All posts by Bishop & Sewell

6 Reasons Why Lessees May Withhold Payment Of Their Service Charges

6 Reasons Why Lessees May Withhold Payment Of Their Service Charges

From our experience lessees are becoming ever more aware of their rights in relation to service charge payments. Here are some tips to try to avoid the tenant withholding payment:

1. Failure to provide receipts and invoices…

Section 22 of the Landlord and Tenant Act 1985 gives a lessee the right to inspect the receipts and invoices which relate to any figure stated in the service charge. You have one month to reply to their request, and you must allow 2 months for the lessee to inspect the documents. If you do not allow the lessee to inspect, the lessee can withhold payment of the service charge to the period to which their request relates.

2. Failure to provide a summary of costs…

A lessee may ask for a summary of costs. You should keep an accurate record of the accounts in relation to the service charges. The summary must be certified by an accountant if the property contains more than 4 flats (Section 21(3), 21(6) & 28(1) Landlord and Tenant Act 1985).

3. Absence of a prescribed notice…

Ensure that each time you demand a payment of ground rent, service charge or an administration charge it is accompanied by a prescribed notice that includes information about the lessee’s rights regarding forfeiture and failure to pay ground rent (Section 153, Leasehold Reform Act 2002). This requirement relates to all demands, including reminders.

4. Failure to keep copies of correspondence…

Keep a copy of all ground rent and service charge demands including the prescribed information. Keep information with regard to the date that the demands were sent and the method by which they were sent. If a lessee later disputes the service charges and/or ground rent, you may be required to show evidence that all the required information was sent to the lessee.

5. Absence of the landlord’s details

Every demand or invoice for a ground rent or service charge must state the name and address of the landlord, and the landlord’s contact details. If a lessee makes a written request for the name and address of the landlord, you must reply within 21 days (Section 1, Landlord and Tenant Act 1925). If you do not comply with this request you are liable to a fine of up to £2,500.

6. Failure to keep information

Keep details of the insurance policy for the premises on file. A lessee has a right to ask for a summary of the insurance policy. If a lessee makes this request in writing, you have 21 days from receiving the letter to comply with it (Section 30A, Landlord and Tenant Act 1985). If you do not comply with this request you are liable to a fine of up to £2,500.

If you are not sure on any of the legal aspects of these tips then please feel free to email or telephone Georgina Little without obligation on 020 7079 4190 or glittle@bishopandsewell.co.uk.

Party Walls – Case Update

Party Walls – Case Update

Disputes concerning party walls are not always straight forward and the recent decision of Freetown Ltd v Assethold Ltd heard in the High Court provides a timely reminder not to forget the basics.

The High Court has clarified the time limits for lodging an appeal against a party wall award. The decision in Freetown shows that the time for appealing a Party Wall Award starts to run from when the award is ‘posted’ by the third surveyor rather than when it was deemed received by the party (as was the case in Freetown).

The Party Wall Act states that there is a 14 day period for appealing the Party Wall Award and misinterpreting the timings could mean that there is insufficient time to prepare an appeal or as is the case with Freetown, a party could be deemed out of time to Appeal. The parties, and more importantly their surveyors, should ensure that they make provision for receipt of the Award so as to remove any uncertainty as to the time limits to lodge an Appeal and avoid costly mistakes.

This case has wider application than just the Party Wall Act as it reminds us of the importance of the serving notices correctly. The Court in this case referred to the service of notices under the Landlord and Tenant Act 1927. To avoid basic mistakes the service of any notice should be checked carefully and should be in accordance with the relevant act, case law or contractual position.

For further assistance in relation to the Party Wall Act, please do not hesitate to contact Lauren Brown on 020 7079 2402.

We hope you have found this note useful; however it is general in nature and for information purposes only. It is not a substitute for legal advice. Therefore Bishop and Sewell LLP accepts no responsibility whatsoever for any loss howsoever arising in connection with any use of the contents of this article. If you require specific advice, then please contact us.

