Monthly Archives: June 2015

Failure to return deposit meant assured shorthold tenancy possession proceedings still invalid

At the end of an assured shorthold tenancy a claim for possession may fail because the tenant has given the landlord a deposit and the relevant landlord’s notice under section 21 of the Housing Act 1988 was served at a time when the deposit had not been protected under the tenancy deposit scheme and/or the prescribed information in respect of the tenancy deposit scheme had not been provided to the tenant as required by section 213(6) of the Housing Act 2004.

Section 215(2) of the 2004 Act provides that if section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with.

The Localism Act 2011 inserted section 215(2A) into the Housing Act 2004 which sets out the circumstances in which a section 21 notice may be delivered, notwithstanding that the deposit was not protected within 30 days of the landlord receiving it:

“(2A) Subsections (1) and (2) do not apply in a case where –

(a) the deposit has been returned to the tenant in full or with such deductions as are agreed between the landlord and tenant, or

(b) an application to a county court has been made under section 214(1) and has been determined by the Court, withdrawn or settled by agreement between the parties.”

So if the deposit has been repaid either voluntarily or pursuant to an application to the court, then it’s open to the landlord to issue the section 21 notice, even though the deposit may not have been protected within the prescribed period at the outset.

The Localism Act 2011 also amended section 214 so that if the deposit was not protected nor the prescribed information supplied within 30 days of the deposit being received by the landlord, the court ‘must’ make an order in respect of the deposit, and an order that the landlord pays the tenant an amount of between one and three times the amount of the deposit.

In the recent County Court case of Khuja v Chowdhury [2015] the Section 21 notice was found to be invalid because, though by then the deposit had been protected by the scheme and the tenant had received the prescribed information, the deposit had not been returned to the tenant.

The mandatory penalty was kept down to twice the amount of the deposit as the court found some mitigating factors including the fact that the landlord had acted honestly.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Removal of noise condition within boundaries of committee’s planning judgement

Paragraph 123 of the National Planning Policy Framework (“NPPF [123]”) deals with noise caused by new development:

“Planning policies and decisions should aim to:

• Avoid noise from giving rise to significant adverse impacts on health and quality of life as a result of new development;

• Mitigate and reduce to a minimum other adverse impacts on health and quality of life arising from noise from new developments, including through the use of conditions.”

Footnote 27 which applied to both states:

“See Explanatory Note to the Noise Policy Statement for England (Department for the Environment, Food and Rural Affairs).”

NPPF [123] as boosted by the Explanatory Statement is a hierarchical policy. Where, the noise caused by the proposed development crosses the “lowest observed adverse effect level” (the lowest level at which an adverse effect can be observed) (“LOAEL”) the decision maker must at least give consideration to the question whether there are any further steps that can reasonably be taken to reduce the impact of noise.

In the Court of Appeal case of May, R (on the application of) v Rother District Council & Others [2015] the Appellant’s house and garden were next to a Multi-use Games Area (a “MUGA”). The MUGA was subject to a planning condition which limited its hours of operation to between 0900 hours and the earlier of sunset and 2030 hours. Contrary to the advice of it’s Environmental Health Officer and Planning Officer, the Rother District Council removed that condition. The Appellant challenged this.

The court said that the Noise Policy Statement for England said noise impact is to be minimised “within the context of Government policy on sustainable development”. It is not a free-standing requirement. The policy is to be interpreted as minimising noise as far as reasonably practicable. The Noise Policy Statement also makes it clear that considerations of noise do not trump everything else. It says that the relevant part of the policy does not mean that adverse effects from noise cannot occur.

Lastly the opening part of NPPF [123] describes the noise policy as an “aim” rather than as a rule. This was contrasted with other parts of the NPPF which, for example, require decision makers to apply a sequential test to applications for town centre uses.

Whether the imposition of a condition is a “reasonable step” is one of planning judgment for the planning authority.

