Since the law changed in 2016 it has been easier for tenants to make RRO applications as tenants can apply straight to the First-tier Tribunal (Property Chamber) without waiting for the local authority to obtain a conviction. Tenants have 12 months from the date of the offence to make an RRO application so landlords frequently receive applications from former tenants many months after they have moved out. In many cases, the first notice the landlord will receive is a letter from the Tribunal informing them that an application has been made. Although RRO applications can be made on the basis of a number of housing offences including unlawful eviction or harassment, the majority of applications relate to licensing offences: failure to obtain an HMO licence under mandatory licensing or a local authority’s additional licensing scheme or failure to obtain a selective licence for a house in a selective licensing area.

Here are 10 things to consider if you receive an RRO application:

1. Seek independent legal advice

An RRO application is a serious matter. In order to determine the tenants’ application the Tribunal will need to make a finding on whether a criminal offence has been committed. While the Tribunal case cannot lead to a criminal conviction (only the criminal courts can convict a landlord) it can result in a public decision that the landlord has committed a criminal offence. The local authority could rely on this when taking enforcement action against the landlord, for example, serving a financial penalty notice or starting a prosecution. Early, independent legal advice is therefore important so that full details of the offence and any defence can be explored.

 

2. Have the tenants made their application against the correct person?

RROs can only be made against a tenant’s landlord. They cannot be made against a tenant’s agent. The Court of Appeal case of Rakusen v Jepson [2021] EWCA Civ 1150 also confirmed that an RRO can only be made against the tenant’s immediate landlord and not a superior landlord, for example, in situations where the property owner has let their property to a tenant who has sublet the property to the occupiers claiming the RRO. However, the Rakusen case is being appealed to the Supreme Court with a decision expected next year.

 

3. Have the tenants applied in time?

Tenants have 12 months from the date of the offence to make a RRO application. The Tribunal does not have the power to extend this deadline. If the tenants do not apply in time their application will be statute-barred and they will not be able to claim an RRO.

 

4. Are the tenants entitled to make a RRO application?

The offence must relate to housing that, at the time of the offence, was let to the tenant. If the property was not let to the tenant, for example, they were living at the property without the landlord’s permission, then they may not be entitled to claim an RRO. Note, however, that the occupier does not need to be a tenant to apply for a RRO and licensees can also apply.

 

5. Has an offence been committed?

Tenants need to prove that an offence has been committed beyond reasonable doubt which is the criminal standard of proof. Some cases will be straightforward and tenants will be able to prove this relatively easily while other cases will be more complicated, for example, in HMO cases where occupants have individual agreements for different rooms in a property and there are disputes regarding how many people occupied at any given time. The legal rules governing whether a property is an HMO and/or whether a property requires a licence are complex. Each element of the offence will need to be considered and the tenants will need to provide evidence to demonstrate that the landlord has committed an offence. In a recent case, the Upper Tribunal was critical of the tenants relying on pro-forma witness statements that omitted to deal with a key component of the offence. The Tribunal could not be satisfied to the criminal standard that an offence had been committed and refused to make an RRO.

 

6. Is there a defence?

A landlord may have a defence to the claim. With licensing failures, the offence ceases once the landlord has ‘duly made’ an application for a licence. Licensing offences are strict liability offences which means the landlord does not need to have intended to break the law. However, the law does provide for a defence of ‘reasonable excuse’. A landlord may have a defence if they can prove, on the balance of probabilities (the lower, civil standard of proof), that they had a reasonable excuse for managing or being in control of an unlicensed HMO or house. There is no definition of what constitutes a reasonable excuse and each case needs to be considered on its own facts.

 

7. Have the tenants applied for the correct period?

If the tenants can prove that an offence has been committed and the Tribunal decides to make an RRO, it is important to assess whether the tenants have applied for the correct amount. The maximum amount the Tribunal can order is 12 months’ rent but with licensing offences, the amount must relate to rent paid in respect of the period during which the landlord was committing the offence. It is therefore important to consider carefully whether an offence was being committed for the whole period for which the tenants are submitting the RRO application. It may be that the offence had ceased because there were periods when the property’s occupancy changed so that it was no longer a licensable HMO or the offence had ended because the landlord had applied for a licence.

 

8. Will the Tribunal make an RRO application for 100% of the rent?

With tenant applications for licensing failure offences the Tribunal is not required to make an RRO application for the maximum amount: the full 12 months’ rent. The Tribunal retains discretion over the amount to be awarded and must take into account certain factors including the landlord’s and tenant’s conduct, the landlord’s financial circumstances and whether the landlord has ever been convicted of an RRO offence. In a recent case, the Upper Tribunal confirmed that considering the seriousness of the offence is a key part in assessing the level of the RRO.  All the circumstances of the case need to be considered.

 

9. Does the case have to go to a hearing?

Just because the tenants have commenced a claim in the Tribunal, this does not mean that it has to proceed to a final hearing. The Tribunal usually encourages the parties to communicate early in the claim process with the aim of trying to settle the dispute. The parties are free to negotiate and, in appropriate cases, early offers can be an effective way of settling the claim without incurring the time and cost of complying with Tribunal directions and attending a hearing.