Bishop & Sewell LLP At The ERMA’s

Bishop & Sewell LLP At The ERMA’s

There was good news at last night’s ERMAs (the Enfranchisement and Right to Manage Awards) held at Congress House in Central London. Mark Chick, our head of Leasehold Reform and Landlord & Tenant was ‘Highly Commended’ by the judges in the Solicitor of the Year award and Bishop & Sewell LLP were named as finalists in the Solicitors of the Year category.

An Expensive Lesson In Communication For Managing Agents

An Expensive Lesson In Communication For Managing Agents

A recent case involving a Bishop & Sewell client who is the freeholder of a block of flats, has highlighted the potential costs and inconvenience, which can be avoided if managing agents keep open the channels of communication with their tenants. It might also be an eye-opener for tenants wanting to sue their freeholder and their managing agents and they might think again.

Bishop & Sewell acted for a freehold company who found themselves on the receiving end of an application by a number of lessees who were challenging the reasonableness of the service charges. Our client had instructed managing agents to deal with the day to day management of the site. The matter was heard on several days amounting to around a total hearing length of ten days with significant legal costs being incurred by the landlord.

As it transpired, the application was withdrawn at a very late stage and part way through the substantive hearing. The small number of tenants who made the application achieved very little except to incur legal costs and to expend considerable time in dealing with this matter as well as the time spent attending the hearing to give evidence.

The landlord has the benefit of a clause in the leases which entitles it to claim its legal costs through the service charge and therefore the costs will no doubt fall to be paid by all the tenants, not just those who brought the action.

One has to consider why the applicants felt it necessary to make an application to the LVT. It became apparent from the tenant’s oral evidence that they were dissatisfied with the services of the managing agents. They perceived:

  • a real difficulty in being able to contact the managing agents on a day-to-day basis
  • their requests were not dealt with promptly
  • there was a lack of transparency

I am a solicitor who deals with many managing agents. I find that it can sometimes be very difficult to speak to them under most conditions and even more so when a urgent issue arises. It is likely that in the situation above the tenants were frustrated at not having their queries dealt with. They seem to have felt that the only way they could have their voices heard was to make an application to the LVT. It is clear that this could have been avoided.

Top Tips: How Managing Agents Can Avoid Proceedings

It seems likely that this matter arose as a result of the tenants’ frustrations. Had they been able to contact the managing agents more easily and achieve timely responses, an application to the LVT may have been avoided.

  1. It is accepted that there is not always an immediate cure for a problem, but a short email or telephone call to a tenant acknowledging receipt of their correspondence convinces them the issue is being taken seriously.
  2. Give a time frame for dealing with the issue.
  3. A transparency as to what has been charged to the tenants avoids many enquiries in the first place.
  4. An openness to deal with legitimate queries prevents problems gaining their own momentum.
  5. Regular ‘meeting the manager’ at the site may also provide a valuable opportunity to build up tenant satisfaction and provide early warnings if something is not going as well as could be hoped.

About The Author

Karen Bright is Member of Bishop & Sewell LLP and head of the Dispute Resolution & Insolvency team. She specialises in Landlord & Tenant litigation in the Leasehold Valuation Tribunals and County Courts. Karen acts for both landlords and tenants in the forfeiture of leases, injunctions, nuisance, recovery of service charges and rent, and possession work.

Bishop & Sewell LLP Nominated At The ERMA’s

Bishop & Sewell LLP Nominated At The ERMA’s

Bishop & Sewell LLP are delighted to announce that they have been nominated as a finalist in the prestigious Enfranchisement and Right to Manage Awards (the ‘ERMAs’) to be held in Central London this week. The firm has been nominated in the category of Solicitors of the Year. Head of Landlord & Tenant / Leasehold Reform Mark Chick said “I am delighted that we have been nominated for an award in this area and this is testament to our continued strength in this area – well done to everyone in the L&T Team.”

Bishop & Sewell LLP Secures Court Victory For Henley Homes PLC

Bishop & Sewell LLP Secures Court Victory For Henley Homes PLC

Bishop & Sewell LLP Senior Litigation Associate Shams Rahman successfully defended a claim brought by a major scaffolding contractor against our client, Henley Homes PLC which resulted in a trial at Court.