It is a judgment on which reasonable people can disagree. Whether a step is a reasonable step is a judgment which may take into account both the position of the would-be developer and also the position of those who would be affected by the development.

NPPF [123] was consistent with the decision maker balancing conflicting considerations. If, as the committee concluded, the noise was neither unreasonable nor substantial, it was difficult to see what further reasonable steps they were required to consider.

Paragraph 206 of the NPPF restates the position that a planning condition should only be imposed where is it “necessary, relevant to planning, enforceable, precise and reasonable in all other respects.” The planning committee here decided that the condition did not “solve the problem” and that the noise itself was neither unreasonable nor substantial. The committee had concluded that the condition “no longer served a useful purpose”. Once the committee had reached that conclusion they could not have justified retaining the condition. If it served no useful purpose, it could not be “necessary”?

Whether or not it did in fact serve a useful purpose might have been highly controversial; but the answer to that question was one of fact or planning judgment. It showed no error of law.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Flat leases: modification of defective lease terms in new leases under Leasehold Reform, Housing and Urban Development Act 1993

Chapter II of Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) gives the tenant of a flat the right, subject to paying a premium, to be granted a new lease of the flat as a replacement for the existing lease, for a term expiring 90 years after the last day of the existing lease.

Section 57, “Terms on which new lease is to be granted”, provides:

“(1) Subject to the provisions of this Chapter (and in particular to the provisions as to rent and duration contained in section 56(1)), the new lease to be granted to a tenant under section 56 shall be a lease on the same terms as those of the existing lease, as they apply on the relevant date, but with such modifications as may be required or appropriate to take account:

(a) of the omission from the new lease of property included in the existing lease but not comprised in the flat;

(b) of alterations made to the property demised since the grant of the existing lease; or

(c) in a case where the existing lease derives (in accordance with section 7(6) as it applies in accordance with section 39(3)) from more than one separate leases, of their combined effect and of the differences (if any) in their terms.

(6) Subsections (1) to (5) shall have effect subject to any agreement between the landlord and tenant as to the terms of the new lease or any agreement collateral thereto; and either of them may require that for the purposes of the new lease any term of the existing lease shall be excluded or modified in so far as

(a) it is necessary to do so in order to remedy a defect in the existing lease; or

(b) it would be unreasonable in the circumstances to include, or include without modification, the term in question in view of changes occurring since the date of commencement of the existing lease which affect the suitability on the relevant date of the provisions of that lease.”

In the United Kingdom Upper Tribunal (Lands Chamber) case of Rossman v The Crown Estate Commissioners [2015] the main issue was whether, under section 57 of the 1993 Act, the term of an existing lease, of Flat 124A, which apportioned the lessee’s liability to a service charge contribution on a fixed percentage basis ought to have been modified in the new lease to be instead a fair proportion based on the floor space of the flat, given that the aggregate of service charge contributions for which the lessees were currently liable under their existing leases was well in excess of 100% of landlord’s expenditure! Quite simply the existing lease of Flat 124A, and others, entitled Whitehall Court (Investments) Ltd., as landlord, to collect from the tenants of Whitehall Court almost 30% more by way of service charges than it was actually spending on services.

So there had been a voluntary abatement scheme, which operated, without the force of contract, to reduce Mr Rossman’s liability for service charge contributions to a percentage figure materially below the figure in his lease. The scheme had a similar effect on the corresponding provisions in the other Whitehall Court leases too.

Here the Tribunal had little difficulty in finding that there was a defect in the existing lease of Flat 124A, and it was a sufficiently serious defect to require a remedy.

To include in the new lease a term replicating the provision for a fixed 0.8% service charge contribution in the existing lease would be wrong.

It could not be right for a defect of that nature to be incorporated into the new lease of Flat 124A. To do that would run contrary to Parliament’s evident intention in section 57(6) of the 1993 Act.