 

10. What are the benefits of reaching a settlement?

There are benefits to both parties in reaching a settlement rather than proceeding to a Tribunal determination. The parties can agree terms that the Tribunal cannot order, for example, they can agree to keep the terms of settlement confidential. The parties can also settle without any admissions of liability and avoid a tribunal finding on whether an offence has been committed. Settlement also has advantages for tenants as they are likely to receive payment more promptly.

 

How Anthony Gold can help if you receive an RRO Application

Sarah Cummins is a senior associate based in our London Bridge office, specialising in residential landlord and tenant disputes. She has extensive experience of cases involving Houses in Multiple Occupation (HMOs) including property licensing, management and council tax. She has represented landlords in tribunal appeals relating to licence conditions, improvement notices, prohibition orders and rent repayment orders.

Anthony Gold has a team of experts in RROs and we are frequently approached to assist in settlement negotiations and representing parties in the Tribunal. If you are looking for help with an RRO application, please contact us.

5 things private landlords need to know about the new changes

From 1 October 2022 the Smoke and Carbon Monoxide Alarm Regulations in England will change. Private landlords will be required to comply with the new obligations from this date. Below are 5 key things private landlords need to know about the new regulations.

1. Carbon monoxide alarms will now be needed in more rental properties

At present, under the existing 2015 Smoke and Carbon Monoxide (Alarm) Regulations landlords must install a carbon monoxide alarm in any room which is used wholly or partly as living accommodation and contains a solid fuel appliance, for example an open coal fire or log burning stove. This requirement is being extended so that from 1 October 2022 landlords will be required to provide carbon monoxide alarms in any room with a fixed combustion appliance. This will bring gas appliances such as gas boilers within the remit of the regulations, however, gas cookers are expressly excluded. This means that most properties save for those powered solely by electricity are likely to need carbon monoxide alarms.

 

2. Landlords will now be responsible for repairing and replacing faulty alarms throughout the tenancy

Again, the Smoke and Carbon Monoxide Alarm Regulations are being extended by placing the responsibility on landlords to repair or replace faulty alarms throughout the tenancy. Under the current rules, after the landlord’s test at the beginning of the tenancy, responsibility passes to the tenants to carry out ongoing tests and arrange the replacement of batteries or faulty alarms with the landlord. This will no longer be the case and landlords will be under a new obligation to repair or replace any alarm found not to be in proper working order. The legal obligation will be triggered following receipt of a report from a tenant or their nominated representative. Once such a report is made, the landlord is under an obligation to determine whether the alarm is in working order and carry out any required repair or replacement as soon as reasonably practicable. What is “reasonably practicable” is not defined in the regulations but given the safety implications of a faulty alarm system it would be advisable for landlords to act promptly. The explanatory memorandum to the regulations state that local authorities should make “reasonable judgements” and consider factors such as the local availability of alarms, the granting of access by occupiers and any exceptional circumstances that have resulted in delays. Any difficulties in gaining access to properties to check the alarms and carry out repairs should be noted so that landlords have records if they are asked to justify the speed within which they responded to a report.

 

3. Tenants will still need to report faulty alarms

When the rules change, tenants will no longer be responsible for arranging repairs or replacement of fire and carbon monoxide alarms. However, tenants are still required to notify landlords of the need to repair or replace alarms as it is this report to the landlord or their agent that triggers the duty to repair or replace the alarm as soon as they are found to be faulty.

 

4. There are still tough sanctions for a breaching the Smoke and Carbon Monoxide Alarm Regulations but local authorities must consider a landlord’s written representations

As is the case under the current rules, if landlords do not comply with their duties set out in the Smoke and Carbon Monoxide Alarm Regulations, the local authority can serve a remedial notice on the landlord. A failure to comply with a remedial notice can lead to the local authority carrying out remedial works and imposing a financial penalty of up to £5,000. The new regulations, however, change the procedure in relation to the service of remedial notices. From 1 October 2022, local authorities will be under a new duty to consider written representations made by a landlord in response to a remedial notice. While the local authority is considering the representations the remedial notice is suspended until the local authority informs the landlord of its decision to either confirm the remedial notice or withdraw it.

 

5. HMO and other property licence conditions will also be amended to reflect the changes

Where the property requires an HMO licence or a selective licence the Smoke and Carbon Monoxide Alarm Regulation’s requirements are set out in the licence conditions. There are mandatory conditions in HMO and selective licences that incorporate the duties set out in the smoke and carbon monoxide alarm regulations. The new regulations will therefore change the mandatory conditions in licences to reflect the new provision that carbon monoxide alarms must be installed in any room with a fixed combustion appliance (gas cookers excluded). Again, this will only apply to property licences in England and the conditions will only apply to licences that are granted on or after the 1 October 2022.

