The new obligation is to be introduced as part of the immigration bill which will be put forward in this parliament. It is not at all clear how this will work, or even if it will work at all! First, is the obligation only to check on immigration status? Presumably there will have to be a linked offence of not letting to someone who does not have leave to remain in the UK otherwise the check will be meaningless. Secondly, if there is a limit on letting to those without leave to remain then how much leave is needed? If a tenant has a right to be here for 6 months then can I only let to them on a six month tenancy and am I allowed to let that tenancy continue on a periodic basis after the 6 months is over? Currently, almost any one (other than EEA or Swiss citizens) who wants to come to the UK for more than 6 months needs a visa. Thirdly, how will all this be enforced? Will it simply be a case that when illegal immigrants are caught by UK Border Agency that their landlord will be prosecuted or will there be some other means of checking up? Finally, how are landlords supposed to know? Most landlords are not experts in passport and visa systems and these are themselves fairly complex. How much skill is a reasonable landlord expected to display in identifying forgeries (hopefully none!) and where can they find out about what stamps they need to look for. UKBA has published guidance for employers on avoiding illegal workers and so they will hopefully do the same for landlords. There may also be some work done by tenant referencing agencies to try to make the process easier but they can only work on the basis of existing credit records which are not always available for non-UK nationals.

There is also the risk of rampant discrimination with landlords simply refusing to deal with anyone who does not fit their own personal criteria for residency. This will create its own problems and lead to further possible prosecutions for unlawful discrimination.

What To Do?
Landlords and Agents should look to amend their procedures to ask (on a form or in writing) whether each new tenant is a UK national, where they are currently resident, if not what their nationality is, and whether they have a current right to be in the UK and for how long. If they are a non-EEA or Swiss national and wish to take a tenancy for more than 6 months then they will need to have a visa and you should ask to see it. Other countries may also need visas for shorter stays and you will need to look at the list of visa countries on the UKBA website to work this out. Their is a Visa tool which will help work out if your prospective tenant needs a visa. A copy should be taken of any non-UK citizens passport and of any visa or entry stamp. You will need to take care that you do not use the information you gather here to make a decision on the tenant other than refusing to take someone who has no right to be here. Otherwise you may find yourself accused of racial discrimination. You may also wish to lobby your MP on this issue to point out to the Government that it is not the role of private sector landlords to do the job of the UKBA and they should not be criminalised for failing to do so.

Inevitably there will be a lot more said about this topic and it will be a while before full details emerge. Adopting the procedures outlined above will protect you now and should be useful for the future as well.

• The system is a compulsory consumer redress scheme rather than a regulatory mechanism. Therefore there is unlikely to be requirements for agents to carry insurance, client money protection bonds, or have a minimum training standard. That said, a robust redress scheme can have an element of regulation of it sets minimum standards of service which it expects everyone to adhere to.
• There are a number of clear limits on the scheme. It only applies to Assured and Assured Shorthold tenancies under the Housing Act 1988. Agents in London with high-value property portfolios can relax completely! There is also an exemption for businesses that only offer advertising or which provide a means of bringing landlords and tenants together. So, some of the new Internet based introduction businesses are also off the hook. However, it should be noted that the Secretary of State can add new tenancy types by making a further Order if he wishes so this may change.
• Property Management is covered. This includes management of shorter residential tenancies as well as block management work and the management of long leases. Some block management companies will not be happy about this and there is the potential for a flood of complaints and litigation from residents on this issue.
• To make this work there must be some form of enforcement. This is difficult because there is no central register of letting and management agents. The Bill mentions both civil and criminal penalties so the Government is clearly keeping its options open. However, I suspect they are considering a system of “civil fines” rather like those operated for tenancy deposit protection so agents who do not stay up to date could find themselves feeling the pain of landlords who have failed to wake up to the deposit protection regimes. The penalties must also allow for appeals to a Court or Tribunal and it will be interesting to see how the Government apportions responsibility for this. The Court or Tribunal involved may find themselves handed a poisoned chalice which results in a lot of time-wasting claims and defences being put forward.
• The Bill makes reference to approved redress schemes and also schemes run on behalf of the Government. There are, of course, already redress schemes in place for estate agency and, on a voluntary basis, for letting agency work. These schemes will, no doubt, wish to become approved under this Bill. However, the Government is clearly thinking of operating its own scheme, presumably in the tenancy deposit protection mould.