In summary:

The term in the existing lease of Flat 124A, which required from the lessee a fixed service charge contribution of 0.8%, was a defect of the type contemplated in section 57(6)(a) of the 1993 Act, and a modification of that term was required in the new lease.

It might also be that, in view of changes which had occurred since the commencement of the existing lease, the inclusion of that term, unmodified in the new lease, would be unreasonable in the sense contemplated by section 57(6)(b). So the disputed term must now be modified under that sub section too.

So, the case should go back to the First-tier Tribunal so that it could determine, in the light of full evidence and submissions, how the service charge provision in Mr Rossman’s new lease should be formulated.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Adjudication payment triggered implied contractual right to recover overpayment

Adjudication in construction disputes is designed to provide provisional resolution of disputes to preserve cash flow but the outcome is subject to final determination in later legal proceedings.

Provisions are implied into a construction contract under section 108(5) of the Housing Grants, Construction and Regeneration Act 1996, read with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (“the Scheme”).

By providing that the decision of an adjudicator is binding and that the parties shall “comply with it”, paragraph 23(2) of the Scheme makes the decision enforceable for the time being. It is enforceable by action founded on the contractual obligation to comply with the decision combined, in a normal case, with an application for summary judgment.

The limitation period for enforcement will be six years from the adjudicator’s decision. But the decision is only binding and the obligation to comply with it only lasts “until the dispute is finally determined” in one of the ways identified.

By use of the word “until”, paragraph 23(2) appears to contemplate that there will necessarily be such a determination. The short time limits provided by paragraph 19(1) also indicate that adjudication was envisaged as a speedy provisional measure, pending such a determination.

But there is nothing to prevent adjudication being requested long after a dispute has arisen and without the commencement of any proceedings.

Also its unlikely that the Scheme imposes on either party any sort of obligation to start court or arbitration proceedings in order to confirm its entitlement.

Either or both of the parties might understandably be content to let matters lie.

The Supreme Court in Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc (2015) has now provided some guidance as to when those proceedings must be brought and has come to some conclusions which could have bizarrely inconsistent results.

In that case Aspect had failed to pick up some asbestos on a survey which later impeded and added cost to Higgins’ contruction work. Higgins were awarded over £600,000 adjudication which was 75% of their claim. Aspect paid.

The contract was not entered into as a deed so the limitation period for bringing proceedings for breach of it was 6 years rather than 12 years from breach.

More than 6 years after their breach of contract Aspect sought recovery of monies they had paid Higgins under that adjudication award. However they issued proceedings for it within 6 years of paying it.

Aspect rested its claim on an implied term, alternatively in restitution.

The implied term was that:

“in the event that a dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicator’s decision made pursuant to the Scheme, that party remained entitled to have the decision finally determined by legal proceedings and, if or to the extent that the dispute was finally determined in its favour, to have that money repaid to it.”

The court said it was a necessary legal consequence of the Scheme implied by the 1996 Act into the parties’ contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicator’s decision had led to, once there had been a final determination of the dispute.

The obvious basis for recognising that right was by way of implication arising from the Scheme provisions which were themselves implied into the construction contract.

If and so far as the court’s decision abolishes the basis on which the payment was made an overpayment is, retrospectively, established. Repayment must then be required either by contractual implication or, if not, then as an independent restitutionary obligation.

Since Aspect’s cause of action arose from payment and was only for repayment, then whether it was analysed as in implied contractual terms or restitutionary terms, it was a cause of action which could be brought at any time within six years after the date of payment to Higgins on 6 August 2009.

Higgins complained that this gave Aspect a one-way throw and undermined finality. By delaying commencement of the present claim until 2012, Aspect can sue to recover all or part of the £658,017 paid to Higgins, without having the risk of ending up worse off, since Higgins was barred by limitation from pursuing the £331,855 balance of its original claim.

That, however, resulted from Higgins’s own decision not to commence legal proceedings within six years from April 2004 or early 2005 and |Higgins has assumed the risk of not confirming (and foregoing the possibility of improving upon) the adjudication award it had received.