 

Sarah Cummins is a senior associate based in our London Bridge office, and a specialist in residential landlord/agent disputes. Our Housing & Property Disputes team are highly experienced in helping landlords who are in dispute with the local authority over their multiple occupancy (HMO) licence or fire safety obligations, including Smoke and Carbon Monoxide Alarm Regulations.

The Housing Law Practitioners’ Association (HLPA) intervened in the Court of Appeal in Khan v Mehmood.

Simmons v Castle

The case of Simmons v Castle established that Claimants in personal injury, defamation, and other torts which cause suffering, inconvenience or distress to individuals, should be 10% higher than previously. This was to partially compensate Claimants for legislative changes which limited legal aid and meant that success fees in cases funded by Conditional Fee Agreements (CFAs) could no longer be paid by the Defendant and must be taken from Claimant’s damages. Simmons v Castle is routinely used by housing practitioners in housing disrepair and other cases to justify a 10% uplift on damages.

Khan v Mehmood

The landlord in Khan v Mehmood argued that the 10% uplift should not apply to disrepair cases because damages in those cases are calculated by reference to a reduction in rental value rather than by tariff.

HLPA intervened, and Eleanor Solomon of Anthony Gold Solicitors submitted witness evidence on HLPA’s behalf. HLPA’s submissions set out that the 10% uplift was routinely awarded in disrepair cases, that the uplift was intended to apply to this kind of case, and that Claimants in disrepair cases receive modest levels of damages, meaning that the 10% uplift is necessary and has a significant affect on the level of compensation they receive. HLPA also set out that the number of legal aid practitioners specialising in disrepair is falling. Representation by CFA is therefore increasingly common and necessary for potential claimants. The success fee is a vital part of the sustainability of representation for tenants, particularly for those in social housing or at the lower end of the private housing market who are unable to afford legal fees out of their own resources. Removing the Simmons v Castle uplift, and thereby reducing the level of general damages, would have an adverse impact on success fees and the availability of legal representation for such claimants.

HLPA’s submissions were accepted and the 10% uplift will continue to apply to damages in disrepair claims.

Why the Khan v Mehmood Judgment Matters

This is an important judgement, firstly because it safeguards levels of damages for tenants and leaseholders in disrepair cases. If the landlord had been successful then damages in disrepair cases would have fallen. Secondly, it recognises the issues with funding disrepair and other housing claims, and the shortage of practitioners in this area as a result. Funding of housing claims is massively threatened by Fixed Recoverable Costs, which are due to apply to most housing cases from April 2023. The judgement in Khan v Mehmood recognises that further cuts to costs or damages in disrepair cases will make funding many disrepair cases unviable, which will be a huge loss to tenants living in poor housing conditions.

 

Eleanor Solomon is a specialist in housing and property disputes. She advises tenants and leaseholders on forcing landlords to comply with their legal obligations, including making repairs. She also helps clients who are facing possession orders, homelessness or have bought a defective new build property.

Along with a number of other changes to the private rented sector including the scrapping of section 21 notices, the Government has announced that a new ground for possession will be available for landlords who wish to evict their tenants if they intend to sell their property. At the moment, there are various ways in which a landlord can obtain possession of their property through the existing Section 8 and Section 21 notice procedures. Where a landlord wants to serve a section 8 notice they must demonstrate that one of the grounds for possession applies. Currently, there is no specific ground for obtaining possession in relation to a sale of a property.

Current Procedure to recover possession

At the moment, landlords who intend to sell their properties can serve a section 21 notice on their tenants. Some landlords may wish to inform their tenants of their intentions to sell a property so that a notice seeking possession does not come as a surprise to the tenant, but when giving a section 21 notice the landlord does not need to give any reason to their tenant.

However, this process can be complicated. There are various requirements that a landlord has to satisfy before serving a valid section 21 notice on the tenant, including the need to ensure that a valid gas safety certificate, Energy Performance Certificates and How to Rent Guides were served on the tenant and if a deposit was acquired, it was protected by the landlord or their agent with a Government-backed deposit protection scheme.

This can often make it difficult for landlords or cause substantial delay in obtaining possession of a property particularly if any of the prescribed requirements have not been complied with prior to the service of a section 21 notice. It is therefore anticipated that the proposed new ground will remove any difficulties associated with the current section 21 possession procedure where the landlord wishes to sell their property.

The Government’s Proposals

Some details about how this new ground might work were published last week. The Government’s response to a consultation on the abolition of section 21 notices provides a summary of how the new ground would work. The ground would be a ‘mandatory’ ground meaning if it applies, the court dealing with a landlord’s possession claim must order the tenants to leave the property. The amount of notice landlords have to give would be two months, and in almost all circumstances, notice could not be given in the first 6 months of a new tenancy. To prevent misuse of the ground, the response says: “We will prevent the original landlord marketing and reletting the property for 3 months following the use of this ground.”

What evidence is required and is there a possibility that landlords may misuse this process?