There is still a lot of detail missing and there is no indication as to whether current schemes will seek or obtain approval or whether other parties will enter the fray. The apparent following of a tenancy deposit protection model is a concern as that legislation was not well drafted and led to a large amount of wasteful litigation in several levels of court. Hopefully that will not be repeated.

The full text of the amendments can be found in Hansard.

Today’s decision in the case of Johnson v Old, confirms that payment of rent in advance is not a deposit. The case is fairly straightforward in its facts but is made a little more complex because of some slightly odd drafting in the tenancy agreement. In short, Ms Old was referenced for a tenancy and was deemed to have an acceptable credit rating but to be a risk as she had no set income. The landlord offered a 6 month tenancy but elected to reduce the risk by asking her to pay the rent 6-monthly in advance. The agreement expressed the rent as being payable monthly in advance but then went on to state that the rent for the whole 6 months should be paid in advance. This unfortunate double wording certainly caused issues in the lower courts and shows the importance of careful wording in tenancy agreements.
The tenancy was renewed on the same terms several times before it then carried on as a periodic tenancy with the rent paid monthly in advance. The landlord then sought to serve a section 21 notice and the tenant defended the matter on the basis that the notice could not be served because the rent paid in advance was a deposit and so was subject to protection.

The Court of Appeal cut the question down to one simple issue. Was the money paid in advance for the last tenancy renewal security, and therefore a deposit. If so, then everyone agreed that the s21 notice would be invalid.

The legislation sets out the definition of a deposit under the Housing Act 1988 as:

any money intended to be held . . . as security for – (a) the performance of any obligations of the tenant, or (b) the discharge of any liability of his

Therefore the issue was whether the payment of rent in advance was security for the performance of an obligation or discharge of a liability.

The Court of Appeal drew a distinction between security and the actual discharge or performance. It then produced a simple but devastating analysis. It asked how the tenant would have responded if she had been asked to make a further payment of rent for a month which was covered by one of the 6 month in advance payments. She would, according to the Court, have said that she had already paid the money. This being the case, then the money in advance must have been a discharge of the liability and not the security for it.

Once this conclusion had been reached then all other issues fell by the wayside.

This decision will bring relief to a large number of agents and landlords who have entered into tenancies where six months rent has been taken in advance. It also resolves a long-running debate in relation to rent in advance.

The Government’s position is that it is not keen on further regulation for business. This is partly an ideological position, of course, founded on the Conservative party’s historical distaste for regulating business. However, there is also the, perfectly fair, point made by the government that there is already more than enough regulation in place to deal with rogue letting agency practice. When one considers the powers created by the Unfair Terms in Consumer Contract Regulations and the Consumer Protection From Unfair Trading Regulations this would seem to be true. However, these regulations are only really effective if they are enforced in a sensible and practical manner. This is not always the case. The main enforcing bodies are local authority trading standards officers. In practice, they are not generally trained for this purpose and have a weak understanding of the underlying law and the legislation they seek to enforce. They are also poorly resourced and so tend to focus their efforts on easier cases. Finally, they are only able to take action if they are aware of a problem. This requires consumers to complain. In practice, this means that the very worst agent, dealing with the most vulnerable sectors of society continue to get away with poor behaviour because there is nobody who is prepared to engage with the local authority to complain about them.