Adjudication had been conceived as a provisional mechanism, pending a final determination of the dispute.

Though it was understandable that Higgins should wish matters to lie as they were following the adjudication decision, Higgins could not ensure that matters would so lie without either pursuing legal or arbitral proceedings to a conclusion or obtaining Aspect’s agreement. In the absence of Higgins doing that there would be finality.

This post is made out of general interest. It does not replace the need to get bespoke legal advice in individualcases.

Neighbourhood Development Plans can include site allocation policies

Can a neighbourhood development plan made under section 38A of the Planning and Compulsory Purchase Act 2004 as amended (“the 2004 Act”) include site allocation policies?

In the Court of Appeal case of Larkfleet Homes Ltd, R (on the application of) v Rutland County Council & Ors [2015], Larkfleet said that the statutory power to make neighbourhood development plans that include site allocation policies had been cut down by regulations made under a section located elsewhere in the statute and dealing with a different subject, that is to say local development documents.

The court said the provisions relating specifically to neighbourhood development plans are plainly wide enough to allow site allocation policies to be included in such plans.

It would be very odd if site allocation policies could not be included in them, because the location of housing is likely to be the single most important planning issue for a neighbourhood.

Anyway, section 38B deals with the provision that may or may not be made by neighbourhood development plans.

There is nothing in the section itself to restrict the inclusion of site allocation policies.

There is an express power in subsection (4) for regulations to restrict the provision that may be made, however the regulations under the section, the Neighbourhood Planning Regulations, contain no material restriction.

So, the statutory regime governing neighbourhood development plans clearly permits such plans to include site allocation policies.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Council estopped from saying compulsory purchase claim time barred

A claim for compensation for compulsory purchase is subject to the 6 year time limit in the Limitation Act 1980 but when does that time limit run from?

In the High Court case of Saunders v Caerphilly County Borough Council (2015) the claimant argued that the 6 years only started when the Lands Tribunal quantified the award.

But the authority successfully argued that it ran from them giving notice to enter as that triggered the right to “compensation to be awarded by the Lands Tribunal”.

However the court found that the authority was bound, in fairness, by the doctrine of estoppel not to hold the claimant to the time limit.

Historically the claimant had in fact applied to the Lands Tribunal in time but the authority had prevailed on the claimant to withdraw that application based on certain assurances about the claimant’s compensation claim being entertained.

A letter from the authority’s head of legal services in 2008, was clear indication that if the outstanding points were not agreed, they would be referred to the Lands Tribunal. Implicit in that communication was that no limitation point would be taken.

Moreover the authority suggested that the parties should continue to negotiate and that commencing proceedings at that stage would serve no productive purpose.

That was the basis upon which negotiations carried on until 2012, when the authority firstly raised the limitation issue and reserved its rights in respect of it.

Thereafter, the claimant had been entitled to a reasonable time to consider his position, and instruct new solicitors.

So the court ruled that the claim should be admitted out of time.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

VAT Election notified too late to get TOGC Relief

The condition in Article 5(2A)(a) of the VAT (Special Provisions) Order 1995 requires not only that an option to tax has been exercised by the transferee on or before the relevant date but also that notification of that option has been given to HMRC on or before the relevant date. There is no provision to extend the time for that notification.

Where notification is given within the appropriate time limit the option may take effect from the date on which it was exercised. To that extent, and only to that extent, can the notification operate retrospectively.

In the First-tier Tribunal (Tax Chamber) case of Nora Harris v HMRC (2015) Mrs Harris was the Landlady of a Hairdressing Salon. She had opted to charge VAT on the rent. On 1 August 2011 she sold the building to her daughter.

Her daughter had got herself VAT registered in time so had her daughter opted to charge VAT on the property and notified the election to HMRC by 1 August 2011 the sale would have been treated as VAT neutral under the Transfer as a Going Concern VAT relief rules.

