find them all and replace them with a apostrophe in an acceptable format. But I think the newsletter can go out tomorrow now.

The legal aid disaster

I can remember, back in the early to mid 1990s when legal aid 'franchising' first came in, we were all told by 'them' that the changes were just to make things better for the firms who got the franchises. It was not going to result in lower fees, and we were certainly never going to have firms actually bidding against each other to bring the price down, oh no, no, no, no, no. It would all be better for the profession, better for the client.

Well I now read in the legal press that lawyers who do criminal defence work will be unable to get work at all if they continue to work as an independent 'sole practitioner', they will have to join up with one of a limited number of large firms who will be able to work more efficiently with 'economies of scale'. So not a lot of choice for the client there then.

In fact, dear reader, most lawyers have been leaving the legal aid scheme in droves because they simply don't see the point in such low paid time consuming work. A few public spirited solicitors struggle on, but they probably pay for this with stress related illnesses and the spectre of bankruptcy always before them.

We saw the writing on the wall in 1999 and pulled out. In the extra time gained by being released from all that form filling, I was able to set up and launch my online service Landlord-Law.

The real losers from all this are the public, though they little realise it until they try to find a legal aid firm. There is not much point in having legal rights, unless you can enforce them. And with the ever increasing complexity of the legal system, who can do this without the assistance of a trained lawyer?

Dealing with the opportunistic tenant defendant

You have to be so careful when drafting possession claims not to give any opportunity for the opposition to raise a defence.

I issued proceedings recently for a client using the accelerated procedure. The notice had been personally served by the clients managing agent by leaving it at the property, so I put in the claim form that it had been served by inserting it through the letter box of the property (as they often are). However the tenant then went and put in a defence saying that the property did not have a letter box so the notice could not have been served! So annoying, I will never mention letter boxes in my claim forms again! Of course it had been served, and he knew it. However as the defence had been raised, the Judge felt he could not make the order on the paperwork (as is normally done in this type of claim) and ordered a hearing.

However the tenant did not get away with it. Not only did I have my lady who had served the notice at the hearing to give evidence to the Judge, but I also served a schedule of costs. As a result of which, when the inevitable possession order was made, he was also ordered to pay over £500 legal costs. I doubt whether we will ever see it mind, but it made the point that if you raise silly defences which result in more work and inconveneince all round (ie an unnecessary court hearing) you will be expected to pay for it.

OFT squashes agents unfair contract term

For those who are interested in such things, the OFT (Office of Fair Trading, but OFT is easier to type) has published is quarterly report on cases on unfair terms (as per the Unfair Terms in Consumer Contracts Regulations 1999) for October to December 2005. One featured contract term, rightly squashed by the OFT, caught my eye, I quote:

“This term provided that, in the event of a sale of the property arising directly or indirectly out of the letting to the tenant, the landlord was liable to pay a commission to the agent. This was unfair for the following reasons. The future sale of the property was unlikely to be in the contemplation of the landlord at the time he entered into the agreement. If the landlord subsequently decided to sell the property to the tenant, he would have already paid for the services with which he had been provided. It was unfair to seek a bonus for a possible future event in circumstances where the agent had provided no correlative service.”

The creative use of contract terms to swell the coffers is a well known ploy, but landlords will be pleased to know that the OFT have put the kibosh on this one at least.

The ‘how changed’ section of the report goes on to say

“Now the agent merely offers an obligation free valuation of the property. The new term also states that sale of the property would be subject to terms and conditions of a new agreement.”

So now you can sell your property to your tenants, and not pay a penny to your agents. Well, probably.

That eight hours passed quickly ...

Looking at my first post, I see that I posted it at 2.09pm. Very odd, becuase looking at my clock it says about 10.20pm. So either time has gone very quickly indeed, or the software thinks I am in somewhere in America. But I am not, I am in England, UK (thats in Europe for our American readers - that funny little island off at the side), and it is not two o'clock in the afternoon, its gone ten o'clock at night. Disregard all future time notifications, they will all be wrong by about 8 hours. Unless of course I find some way to alter the display in this thing.

My first posting

A new post on a new blog. A new window on the world. Thoughts on residential landlord and tenant/housing law and practice. Thoughts on law. Or just thoughts. Hopefully at least one a week. Relevant. Concise. Informative. The occasional rant. This is the plan. We shall see.