Beware buy to let baloney

Two articles in the Observer today, which you can read here and here show that there are still people out there making money out of other people's greed. Companies such as those featured in the articles, feed off people's desire to get 'something for nothing' and willingness to believe that they can have this with buy-to-let properties.

However although there is no doubt that some people have made huge sums from buy to let, these are invariably people who have done an enormous amount of homework on investing and the property market, and really know what they are doing. It is very easy to go horribly wrong if you buy the wrong property, and one buy-to-let investment course (however expensive it is) will not necessary prevent this happening.

Plus with the new regulations coming into force on houses in multiple occupation, landlords who let to more than two unrelated tenants will have to comply with more onerous management duties from 6 April, and if their property has more than two storeys (including habitable attics and basements) may need to get a license from their Local Authority or face fines of up to £20,000.

Nice try

You can’t keep a devious tenant down. I read in one of my legal journals of a tenant who issued legal proceedings against his landlord and gave as the landlord address for service of the court paperwork, the building where his own flat was. When the landlord failed to respond to the proceedings (because, surprise surprise, he had not received them), the tenant obtained a ‘default judgment’ (which is a procedure for obtaining a court judgment on the basis that the defendant has not responded to the claim).

When the judgment was challenged (when the landlord finally found out about it), the tenant said that he was justified in giving the building where he lived as the landlords address, as the landlord went there to collect rent and it was therefore a ‘place of business’ within the meaning of the court rules. The Court of Appeal however did not agree. Letting a property, they said, was not capable of converting that property into a place of business, as the landlord only has limited power to enter it. The judgment was set aside.

For those interested, the case is O’Hara v. McDougal [2005].

Stranger than fiction

We are buying a new car (well new to us). We drove out to test drive it, but when we arrived the salesman couldn’t believe his eyes. We were driving his old car! He had been the previous owner before us.

If that sort of thing happened in a novel you would say it was impossible. Sometimes life is very strange.

The Scarman Lecture - Scarman's great legacy

Looking at the Law Commission’s web-site recently (as you do) I noticed that they had published the text of a recent lecture (20/02/05) – Law Reform and Human Rights – Scarman’s Great Legacy, by the Hon Justice Kirby (an Australian Judge). So in rash moment I downloaded it and printed it out.

It was most interesting. Kirby compares Lord Scarman to Lord Denning as typifying two different judicial approaches – Scarman judging very much by the letter of the law on the basis that change should come about by Parliament amending the law, as opposed to Denning’s view that Judges had made the common law in the past and could make and remould it for the present and for the future.

However Scarman was not just a boring Judge, judging only by the letter of the law. He accepted that in many aspects the law is deficient and worked to improve this. The lecture looks at two great initiatives championed by him.

The first is the Law Commission. This was set up in 1965 as an independent body to continually review, reform and codify the law, and Scarman was its first chairman. The Law Commission is of course very active today and does excellent work (in my own field it has been looking to review housing law). However there are problems, identified by Kirby. One is the sheer volume of published law nowadays, and the fact that there that there is no guarantee that the carefully considered proposals for reform will actually make it onto the statute book. Another is that powerful ministers often like to have control over the law making process themselves.

The other great reform, championed by Scarman, was an enforceable statement in English law of fundamental human rights. This finally came to fruition as the Human Rights Act in 1988. Judges can now use this to help them ‘attend to injustices that Parliament have created thoughtlessly or overlooked’. However unlike the Denning approach, this is one enshrined in statute.

This is a ridiculously brief overview of an extremely erudite lecture which runs to some 64 pages. However if you have found it interesting I would suggest you read the lecture for yourself, which can easily be downloaded from the Law Commission home page. It is written clearly in an approachable style and will be particularly interesting for anyone interested in Law Reform and its history.

A can of worms, by design

Doing the research for an article for my website today, I read for the first time the new HMO Management Regulations, which I mentioned briefly in a previous post.

It looks like life is going to get tougher for landlords, particularly those whose properties are not up to scratch. These new regulations impose new obligations, for example to have electrical checks done at least every five years (plus landlords will be obliged to provide copies of certificates for this and their gas certificates to the Local Authority on demand within 7 days), plus properties will have to be safe, not only with respect to their fire safety and structural condition, but also by reason of their design. Does this mean, I wonder, that ill designed properties will become effectively impossible to rent out? That sounds like a can of worms to me.