Unfortunately she had done neither and her efforts to notify a late election to HMRC were totally undermined because the tribunal ruled that the requirement to notify her VAT election to HMRC before the completion of her purchase was mandatory and that her failure to do so was fatal to the validity of her VAT election and would have been so even if her actual election had been made before completion of the purchase from her Mother.

In fact Mrs Harris’ daughter knew nothing about the relevant VAT rules and even her election to charge VAT was merely inferred from the fact that she charged VAT to the tenant after buying ownership of the freehold from her Mother.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Additional accommodation for visitors disqualified flat cost from business deduction

Section 34 Income Tax (Trading and Other Income) Act 2005 (“ITTOIA”) prohibits certain expenses from being deductible in calculating income tax:

“34 Expenses not wholly and exclusively for trade and unconnected losses

(1) In calculating the profits of a trade, no deduction is allowed for–

(a) expenses not incurred wholly and exclusively for the purposes of the trade, or

(b) losses not connected with or arising out of the trade.

(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.”

The First-tier Tribunal (Tax) Tribunal case of Healy v Revenue & Customs (Rev 1) [2015] concerned the Cheshire based geordie actor Tim Healy and his efforts to get certain costs of his multi bedroom London flat deductible against tax. He had taken the flat when he had taken a London role as commuting from Cheshire would have been impossible.

The Tribunal said it had to consider the actor’s intentions at the time that he entered into the tenancy agreement. The actor had said that he knew “how massive the show would be” and that he “needed space” for people who would want to come to visit.

This was fatal to his relief claim as from the outset the actor was seeking to secure space for visitors as well as for himself, and that had been a consideration when deciding which particular flat to rent.

For the purposes of Section 34(1) of ITTOIA, this was an independent purpose, and that the expenditure on the flat thus had a dual purpose of enabling the actor to perform his duties under the performer’s contract, as well as enabling him to receive visitors in London.

That latter purpose was not a business purpose and the fact that the three bedroom flat cost no more than a hotel was immaterial.

For the purposes of Section 34(1) ITTOIA, the question was whether the expenditure had a dual purpose, not whether there was additional expenditure in order to meet an additional purpose.

That dual purpose meant that the “wholly and exclusively” test in s 34(1) ITTOIA was not satisfied.

In fact, no item of identifiable expenditure, relief was claimed for in the Appeal, had met the requirement of being incurred “wholly and exclusively” for the business purpose.

Had the expenditure been incurred to meet the actor’s ordinary needs for warmth and shelter for purposes not merely ancillary to his business purpose that would also have disqualified it from relief as well but the objective of entertaining visitors was sufficiently disqualificatory to make it unnecessary for the Tribunal to reach a view on that.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Third party’s use of land for unrelated purpose did not support squatter claim

The grant of a licence to make a particular use of land is an indication that the licensor regards himself as in control of the land, and therefore indicates that he has an intention to possess it.

The parking of a vehicle in a restricted space can amount to an act of possession if
it demonstates an intention to control the space.

Acts of possession done on parts of the land to which a squatter’s title is claimed may be evidence of possession of the whole. The issue is whether there is such a ‘common character of locality’ between the different parts as to raise a reasonable inference that the disputed land belonged to the person who has possessed it in the same way as the other parts did.

In the Upper Tribunal (Tax and Chancery Chamber) case of Re Land adjoining 19 Bridge End, Billington, Clitheroe [2015] the claimant had licensed a third party to park a vehicle on hardstanding outside a garage and to the west of it (“the Western Land”) -though insufficiency of space meant any vehicle also having to encroach onto land to the front of that hard standing.

The tribunal said:

– the garage was enclosed whereas the Western Land was open land; and,

– the boundaries of the garage (its walls) were clear, whereas the boundaries of the Western Land were not obviously delineated.

The claimant’s possession of the garage for storage purposes raised no reasonable inference that the claimant was also in possession of the hard standing, still less of the whole of the Western Land. That inference was ruled out because the boundaries of the Western Land were not “obviously defined”.