Summary

The Court found that award winning developer Henley Homes PLC was not liable for the payment of any invoices sent by the claimant H&B Contracts (Holdings) Limited, in relation to historic hire charges, scaffolding removed from its development site during the course of an alleged theft, and/or subsequent and ongoing hire charges at the site. The Court held that Henley Homes PLC had correctly terminated H&B’s written contract and under the relevant terms of business, no payment was due to H&B. H&B has been ordered to pay Henley Homes PLC’s substantial costs of successfully defending the claims.

Overview

This case demonstrates that in important development and construction contracts, it is not sufficient merely to rely upon passing terms of business and any claims for payment under the invoices must be fully supported by other, additional, documentary evidence in support.

The Court held that although the onus was on H&B to satisfy the court of its various claims, on the balance of probability it failed to do so. In particular, H&B had argued that it was also due payment on the basis of “quantum meruit” being a fair payment for the works undertaken by it. However, this claim was also dismissed because H&B had failed to produce any relevant evidence of a fair valuation whereas the Court held that Henley Homes PLC had undertaken its own fair valuation exercise in order to resolve the dispute and the figures could not be disputed. This demonstrates the need to ascertain expert valuation on complex issues regarding costings in construction and building works.

For further information please contact Shams Rahman on 020 7631 4141 or by email: srahman@bishopandsewell.co.uk.

Breach Of Lease: How To Avoid Making The Situation Worse

Breach Of Lease: How To Avoid Making The Situation Worse

Breaches of a lease need to be dealt with very carefully to make sure that you do not limit the landlord’s legal options. As a solicitor, I have come across multiple instances in the past of managing agents seeking to be helpful but inadvertently intervening in a way that can cause problems when it comes to forfeiture proceedings. Here are some thoughts on how to reduce the chances of making costly errors.

  • If unsure of a potential breach do not DEMAND or ACCEPT ground rent or service charges.
  • Gather evidence supporting the belief that there has been a breach of the lease.
  • Avoid communicating with the lessee if at all possible before seeking legal advice.
  • Does the lease contain a re-entry provision? This provision will not always be obvious and so the lease should be checked carefully.
  • Seek advice on the cost provisions in the lease regarding forfeiture.
  • Do not attempt to re-enter the property with or without bailiffs as this constitutes a criminal offence; residential property court proceedings are always required.
  • Make sure automated systems are updated accordingly so no demands are made to the tenant either by letter, email or by telephone as this may also waive the right to forfeit the lease.
  • Remember, where the breach does not concern rent, it will be necessary to apply to the Leasehold Valuation Tribunal (‘LVT’) for a declaration that a breach has occurred before forfeiture proceedings can be issued.
  • Make sure legal advice is obtained before the service of a Section 146 Notice under the 1925 Law of Property Act demanding remedying of a breach of covenant.
  • Alternatively, if rent arrears have been accrued, you may wish to consider a Letter Before Action copied to the tenant and its lender. Depending on the tenant and lender this may result in payment but it will prevent you continuing with forfeiture.

If you are in any doubt concerning the above legal advice we would suggest that legal advice be taken avoid prejudicing any actions following from the apparent breach and the resultant costs and delays. We at Bishop and Sewell are more than happy to help in this regard.

Do You Let Residential Property?

Do You Let Residential Property?

Do you let residential property? If so you need to comply with the rules on holding tenants’ deposits.

Since 6th April 2007, landlords who let property under an Assured Shorthold Tenancy (AST) have been required to pay all deposits into an approved Tenancy Deposit Scheme (TDS). In addition, a Landlord must also provide certain information to its tenant; this is referred to as the prescribed information. This information was required to be provided within 14 days from receipt of the deposit, although from 6th April 2012 this has been extended to 30 days.

A failure by a landlord to comply with the above requirements can be very costly. There are two main sanctions; the first is that the landlord may be prevented from recovering possession of the property. Secondly, the landlord may be required to return the deposit and pay compensation by way of a fine of up to three times the deposit to the tenant (or other person who pays the rent).

Should a landlord find that it has not complied with the above, then it should immediately do so. Until this information has been provided, a landlord cannot serve a Section 21 Notice to bring the tenancy to an end.

The late provision of the prescribed information may result in the landlord having to return the deposit and pay a fine to the tenant of up to three times the deposit. A tenant can apply to the court even after the tenancy has ended.

