HPLA Intervention in Khan v Mehmood

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.

Recovering possession to sell properties after section 21 notices are abolished for private landlords

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.

Good News for Pet Lovers – Blanket Ban on Pets to be Removed

The much-awaited fairer private rented sector white paper (“the white paper”) has finally been published. The white paper comes with good news for pet lovers who live in the private rented sector as it intends to remove the blanket ban on pets.

The white paper has set out proposals to provide tenants with a positive renting experience by allowing tenants to treat their private rented property as their own home whilst in occupation. This includes giving them the right to request to have their pet living with them and thereby giving them more freedom and choice in their own home. The government intends to bring in legislation which will prevent landlords from withholding consent for a pet to be brought into rented accommodation without a good reason. Landlords will not be able to unreasonably withhold consent when a tenant requests to rent with their pet or bring in a pet. If such a request is made, then the landlord will need to provide reasoning for any such refusal. Tenants will also be given the opportunity to challenge any refusal for permission without a good reason.

However, there is still currently a lot of uncertainty with these proposed changes. It is not clear whether the proposals will allow for just one pet or multiple pets. Furthermore, it remains to be seen what sort of process will be introduced to challenge any refusal to allow a pet at the property. It is not clear whether that will be an internal process with the landlord or a more formal route to challenge any such decision by the landlord through the Ombudsman and/or Courts.

In addition to the above, changes will also be introduced to the Tenant Fees Act 2019 to allow landlords to require any tenant who makes a request to have a pet in the Property to take out pet insurance. The purpose of this is to cover landlords for any damage to the Property by the pet under the terms of the pet insurance. Again, there is uncertainty on how this will work in practice and whether the landlord can insist on specific cover amounts to be taken out under the policy.

There is still a lot of uncertainty on how this proposed change will work in practice and whether there will be categories of pets which are more likely to be accepted by landlords than other pets. It is also not clear on what kind of reasoning will be considered a reasonable refusal by the landlord not to allow the pet. This remains to be seen.

Overall, the proposed changes are good news for tenants as those who have been unable to rent with a pet in the past will now be able to do so.

Nikki Basin specialises in property litigation including residential possession claims, deposit protection claims, breach of contract, disrepair, new build claims, co-ownership disputes, claims under Trust of Land and Appointment of Trustees Act (TOLATA) 1996 and professional negligence claims. Contact her at nikki.basin@anthonygold.co.uk or on 020 7940 4060.

Should tenants be advised to remain in unlicensed HMOs to maximise rent repayment orders?

When a tenant discovers that they are living in an unlicensed HMO it is usually not long before they realise that they can make an application to the First-tier Tribunal for a rent repayment order (RRO) against their landlord. At this point, one of the first questions to consider is when should the tenants make that application?

When should a tenant make an application for a rent repayment order?

There is no need to apply straight away – tenants have until one year from the date of their landlord’s criminal offence to make their application to the Tribunal. Many tenants choose not to apply for an RRO until they have moved out.

Reasons tenants delay making a rent repayment order

There are sensible reasons to do that. Often tenants would prefer not to start legal proceedings against their landlord while they are still living in the Property. That might be out of fear of eviction or mistreatment, or simply to avoid the awkwardness of having to interact with someone you are suing.

But there is another reason for delaying – the tribunal can award tenants up to one year’s rent, but the amount awarded will not exceed the rent paid by the tenant during the period in which the property is unlicensed. If the tenant is alleging that their landlord has committed the offence of managing or being in control of an unlicensed house in multiple occupation, the longer the property is unlicensed, the better the chances that the tenant will recover a whole year’s rent.

This means that there is a completely rational reason for tenants to keep quiet and live in an unlicensed HMO for at least 12 months before complaining to the landlord and applying for a rent repayment order – complain any earlier and the landlord will be ‘tipped off’ about their mistake. A sensible landlord would immediately apply for a licence, and that could reduce the amount of any rent repayment order.

This should make us uncomfortable. Licensing exists in part at least to ensure that rented properties are safe. The conditions of a licence will include requirements to ensure that the landlord has carried out proper safety checks, and tenants who live in an unlicensed property might not have the benefit of fire detection and alarm systems suitable for their property.

What should advisers be telling tenants?

The starting point has to be that any type of legal adviser should tell tenants the truth. That means being honest about the possible benefits of not telling the landlord about their mistake straight away, and being honest about the possible safety risks of living in an unlicensed HMO. After that, it is for tenants to decide for themselves how they want to proceed.

Legal advisers need to be careful about advising about fire safety. Most of us are not experts in fire safety, but experienced housing advisers might know something about the legal framework for fire safety in HMOs and how to interpret fire safety guidance. We might be able to point out ways in which landlords are breaching the law, but for most legal advisers it is well beyond our expertise to conduct a fire risk assessment.

For solicitors, our duty of confidentiality to our clients means that if tenants choose not to notify anyone that they are living in an HMO, we could not go against the wishes of the tenants. Most advisers will be subject to similar confidentiality obligations.

What should local authorities be telling tenants?

For local authorities, the position is very different. If local authority officers decide to write to the landlord and tell them they are managing an unlicensed HMO, they are entitled to do so.