Was the hard standing to the west of the garage so inherently linked to the garage itself as to raise the reasonable inference that the claimant was also in possession of that hard standing?

No, because:

(a) The claimant did not use the Western Land for storage. Instead it was used by a third party licensee for the purpose of parking a motor vehicle in connection with that licensee’s occupation of his own neighbouring house;

(b) That use for parking was not in any way related to the use of the garage, but rather to the use of that licensee’s own house, some distance from the garage; and

(c) the claimant’s possession of the garage for the purposes of storage alone could not give rise to any reasonable inference that the claimant was also in possession of the Western Land, which was used for an entirely different purpose.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

VAT: University building was extended rather than continued so no zero rating

Section 30(2) of Value Added Tax Act 1994 (“VATA”) provides that a supply of goods or services is zero-rated if the goods or services are of a description for the time being specified in Schedule 8 VATA.

Item 2 in Group 5 of Schedule 8 VATA specifies:

The supply in the course of the construction of:—

(a) a building … intended for use solely for … a relevant charitable purpose …

of any services related to the construction other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity.

Note 16 to Group 5 provides as follows:

For the purpose of this Group, the construction of a building does not include:-

(b) any enlargement of, or extension to, an existing building …”

In the First-tier Tribunal (Tax) case of York University Property Company Ltd v Revenue & Customs [2015] it was decided to build a chemistry building in two phases due to an initial lack of funds to complete the whole building. At the time phase 1 was completed, it was not known when phase 2 would be completed.

Phase 1 was a three-storey building shaped like a rectangle, with a sacrificial wall on one of its short sides.

A donation was made to the University, in 2010, enabling phase 2 to be completed. The University wanted the phase 2 works to be zero rated for VAT.

Phase 2 was in the same style and was of similar size and shape to phase 1, and was joined to phase 1 where the sacrificial wall previously stood.

Following completion of the phase 2 works, there was one single three-storey rectangular building that was double the length of the phase 1 construction. Without looking closely at the building it would now be impossible to tell that the two parts of the building were constructed at different times.

There was no disagreement between the parties that both the phase 1 and phase 2 works related to “a building … intended for use solely for … a relevant charitable purpose” within the meaning of this provision, and HMRC accepted that the phase 1 works fell to be zero-rated on that basis.

Of the precedent cases there had been only one where a second phase of works was found to be a continuation of the original development rather than an extension to a completed building.

The tribunal said the fact that the phase 1 construction contained a sacrificial wall in anticipation of the phase 2 works was of marginal relevance.

In one of the precedent cases the first phase single storey wing included foundations and steel beams of sufficient strength to support the additional storey to be added in phase 2, but this had not affected the tribunal’s conclusion that it was an enlargement of an existing building rather than a continuation.

The only precedent case at all supportive of the University’s argument, that phase 2 was a continuation, was different as it had rested on the finding that the kitchen and laundry block built in the second phase (included in the planning consent) was integral to the development, in that the hospital could not function without it. There had been only an 18 month gap between completion of the first phase and the commencement of the second phase. Moreover, in that case the Commission for Social Care Inspection had required that the kitchen and laundry facilities be built, and had granted an extension of time for that to be done.

In this case the Chemistry Department’s vision could not be achieved until phase 2 was completed, but there was no suggestion that the phase 1 construction could not function and be used for chemistry research until phase 2 was completed.

Phase 1 did so function, as did the Chemistry Department as a whole, for some 9 years until phase 2 was completed in 2013.

Phase 1 could have continued to so function indefinitely, without phase 2. There was no suggestion that any public authority required phase 2 to be completed within any stipulated timeframe, or at all.

So phase 2 of the building was, for purposes of Item 2 in Group 5 of Schedule 8 VATA, an enlargement of or extension to phase 1, rather than a continuation of the original development of the building and so not eligible for zero rating.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.