The Government now appears to be proposing to make all lettings agents join an Ombudsman scheme, in the same way as estate agents are obliged to do so. This is to be done by a last minute change in the Enterprise and Regulatory Reform Bill which is in its final stages in Parliament. This may help the situation. From experience as a solicitor, it is clear that one of the key problems consumers face in complaining about professional services is a lack of certainty about who to complain to. However, an Ombudsman scheme is only truly effective if there are clear penalties for not joining which are actively enforced, and if the Ombudsman enjoys genuine respect and cooperation from the industry. It is not clear how the government intends to do this. Unlike solicitors and the Legal Ombudsman there is no central regulating authority with a list of all lettings agents who can ensure they join a scheme. The system will only really work if consumers report those who have not joined. This will require investment in consumer information, something successive governments have utterly failed to do in the property sector. There is also some doubt as to what level of genuine respect the various Ombudsman services have. For a start there is more than one so there is a level of competition between them and, to date, they have been fairly optional in the lettings sector so agents have been free to ignore them. In addition, they have not always been sensible in their statements and decisions and have been too quick to interfere or make pronouncements on their perception of the law which have not always been accurate.

If the government is serious about agent regulation it must do three things:

1. Find some way of creating a list of lettings agents or identifying those who flout regulation;
2. Actively enforce the regulatory process and make sure consumers are very aware of it;
3. Make sure the regulatory body is credible and serious and produces quality decisions.

A last minute change to a Bill which is largely complete is not the best way to achieve this, especially as the Government was not keen to do it and appears to have had its hand forced by the Lords. However, the Government could rebound from this less than promising beginning if it follows the steps above.

It is unlikely that any social housing tenants will be in a position to privately fund disrepair litigation to a satisfactory conclusion.

We can offer no win no fee agreements as an alternative way of funding a disrepair claim. Usually we would not need you to pay anything at the outset of the case and we could pursue a claim through to its conclusion under this funding arrangement. We can seek an order for repair works and compensation for you.

The general principal in litigation is that the winning party will have their costs paid by the losing party and so a successful claimant can seek payment of their costs from their landlord.

If you were unsuccessful in the claim then we would not usually charge for our work. We can advise you on insuring against the risk of having to pay costs to your landlord in the event that you were unsuccessful.

If you would like advice about no win no fee or any of our services please contact us for further information.

All the work is based on the original Renting Homes report published by the Law Commission back in 2006. This was led by Martin Partington QC, now chair of The Dispute Service. Sadly the government rejected the report and it appeared to be consigned to history. However, the, at that stage fairly new, regional assemblies were more positive and the report found fertile ground in Wales and Northern Ireland. The Welsh Assembly has been seeking to reform tenancies in Wales and is now planning to introduce a bill to do so during the lifetime of the current Assembly (probably in 2015). Against that background the Law Commission as been asked to review and update its original Renting Homes report by the Welsh Assembly.

What is planned?
Essentially the proposal is a total removal of the Housing Act 1988 and the Housing Act 1985 in Wales. This will mean that Assured, Assured Shorthold, and Secure tenancies will all disappear. These will all be replaced (and existing tenancies will be converted) to two new types of tenancy. These are currently being called the Standard Contract (which is very similar to an AST really) and a Secure Contract (which is quite like a current Secure tenancy).

Will other things change?
Yes. The Law Commission has been critical of the current, fairly complex, system of overlapping legislation and common law provisions. Lawyers of course love this complexity, but most normal people find it less satisfying! The new proposals will mean that a lot of the other associated legislation is also removed and everything is then concentrated in a single new piece of legislation which will cover all issues.

What are the problems?
Well it is a big change for everyone so there will be a lot of work to do. The changes will also mean that there is a risk that the new legislation will have gaps or mistakes which will generate more litigation. It is also not clear what will happen to existing systems like HMO licensing and tenancy deposit protection. They are not really mentioned in the plated report so they may remain untouched or they may be brought within the new legislation. Either way, there will always be something that remains outside so the objective of simplification will only ever be met in part.

I heard that there would be no ground 8 in Wales!
It has been widely reported that the plan is to remove ground 8 which requires a court to give possession if there are significant rent arrears of more than two months. As usual, this is partly true. In a sense all the grounds will be removed because the Housing Act 1988 is effectively being abandoned and rewritten from the ground up in Wales. However, a ground 8 equivalent will probably remain for private sector tenancies on the less secure contract. For social tenancies on a secure contract then there will be no ground 8 equivalent. Therefore social landlords may have more difficulty securing possession for serious rent arrears than before. Private landlords are unlikely to be affected.