Because these regulations are important. Because they will apply to far more properties than the old regulations. Because as a result of the new HMO definition in the Housing Act 2004, far more properties are likely to be HMO’s.

So I would strongly recommend all you landlords of properties with more than two people who are not family members sharing, to check these regulations carefully to see that you are compliant. Because you may find that they apply to your properties.

The new regulations come into force on 6 April 2006.

Observations on the Observer

Today being Sunday, one of the main activities of the day is reading the Sunday papers. We used to get both the Observer and the Sunday Times, but it was a bit much to read, so as my husband dislikes the Sunday Times it had to be the Observer. Which I like, but don't you think its diminished somewhat since it changed its size?

For a start, it used to have several property pages in the Cash section, but there is now no separate Cash section, just the Business section of which Property is only one page. Then the magazines are smaller, and the whole lot just seems to be so much lighter when I carry it from the front door into the sitting room of a morning. Of course if they really are packing in the same content on less paper then this is good for the environment, but are they? There has, I note, been no commensurate reduction in price.

The most important problem of this new size however is that I can no longer use it for wrapping up the ash from my coal fire in the office, forcing me to develop a new system of using tabloid sized newspaper in a plastic bag.

The Ob does have some excellent content however. For example there was a very interesting article this week, on the increasing importance of the internet. I like articles on the importance of the internet as I run an internet business and therefore have a vested interest in its continuing success. Long may it continue!

ASBOs made against anti-social landlords

Local authorities and the police are starting to get tough against bad landlords. In Manchester an ASBO was made against landlord Mansha Shaheen in November 2005 preventing him from using or threatening violence against his tenants. Reported in the local press.

A similar order was made against a large private landlord, Steven Dickens, in Conwy, Wales in January. Interestingly this order not only prohibits him from using abusive behaviour against his tenants and withdrawing services, but also from approaching Conwy County Borough housing staff without an appointment. Apparently he made threats against staff when asked by them to effect repairs to his properties. He sounds like a nice man – he subsequently breached the ASBO order and has had his passport confiscated pending a criminal prosecution for mortgage fraud. Read all about it here.

HHSRS guidance published late

I read in the excellent Legal Action magazine that the government is late in publishing guidance to Local Authorities on the new Housing Health and Safety Rating System ("HHSRS"), which comes into force on 6 April. The Governments own published program provided for it to be distributed in January. Legal Action say it is not published but looking on the ODPM web-site, I see that guidance went online on 27 and 28 February, presumably after Legal Action went to press.

Still, not really good enough is it? The Local Authority officers have to go live with this stuff on 6 April, which is not long off. I wish them the best of luck!

Tie the Judge down with a mandatory ground

I always say that you should only ever apply for a possession order if you have a mandatory ground, but it is only when you see what can happen if you don't, that you realise how very important it is.

What do I mean? When you go to court for a possession order, your claim has to be based on a legal ground (or reason). There are two types, discretionary and mandatory. As you would imagine, a discretionary ground is where the Judge does not have to make an order if he does not think it right. So if you want certainty, go for the mandatory ground.

However there is another reason. If you have a discretionary ground, even if he grants you an order for possession, the judge can put off the date when the tenant is supposed to go (called a stay or suspension), for as long as he considers fit. But if the order is based on a mandatory ground he cannot delay the possession date by more than six weeks.

You can see the sort of thing that can happen by looking at some of the claims made against social tenants where mandatory grounds are not available. In a recent case involving a tenant with a bad history of rent arrears (Richardson -v- Ealing London Borough Council [2005]) , eight attempts (eight!) were made by the Council to send in the bailiffs, and every time the tenant had been able to persuade the Judge to grant another stay. On the ninth occasion the Council decided that enough is enough, and appealed the decision to grant yet another stay. However the Court of Appeal upheld the original decision saying that although it was very generous, the decision was not outside the ambit of District Judge’s discretion. The Council officers must have been tearing their hair out!

Moral – Judges do not like evicting tenants, and the only way to be sure to get them out is to use a mandatory ground where the Judges hands are tied.