It is not clear what evidence will be required to prove a sale of the property. The White Paper makes reference to the landlord “intending” to sell a property and it could be that a landlord may only have to demonstrate their intentions by showing that the property has been marketed for sale by an estate agent. However, this could potentially lead to a misuse of the new ground – some landlords might regard this ground to be the easier option in getting possession and falsely serve a notice citing this ground, but they may then take their properties off the market once a possession order is made.

The White Paper does state that “misuse of the system or any attempt to find loopholes will not be tolerated” and the Government will look to extend the “power for councils to issue Civil Penalties Notices for offences relating to the new tenancy system”. Therefore, it is likely that the Government will introduce additional penalties or strengthen existing penalties for landlords who abuse this procedure. Landlords will still be subject to the rules relating to contempt of court where they have commenced a court claim for possession but dishonestly signed a statement of truth.

Conclusion

This details of this proposed new ground for possession will become clear when the draft text of the Renters Reform Bill has been published and it is interesting to see how the drafters of the Bill attempt to prevent abuse of this ground. We also wait to see what restrictions will be imposed on landlords when relying on this ground and the extent of evidence required to bring a successful claim.

Tamanna Begum assists with complex disputes regarding private residential property; including landlord and tenant possession proceedings, bringing appeals to the First Tier Tribunal (Property Chambers) and defending landlords and agents in property licencing and trading offences. Contact her at tamanna.begum@anthonygold.co.uk or on 020 7940 4060.

The Government published its long-awaited White Paper on reforms to the private rented sector on 16th June. Described as marking ‘a generational shift,’ the paper set outs an ambitious 12-point plan of action to reform the sector and re-balance the rights of landlords and tenants to create a fairer private renting system in England. The proposals are due to form part of the Renters’ Reform Bill that is expected to be introduced this Parliamentary session. Below we take a look at the key proposals set out in the Government’s paper. These will be explored in more detail in future blog posts.

Key proposals in the Government’s paper White Paper on reforms in Private Renting:

1. Abolition of section 21 ‘no fault’ evictions and a new modern tenancy system

Abolishing section 21 notices, which allow landlords to evict without giving a reason, has been one of the most prominent and divisive proposals in the anticipated Renters’ Reform Bill. Despite the upheaval of the pandemic, the Government remained committed to scrapping s21 notices but little detail was provided on how this would be done and what this would mean for private sector tenancies. The White Paper reveals the Government’s plans to completely overhaul the assured tenancy regime by moving all tenants who previously had an assured tenancy or assured shorthold tenancy onto a single system of periodic tenancies. This new ‘modern tenancy system’ will give tenants greater security by preventing landlords from evicting without a reason. Furthermore, tenants will no longer be locked into fixed-term contracts but will be able to end their tenancies on two months’ notice. ASTs will be phased out with all tenants eventually transitioning to the new system following a staged implementation process. This is an ambitious proposal and suggests the Government is committed to comprehensive reform of private renting, creating a whole new tenancy regime rather than tweaking the assured tenancy system currently in place.

2. New grounds for possession and a more efficient court process

Coupled with the Government’s plan to end no fault evictions has always been the promise to strengthen possession grounds to ensure responsible landlords are able to regain possession of their properties swiftly when they need to. The White Paper therefore sets out the Government’s aim to reform grounds for possession including introducing a new ground for landlords who wish to sell or who wish to move themselves of their family in. There are also proposals to accelerate a landlord’s ability to evict tenants causing anti-social behaviour and strengthen rent arrears grounds, including a new mandatory ground for tenants who repeatedly fall into serious arrears.

The Government has also committed to providing a more efficient court process so landlords who have a legitimate reason for gaining possession can do so more quickly. Rather than proceed with a new housing court, the Government has decided to reform the existing court system. Procedural changes adopted during the pandemic including the prioritisation of certain cases and a mediation scheme look set to become permanent features of this reformed possession process.

3. Improving housing conditions by applying the Decent Homes Standard to the PRS

The Decent Homes Standard is a standard that applies to the social rented sector. It requires homes to be free from category 1 hazards, in a reasonable state of repair, have reasonably modern facilities and services and provide a reasonable degree of thermal comfort. The Government now intends for homes in the PRS to meet this standard. Local authorities are already under a duty to take enforcement action in relation to properties with category 1 hazards but in practice this often works reactively with tenants involving the local authority if they are unhappy with the condition of their property. It will be interesting to see how the Government proposes to enforce this standard and whether there will be a more pro-active approach to ensuring the standard is met. The White Paper refers, in the longer term, to considering whether there is scope to introduce a system of regular, independent checks, possibly even an independent regulator for the PRS. However, in the short term, it seems the Government is focused on ensuring local councils have the tools to enforce the standard and extending existing measures such as Rent Repayment Orders to include non-decent homes.

4. New Property Portal and stronger enforcement powers for councils

The Government’s proposes to introduce a new digital Property Portal where all landlords will be required to register their properties. The Portal will then provide a single ‘front door’ for landlords to both learn about their legal responsibilities and also demonstrate their compliance. The idea is that responsible landlords will be able to easily show they are compliant and this will help them attract good tenants who will be able to carry out due diligence on their prospective landlords through the Portal. Equally, the Portal will expose landlords who fail to comply with their obligations and this will assist Councils take more effective enforcement action.