There is a statutory duty on local authorities in section 61(4) of the Housing Act 2004 to “take all reasonable steps to secure those applications for licences are made to them in respect of HMOs in their area which are required to be licensed under this Part but are not”. A council officer knowing that an HMO is unlicensed but choosing to not do anything about that does not sit easily with that duty.

From the point of view of overstretched local authorities, Rent Repayment Orders provide a cost-effective way of ensuring that there are consequences for landlords who do not obtain a licence. This is one reason why local authorities often assist tenants who are applying for an RRO.

There are some reports of council officers agreeing not to notify landlords that they are breaching a licensing requirement. For example, in this article, a tenant describes being told by council officers that “they could apply for a Rent Repayment Order which would allow them to take their landlord to court – only if they continued living in the unfit accommodation for the year.”

It is one thing for an adviser to give this advice, but for an officer of a local housing authority to agree to allow a property to continue to be unlicensed for several months to maximise the tenant’s size of a rent repayment order is troubling to me. Local authorities are meant to enforce the law and encourage landlords to apply for licences.

How should the Tribunal respond to this?

It is the First-tier Tribunal which decides whether to make a rent repayment order and how much should be awarded.

I can think of one example of a case where the Tribunal determined that a tenant knew the property they were living in was unlicensed – in Wilson v Campbell [2019] UKUT 363 (LC) the applicant was apparently employed by Newcastle City Council as a Senior Environmental Health Technician. The landlord argued that the tenant had “made an informed decision to continue residing in a property that she was aware was unlicensed with the sole intention of being able to apply for a rent repayment order.” The First-tier Tribunal was mostly convinced, finding “the Applicant chose to live in premises that fell short of legal requirements, possibly with the intention to apply for a rent repayment order in the future”. Unimpressed by this or by the absence of any details about the tenant’s profession in their evidence, the Tribunal made only a token rent repayment order of £1.

That decision was overturned by the Upper Tribunal on the grounds that there had been a breach of natural justice because she had not been given an opportunity to explain why she did not mention her job in her application. The Upper Tribunal also queried, without making any definitive finding, whether the tenant’s failure to mention her job, her alleged knowledge that the house was unlicensed, and her alleged motivation for staying on in the property were relevant factors which did justify reducing an award.

A commenter on the Nearly Legal blog article about this case gave this update on the result of this case after it was re-heard by the First-tier Tribunal: ‘the Tribunal made an RRO of approximately £3,200 (being the full rent paid less utilities). The allegation that the applicant had moved into the property to secure an RRO was rejected having heard the “convincing” oral evidence and it was held that it would be in any case “inequitable if the Applicant was not entitled to an RRO due to any knowledge of housing law”.’

That result meant there was no need for the Tribunal to tackle head-on the question of whether consciously moving in an unlicensed HMO with the intention of applying for an RRO later is ‘misconduct’ or not. For now, at least, there is no clear indication from the Tribunal that tenants who ‘keep quiet’ to maximise their award would be doing anything wrong.

Concluding thoughts

I do see it as a problem that the rent repayment orders can incentivise tenants to tolerate potentially unsafe conditions to secure a windfall. This is bad public policy, even if it is also just a logical consequence of the way rent repayment orders operate. It would be far better if tenants did not have to make any sort of trade-off between their comfort and safety and their potential return under a rent repayment order.

Robin Stewart specialises in property litigation, especially landlord and tenant disputes, and the regulatory law relating to rented property. Contact him at robin.stewart@anthonygold.co.uk or on 020 7940 4060.

Reforming Private Renting in England

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Eleanor Solomon is now a Partner in the Housing team

Anthony Gold is delighted to announce that Eleanor Solomon has accepted an offer to become a Partner at the firm with immediate effect.

Eleanor Solomon New partner

Eleanor becomes a Partner in the Housing team, specialising in housing and property disputes.  She advises tenants and leaseholders on forcing landlords to comply with their legal obligations.  She acts for clients in claims brought against their housing associations and local authorities, with particular strength in claims relating to building safety and disrepair and offering experience of unlawful eviction and nuisance matters.

Eleanor has expertise in contentious and non-contentious work for social landlord housing co-operatives.

Having trained at Anthony Gold and qualifying in 2016, she became a Senior Associate in 2020 and is mentioned as an ‘Associate to Watch’ in the current Chambers & Partners 2022.

This move sees Anthony Gold building on its strengths in Housing law, with its lead rankings in Chambers (Social Housing: Tenant – Band 1) and Legal 500 (Social Housing: Tenant – Tier 1).

Head of Housing, Andrew Brookes, said: “Eleanor manages a complex caseload effortlessly, passionate about housing law and helping people and always goes the extra mile for her clients.”

Managing Partner, David Marshall, said: “I am delighted Eleanor has made Partner at the firm. This is part of a concerted effort to consolidate and solidify our leading position in Housing and ensure the firm has talented practitioners in place for its future growth.”

Supreme Court refuses further appeal in gas safety certificate case Trecarrell House Limited v Rouncefield

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.

Ground Rents to be Banned from 30 June

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.

Is paying a fixed penalty notice or civil penalty an admission of guilt?

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 Building Safety Bill: Expanding Rights of Action?

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.