What does this mean for agent’s and landlords?
There will actually be an increased level of flexibility in Wales. Many of the restrictions that have existed on the use of ASTs will be removed. It will be easier to offer terms shorter than six months and there will be less of a concern as to whether the tenancy falls outside the system as many of the odd exceptions in the Housing Act 1988 will be removed. There will also be the option for private landlords to effectively compete with the social sector by offering secure tenancies with greater rights.
More problematically, there will need to be an extensive process of retraining so that landlords and agents begin to understand the new process. Wise agents and landlords will start this process now, at least in an outline form. There will also need to be wholesale alteration of tenancy agreements to deal with the fairly radical restructuring and new statutory wording envisioned by the report. While model tenancy agreements will be freely available they will be focused on the statutorily required elements and are likely to leave a large number of gaps that sensible agents and landlords would wish to fill in both to protect their interests as well as to ensure that the relationship with their tenants is clearly set out.

Does this mean that Wales is a separate jurisdiction?
No. England & Wales are still one legal jurisdiction. However, as far as landlord and tenant law goes, Wales is increasingly going to diverge from England, not in legal principles, but in the detail of how it is applied. When choosing a lawyer it will be necessary to make sure that they are both skilled in landlord and tenant matters as well as being versed in Welsh law. Naturally, Welsh firms will say that they are the best qualified to advise on Welsh law but English lawyers have long experience in dealing with advice outside their jurisdiction and will probably disagree.

What do I need to do today?
Not too much really. There will probably be a lot of noise and misreporting about the changes. It is worth taking a look at the new report to see what is being proposed and then considering what that will mean for you. Then keep an eye on the Welsh Assembly to see if there is to be a further consultation and to look for the full draft bill. That is when the real work will start.

A group of occupier moved into an empty former children’s centre, owned by Enfield Council, which is apparently to be sold to a private developer. Enfield tried to get an Interim Possession Order (a kind of emergency order) in the Barnet County Court, but this was dismissed because of procedural failings by the Council. Enfield then issued a possession claim in the High Court, which the occupiers defended as having been improperly issued in the High Court.

Practice Direction 55 to the Civil Procedure Rules says that a possession claim may be issued in the High Court if:

(1) there are complicated disputes of fact;
(2) there are points of law of general importance; or
(3) the claim is against trespassers and there is a substantial risk of public disturbance or of serious harm to persons or property which properly require immediate determination.

Enfield argued that at the previous hearing the occupiers had raised a defence involving Article 10 and 11 under the Human Rights Act on the right to free expression and the right to protest, which involved complex issues of law. The Council also argued there was a risk of disorder at the eviction stage.

The occupiers argued that County Court Judges were well able to hear and decide on human rights defences, as there was nothing expecially complex about the issues of law. The occupiers denied that there was any risk of disorder at present or when and if they were evicted. They presented letters of recommendation from community figures in Barnet, where they had occupied and kept open the Friern Barnet Library until a local community trust took over.

The High Court agreed that this was not a matter of complex law that would require a High Court hearing. On the risk of disturbance or harm, the Practice Direction required an immediate, present and/or substantial risk. The possibility of future risk was insufficient. There was no evidence to suggest that the occupiers posed any such risk nor was there even any likelihood of such a risk occuring.

The claim was transferred to the Barnet County Court. Enfield were refused their costs and were ordered to pay £500 to the Access to Justice Foundation in costs for the occupiers’ pro bono legal representation. So Enfield will have to wait for another hearing date, lost the costs of the High Court hearing and even had to pay pro bono costs.

The lesson is that the rules in Practice Direction 55 1.3 are strict and unless they are met, a possession claim should be in the County Court.

In a keynote speech on 24 March 2013 Mr Cameron promised to tackle a “something for nothing culture”. He intends for there to be a tougher approach on housing and benefits which could result in immigrants having to wait up to five years to join council housing registers.

It is thought that only around half of councils strictly apply local connection tests for social housing. Nearly one in 10 new social lettings go to foreign nationals, a proportion that has risen from 6.5% in 2007/2008 to 9% in 2011/2012.