Local authorities are to be given stronger enforcement powers and, longer term, the Government’s aim is to incorporate some of the functions of the Rogue Landlord database into the Portal making details of offences publicly available. The Government also wants to address the variation in enforcement action between local councils, the so called ‘postcode lottery,’ by having greater national oversight of local authority enforcement and creating a national framework for setting fines so there is a more consistent approach to private renting.

5. New PRS Ombudsman

Again, in an attempt to give private tenants the same rights as social tenants the Government intends to introduce a new single government-approved Ombudsman that all private landlords in England, even those who instruct agents, will be required to join. The Ombudsman’s remit will be wide dealing with complaints ranging from landlord behaviour to repairs not being carried out within a reasonable timeframe. The Ombudsman will have a range of powers including the power to compel a landlord to take remedial action and pay compensation of up to £25,000. The aim is to provide quicker and cheaper dispute resolution (use of the service will be free) and reduce the number of complaints that end up in Court. The Government states that it will retain discretionary powers to enable these decisions to be enforced through the Courts if compliance becomes a concern but ultimately there will need to be effective processes in place for tenants to enforce awards if this is to provide a realistic alternative to Court.

6. Restricting rent increases

The Government proposes to end rent review clauses and restrict the circumstances when a landlord can increase the rent. Rent increases will only be allowed to take place once a year and the notice period will be increased to two months. Tenants will continue to be able to challenge rent increases in the Tribunal but the Tribunal will not be allowed to increase rent beyond the amount the landlord initially sought. Interestingly, the Government is also considering introducing a power limiting how much rent landlords can ask for in advance. While seeking large upfront payments may be uncommon in the sector as a whole it is a practice regularly seen in the student rental market particularly with international students.

7. Blanket bans on letting to tenants with families and to those on benefits to be made illegal

The Government recognizes that the profile of those living in the PRS has changed significantly in the last 30 years. The PRS is now home to many people on lower incomes and households with young children. Blanket bans on renting to people on benefits, also known as ‘No DSS,’ have been declared unlawful and in breach of the Equality Act in recent county court cases but the Government now intends to legislate to make such blanket bans illegal.

8. Giving tenants the legal right to keep pets

This is an issue that has frequently made newspaper headlines in recent years. The Government now proposes to change the law so that a landlord cannot unreasonably withhold consent when a tenant requests a pet. To allay landlord concerns, landlords will be able to require tenants to obtain pet insurance to cover pet damage and the Tenant Fees Act will be amended to make this a permitted payment. This is another component of the Government’s wider strategy to improve private tenants’ renting experience, enabling them to make their house their home.

9. Lifetime deposits

Lifetime deposits, also known as passporting deposits, is an initiative designed to improve affordability and mobility in the sector combating the problem many tenants experience when moving of having to find a second deposit while they wait for their existing deposit to be returned. The idea of passporting deposits between tenancies has been around for a while and the Government ran a call for evidence on tenancy deposit reform in 2019. The Government’s current proposal is to monitor the development of market-led solutions in this area. It seems, therefore, that the Government is unlikely to take immediate steps to reform deposits, rather this will be kept under review with the possibility of further action in the future.

Conclusion

We will have to see how many of the Government’s proposals make it into the Renters’ Reform Bill and how many go on to become law. However, this is not the piecemeal approach to PRS reform that we have been used to seeing in recent years. This is an ambitious, even radical, agenda designed to bring about substantial change to the PRS, shifting the balance between landlords and tenants and creating a fairer tenancy system that works for the diverse range of people it serves today. There is plenty to absorb in the Government’s White Paper. Working out how to implement the proposals, considering the knock-on effect on other legislation and transitioning to a new tenancy regime will not be straightforward. Things rarely stand still in the PRS but now it seems major change is on its way.

Sarah Cummins is a specialist in residential landlord and tenant disputes. Contact her at sarah.cummins@anthonygold.co.uk or call us on 020 7940 4060.

The Supreme Court has refused to grant permission to appeal to the tenant in the important section 21 notice case Trecarrell House Limited v Rouncefield.

In June 2020 the Court of Appeal ruled in a 2-to-1 majority decision that late service of a gas safety certificate does not prevent a landlord from serving a section 21 notice on their tenant, provided the certificate has been given to the tenant before service of the section 21 notice.

The tenant in Trecarrell House Limited v Rouncefield had sought to overturn the Court of Appeal’s decision in the Supreme Court. A panel from the Supreme Court consisting of Lord Briggs, Lord Stephens and Lady Rose have now rejected the tenant’s application on the basis that the application does not raise a point of general public importance.

Where does this leave landlords?

The Supreme Court’s decision means that the interpretation of the law accepted by Court of Appeal’s in June 2020 remains binding on District Judges hearing possession claims.