In light of the above, landlords should ensure that they fully comply with the requirements regarding a tenant’s deposit.

For further information on this please click here.

An Update On Tenancy Deposit Schemes

An Update On Tenancy Deposit Schemes

Which types of tenancies are caught by the Tenancy Deposit Schemes (TDS)?

A landlord who lets a residential property on an Assured Shorthold Tenancy (AST) must, since 6th April 2007, pay any deposit into an approved TDS. The majority of residential lettings are likely to be under an AST. The exceptions to this are where the annual rent exceeds £100,000 per annum, the tenancy is as a result of the tenant’s employment or the tenant shares occupation with the landlord. An important point to note for a landlord is that even if the tenant entered into an AST prior to 6th April 2007, if the tenant remains in occupation of the property after the contractual term comes to an end, then this requires the landlord to pay any deposit into a TDS.

What are the aims of the TDS?

The TDS has two main objectives; firstly, to ensure that the tenant’s deposit is protected and returned to the tenant at the end of the tenancy, subject to any legitimate deductions. Secondly, to resolve disputes between the landlord and tenant, without the need to involve the courts.

What types of TDS are available?

There are two types of TDS available, a custodial TDS and an insurance TDS. The key difference between the two types of TDS is that with a custodial scheme it will be the scheme administrator who holds the deposit and with the insurance scheme, it is the landlord who holds the deposit. It is for the landlord to choose which scheme it wishes to use. If the landlord is a company registered overseas, then the insurance TDS is not an option. Furthermore, to use the insurance TDS scheme you or your letting agent must be a member of an approved professional body, these include the Association of Residential Letting Agents, Royal Institution of Chartered Surveyors, National Association of Estate Agents and National Approved Letting Scheme.

What must a landlord do?

As from 6th April 2007, a landlord must pay a deposit into a TDS and provide the tenant or anyone who pays the tenant’s rent with specified written information. This information must include details as to where the deposit is being held, contact details for the deposit holder, the nature of the deposit and the procedure, should there be any disputes regarding the return of the deposit. This information is to be provided within 14 days of receiving the deposit; this was extended to 30 days on 6th April 2012. Any failure by the landlord to do this may have serious consequences.

What are the sanctions for a landlord’s failure?

There are two main sanctions. The first is that the landlord may be prevented from recovering possession of the property. The second is that the landlord may be required to return the deposit and pay compensation by way of a fine to the tenant or relevant person for failing to provide the prescribed information. Should a landlord find that it has not complied with the 14 or 30 day time period for providing the prescribed information, then it should immediately provide such information. Until this information is provided, a landlord cannot serve a Section 21 Notice to bring the tenancy to an end. A landlord who does not provide the prescribed information in time may be fined by the court an amount up to three times the deposit.

Is there any way of avoiding paying the deposit into a TDS?

If you take any security from a tenant then this is likely to be classed as a deposit. There has been an attempt to avoid the requirement that a deposit must be paid into a TDS by a landlord seeking to charge two or more months rent in advance of the start term, which would be held by the landlord and utilised towards the last two months rent. This has been considered by the courts and deemed to be a deposit, therefore a landlord must still comply with the TDS requirements.

Do I need to worry about TDS as I use letting agents?

Hopefully, the letting agent will be fully familiar with the requirements and will comply with the rules. However, there are a small number of less reputable agents who have, in the past, disappeared with tenants’ deposits. We would advise any landlord to ask their letting agent for details of where the deposit is going to be held and a copy of the information provided to the tenant. A landlord will want to ensure that its letting agent has complied. A failure by the agent is likely to result in the landlord being unable to take possession until it has complied with the rules. If the agent has disappeared with the deposit, the landlord will need to pay an amount equivalent to the tenant’s deposit into a TDS. In addition, it may also have to pay compensation to the tenant.

If we can be of any further assistance then please do not hesitate to contact us.

We hope you have found this note useful, however, it is general in nature and for information purposes only. It is not a substitute for legal advice. Therefore Bishop and Sewell LLP accepts no responsibility whatsoever for any loss howsoever arising in connection with any use of the contents of this article. If you require specific advice please contact us.