Mr Cameron intends that statutory guidance will be issued and that local authorities will have to introduce minimum residency times of between two and five years for joining the housing register or justify why minimum residency times are not being applied.

The OFT has also said this in a report published last month. It criticised the lettings industry for not making fees sufficiently clear in advance of contracts being signed. Other reports [PDF] have criticised the industry for its lack of standardisation of fee structures which makes it hard for a meaningful comparison to be made between firms by consumers, both landlords and tenants.

Now the Advertising Standards Agency has now weighed in with an Adjudication in relation to one of the bigger agents in the business and their use of the largest online property advertising site.

As with any advertising aimed at consumers there is a restriction on the advertising offered by Lettings Agents and it is subject to the codes of practice published by the ASA. They can also deal with complaints about them.

Complaint
The agent involved, YourMove, in this case had advertised a property for rent on the online property portal, Rightmove. This is a common method of advertising. A complaint was made that the advert was misleading because it did not specify all of YourMove’s charges and fees to tenants. Therefore the sum quoted for the rent was not the total price that would be paid.

YourMove’s Response
YourMove responded that the advert indicated that there were fees to be paid and contained a link to their website where such charges were specified. They stated that they followed industry practice and codes of conduct (which they do). They also pointed out that the RightMove site was used to find suitable properties to rent and so the agent’s fees were not a material concern for most consumers at that time. Finally, it was pointed out that some of the fees were contingent on other factors and so could not be expressly quoted.

ASA Ruling
The ASA has upheld the complaint against YourMove. YourMove have been ordered to make clear in all adverts where there are further non-optional fees that will be charged and how they are calculated so that a consumer can ascertain themselves from the advert what those fees are likely to be.

Comment
At one level this is a surprise but when you consider their general approach to these issues and some of the adjudications made against airlines, credit card companies, and others it is consistent with their aims. Clearly the ASA will take the same line with all other lettings agent’s advertising. This adjudication will probably do more than any other single thing to change the way charges are set out in the industry as agents will now have to place their charges into adverts alongside rental prices.

Advice to Agents
All agents should carefully consider the effects of this ruling on their advertising. They should amend all their advertising to ensue that their fees are actually visible on those ads directly. It would certainly be helpful if the main portals amended their systems so that these fees could be entered centrally and would then be replicated on all the ads from that agency.

It can happen that a leaseholder applies to the Leasehold Valuation Tribunal, wins, but is then surprised to find that the landlord’s costs of contesting the application have been added to the service charge. The landlord can do this if the lease entitles him to.

To stop this nasty sting in the tail, leaseholders can ask the Leasehold Valuation Tribunal for an order preventing the landlord adding the costs of the application to the service charge. This is called a “s20C Order”. Leaseholders can ask for a s20C order during the service charge case or afterwards by separate application. If the case is in the county court, the county court can make a s20C Order too.

Only those leaseholders participating in the application to the Tribunal can benefit from a s20C Order. For example, say there are four flats and only three leaseholders make an application to the Tribunal. Even if he loses, a landlord may be able to recover one quarter of the costs he incurred contesting the application from the non-participating leaseholder. Leaseholders might want to take note of this when trying to persuade others to join them.

All this sounds fair and sensible, but sometimes the Tribunal makes a s20C Order even when leaseholders only achieve very modest reductions. A landlord may have spent money and effort fighting an application, largely successfully, only to end up substantially out of pocket. Leasehold Valuation Tribunals were warned by a recent case in the Lands Chamber, Johnson & others v County Bideford Limited 2012 [UKUT] 457, of the need to make a proper reasoned decision on a s20C application.

Faced with a s20C application, it is worth landlords reminding the Tribunal that s20C allows it to disallow “all or any” of the landlord’s costs. In other words, if the Tribunal is going to prevent a landlord adding costs to the service charge, it doesn’t have to disallow all of them. I had a case recently acting for a landlord where, because the leaseholder was only partly successful, we managed to persuade the Tribunal to make only a 50% s20C Order. Not only did that seem to be a fair result, but it might discourage leaseholders from making nuisance applications in the future.

Andrew Brookes
Andrew.brookes@anthonygold.co.uk
Anthony Gold
25 January 2013