The Court of Appeal’s decision was greeted as a good outcome for landlords. It has meant that where a landlord has failed to provide a new tenant with the last gas safety certificate before occupation they are able to remedy this by providing the certificate late. That was a welcome relief to the many responsible landlords fearful that accidental mistakes in providing tenants with certificates could result in them permanently losing the ability to serve a section 21 notice.

Furthermore, a failure to complete a subsequent annual check on time will not bar the landlord from serving a section 21 notice provided the certificate is given to the tenant prior to serving the section 21 notice. Again, this will be reassuring to landlords particularly in present circumstances where arranging gas safety inspections has been a challenge.

Unresolved Questions

The Court of Appeal’s decision, however, did not resolve all the issues that have arisen since gas safety was linked to the section 21 procedure in 2015. There are still difficult questions left unresolved. For example, what does this mean for a landlord who has failed to carry out a gas safety check at all before the tenant goes into occupation? Are they able to rectify this breach and serve a valid s21 notice? While the Court of Appeal determined that late provision of the initial gas safety certificate is remediable, they do not go so far as to say that all historic gas safety breaches, including failing to actually have a certificate before the commencement of the tenancy, are capable of remedy.

In addition, the gas safety regulations only require landlords to retain the gas safety certificate for two years from the date of the check which means even where a check has been carried out before the start of the tenancy, landlords may face difficulties remedying the breach later or proving that they have done so.

The Supreme Court’s refusal of a further appeal marks the end of one chapter of litigation concerning section 21 notice and gas safety certificates, but this issue is not going away for landlord and agents. It is almost certain that Trecarrell will not be the last of the cases on these issues because there is still significant uncertainty about how to interpret parts of the law concerning section 21 notices.

Anthony Gold Solicitors together with barristers Justin Bates and Brooke Lyne of Landmark Chambers acted for the landlord in the Court of Appeal and the Supreme Court. The landlord’s successful appeal to the Court of Appeal was supported by the National Residential Landlords Association.

The Leasehold Reform (Ground Rent) Bill received Royal Assent on 8 February 2022 meaning it is now an Act of Parliament (law), its provisions however do not come into force until 30 June. The Act applies to residential long leases granted for a premium and entered from and including the day the law comes into force. The Ground Rent band applies to new residential leases in England and Wales not existing leases. The Act does also apply to lease extensions of existing low lease flats.

This new Act does not change the issue of marriage value being payable on low leases. (Under 80 years). A bill on broader leasehold reforms is expected in the last session of this Parliament which is intended to deal with Reform of the valuation aspects of lease extensions & enfranchisement. However, the exact details of what this reform will entail is not currently clear, if the reforms follow the Law Commission’s recommendations, then it should provide for the following changes.

-No more marriage value

-A 990-year lease extensions right at nil rent

-An industry wide commission on Commonhold – a ‘Commonhold Council’ charged with preparing the way to make this work

The next phase of the reforms is at least 2+ years off becoming law. These are our views on the proposed next stage reforms.

No more marriage value

The proposal to remove ‘marriage value’, which often comprises up to 1/3 or more of the Premium element in many mid-lease length cases, is good news. This will not be popular with freeholders. This change will almost certainly be subject to legal challenge from Freeholders under human rights legislation.

Removing Marriage Value on Freehold purchases or Lease Extensions does not necessarily mean the cost of extending or buy your building’s freehold will become cheaper. Valuation is a complex area, and we would guess that the compensation element for Loss of Reversion could be increased to offset the proposed loss of marriage value.

990-year lease extensions at a nil rent

This is not a surprise – the plus 90-year lease extension has just been upgraded, by another 900 years and so won’t need doing again but 90 is usually sufficient for current owners’ lifetimes.

The nil rent element already exists for statutory extensions as things stand.

What does that mean?

If you are extending your lease or buying your freehold at the moment, no change. The proposed 2nd phase more radical reforms are likely to be challenged by freeholders.

Leaseholders (in most cases) need to act now as the mere ‘prospect’ of reform is not good enough. The longer you leave it to extend or to buy your buildings freehold interest the shorter the unexpired term of the lease becomes. There is still no guarantee that the Premium payable under the proposed new Law will be less. It might be worth while waiting for this 2nd phase legislation to come in if your lease has less than 60 years unexpired.

By waiting you are betting that the calculation on the future valuation model will be less on worst input variables (i.e. lower lease term and high property values etc), in most cases delaying the decision to enfranchise will cost leaseholders thousands more.

Fixed penalty notices are all over the news at the moment as reports emerge that the Metropolitan Police expect to impose penalties on several individuals who attended parties at 10 Downing Street during lockdown. The Metropolitan Police might even give a fine to the Prime Minister, Boris Johnson,  if they conclude that he personally breached the law by participating in a prohibited ‘gathering’.

 

Fixed Penalty Notices

Fixed Penalty Notices (FPNs) are meant to be a quick and easy form of punishment, and this was probably why they were selected as the primary means of enforcing the Covid-19 restrictions. To give one example of the many powers to serve FPN under Covid-19 rules, regulation 9 of the Health Protection (Coronavirus, Restrictions) (No. 2) (England) Regulations 2020 allows police and other authorised officers to give a FPN imposing a penalty between £100 and £6,400 for a breach of those regulations. Although the lockdown restriction no longer apply, FPNs for past breaches can still be imposed.

FPNs have existed for a long time now. There are forms of fixed penalty notice which apply to different aspects of life, ranging from motoring offences and disorderly conduct to school truancy. FPNs tend to be given for minor offences, and generally are for relatively small amounts of money.

FPNs are a form of civil penalty, but not all civil penalties are fixed, and they are certainly not restricted to minor offences.

 

Civil Penalties in the Property Sector

There are now various civil sanctions which apply in the property sector. Landlords who rent property to individuals who do not have a ‘right to rent’ under the Immigration Act 2014 can face civil penalties of up to £3,000 from the Home Office. The Consumer Rights Act 2015 allows penalties of up to £5,000 to be imposed on agents who fail to comply with fee transparency rules. The Tenant Fees Act 2019 contains powers for councils to impose penalties of up to £5,000 for first breaches, and up to £30,000 for subsequent offences. The Housing and Planning Act 2016 gave local housing authorities the power to impose penalties of up to £30,000 for various housing offences, and most recently the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 also contains power for financial penalties of up to £30,000 (without creating any criminal offence).

 

Appeals

There are slightly different rules which apply to the different types of penalty. All the penalties I deal with in my professional practice have some can be appealed to a civil court or tribunal. Most appeals are made to the First-tier Tribunal, either in the Property Chamber or the General Regulatory Chamber, but ‘right to rent’ penalties can be appealed to the County Court.

FPNs work differently. A penalty under the Health Protection (Coronavirus, Restrictions) (No. 2) (England) Regulations 2020 cannot be formally appealed. A person who receives an FPN has the option to pay the penalty within 28 days, and if they do so, they cannot be prosecuted for the same offence. If they do not pay, they can face prosecution in the criminal courts.

It is possible to write the police or local authority and ask for a penalty to be withdrawn, but this is not the same as a right of appeal to an independent court or tribunal.

 

Consequences of Paying

It is possible to pay a penalty without ever admitting guilt, or any formal finding of guilt. The police only need to ‘reasonably believe’ that someone has committed an offence to give an FPN under the Covid-19 regulations. Other types of FPN have an even lower threshold – under the Criminal Justice and Police Act 2001, an FPN may be given by “a constable who has reason to believe that a person aged 18 or over has committed a penalty offence”.

In R v Hamer [2010] EWCA Crim 2053 the Court of Appeal Criminal Division held that an FPN under the Criminal Justice and Police Act 2001 should not be regarded as a conviction that in paying the penalty the Defendant “was not admitting any offence, not admitting any criminality, and would not have any stain imputed to his character.”

Based on this analysis, it would appear that in the eyes of the law, someone given an FPN under the coronavirus regulations could pay the penalty and then later claim that they were innocent of any crime. Indeed, one Conservative party MP has already been making this point online, stating: “Fixed Penalty Notices are given out for prescribes minor breaches of law. They’re not fines, convictions or proof of guilt – all of which can only be handed out or determined by a court.” We might not all agree that breaches of covid restrictions were ‘minor’, but its true that an FPN is not the same as a criminal conviction, and it is not proof of guilt.

 

Consequences of Paying – Housing and Planning Act 2016 penalties

There is a striking contrast between such FPNs and ‘Financial Penalties as an alternative to prosecution’ under the Housing and Planning Act 2016. These financial penalties can only be imposed where the local authority is satisfied beyond reasonable doubt that a landlord or agent has committed a criminal offence. A landlord who believes they are innocent can appeal to the tribunal, and on appeal an independent panel (a judge and an experience property professional) will weigh up the evidence and make a decision about whether the local authority have proved that alleged offence was committed.

But what if the landlord decides not to appeal – are they admitting guilt by not doing so? Formally the answer has to be no, because there is no need to make an admission of guilt to pay one of these penalties.

The more difficult question appears to be – how much weight should be given to the local authorities’ conclusion that the landlord committed an offence? Local authorities are not very likely to accept that only a court can determine guilt, and I am sure that some officers would take the view that their decision should be treated as final unless overturned by a court or tribunal.

In various ways, both practical and legal, financial penalties which are not appealed are treated as findings of guilt:

1. Financial penalties are publicised by local authorities. This can be through press releases, on their websites or in London, on the Mayor’s Rogue Landlord Checker.
2. A landlord or agent who receives received two or more financial penalties in respect of a ‘banning order offence’ within a period of 12 months can be added to the Government’s database of rogue landlords and agents.
3. A financial penalty can affect the amount of a rent repayment order in the same way as a conviction under section 46 of the Housing and Planning Act 2016.
4. Local authorities might take account of these penalties when assessing whether or not a landlord is a fit and proper person.

So, a paying a financial penalty of this sort is not itself a formal admission of guilt, but it does involve giving up the opportunity to challenge a finding by a local housing authority that an offence was committed, and it does – whether rightly or wrongly – come with some stigma and potentially adverse publicity.

The sheer range of civil sanctions and penalty notices now available to enforcement bodies make this a complex area of law, and it is impossible to an accurate account of the full consequences of accepting a civil penalty or FPN in a short article like this – in particular, there are legal questions about when Housing and Planning Act financial penalties which will need to be resolved at some point, such as when they should be admissible as evidence. Landlords and agents need to think carefully about the effect of appealing or not appealing any penalties.

The long-awaited Building Safety Bill (the ‘Bill’) is expected to receive Royal Assent later this year, between April and July 2022.  It comes as a result of increasing concerns raised around fire safety following the Grenfell Tower fire and much confusion around the roles and responsibilities of those involved in the construction process. The Bill aims to make people safer in their homes; give residents and homeowners more rights, powers and protections and establish a more comprehensive building safety regime.

Whilst the Bill is expected to introduce a whole raft of changes, this blog will only focus on those provisions which increase the ‘rights of action’ available to those suffering from construction defects.

 

The Defective Premises Act 1972

Under section 1 of the Defective Premises Act 1972 (‘DPA’), homeowners (including leaseholders and landlords) may bring a claim in respect of defective work where that work renders the dwelling ‘unfit for habitation’. Currently, this only applies to construction (i.e. new builds), conversion of buildings (e.g. the conversion of offices into flats) or enlargements of a building, but does not extend to work undertaken on existing dwellings. Claimants are usually entitled to reinstatement costs (i.e cost of putting the defects right) and may also be entitled to damages for loss of enjoyment whilst the dwelling is uninhabitable.

Key amendments for building safety

The Building Safety Bill proposes two key amendments which should in theory expand existing rights under the DPA.

Firstly, the Bill proposes to extend the limitation period for a person to bring an action under section 1 of the DPA. Currently, a person has 6 years from the date of completion of the dwelling within which to bring an action. This is set to be extended to 15 years and will apply to claims brought after the Bill comes into force. This will more than double the period within which homeowners can bring a claim in court and is designed to afford them more protection.

The Bill also proposes to extend the limitation period retrospectively under section 1 of the DPA to 30 years. This means that claims which are currently deemed ‘out of time’ may now potentially be ‘revived’. Therefore, if the Act comes into force in April 2022, as is currently expected, the ‘cut-off date’ would be April 1992. For those claims only just falling within the time frame, the Bill is also going to provide for 1 year of grace to allow proceedings to be brought.

It is important to note that this retrospective application remains limited in two ways:

1. Any already determined claims cannot be re-opened. This means claims that have been settled or already struck out on limitation grounds will not be reviewed; and
2. The retroactive application will only apply to the extent that it does not infringe on the defendant’s (i.e the developer) human rights under the Human Rights Act 1998. Exactly how and when this defence will be raised remains to be seen.

Secondly, the Bill also widens the scope of the DPA by introducing a new Section 2A which expands the right to claim compensation for works undertaken on existing buildings that contain one or more dwellings to include refurbishment or rectification works. The limitation period for this would also be 30 years. Whilst this change would seemingly ‘plug the gap’ in protection for homeowners, it would only apply to work completed after the Bill comes into force (i.e it will not have retrospective application) and is therefore unlikely to spark any immediate increase in claims.

Section 38 The Building Act 1984

The Building Safety Bill intends to also bring the currently ‘dormant’ Section 38 of the Building Act 1984 into force. This will provide a right of action, independent of any claim under the DPA or for breach of contract, to anyone who suffers damage as a result of the breach of the Building Regulations. This applies to all buildings, not just dwellings, and will also be subject to a 15-year limitation period (with prospective application only).

The Bill is also set to amend the Building Act 1984 to enable claims for purely financial loss (e.g. the cost of rectification work or resulting loss in capital value) to be covered under section 38.

 

Potential gains for homeowners

At a glance, the changes proposed by the Bill give a significant boost to homeowners’ rights, in particular, the extension of the limitation period which would allow homeowners to challenge sub-standard construction work that may have only become apparent after the existing six-year limitation period had ended. Additional rights and protection are also afforded with the new Section 2A of the DPA and Section 38 of the Building Act 1984.

Potential issues for claimants

However, whilst these changes may increase the number of potential compensation claims which can be brought, claimants will still need to substantiate their claims. This may prove more difficult in terms of obtaining evidence, particularly concerning claims which were previously considered out of time, as documentation may now no longer be retained by developers. Claimants may also find obstacles in identifying potentially liable defendants who are still solvent or insured. If the developer has insufficient funds to compensate the claimant, claimants could be left having to bear their loss and homeowners may still have to meet the ultimate costs of repair via service charge provisions. The uncertain nature of litigation also remains, along with the cost and time involved in pursuing claims. Such obstacles may therefore continue to limit the number of claimants who can make use of these new rights.

 

Nina Brennan joined Anthony Gold as a trainee in September 2020. She is currently undertaking her second seat in the Housing Department.