Tag Archives: residential tenancies

Payment of lease extension completion statement did not oust LVT’s judgement on costs

By section 60 of Leasehold Reform Housing Urban Development Act 1993 (the 1993 Act) it is the enfranchising residential tenant who must pay the costs of the extension lease. Where those costs are in dispute there is a mechanism for completion to take place without resolution of that dispute. This is provided by section 56(3) of the 1993 Act.

Whether the Leasehold Valuation Tribunal (LVT) has jurisdiction depends, to some extent, on section 91(1) of the 1993 Act. It says the LVT only has jurisdiction “in default of agreement” as to the amount of costs recoverable under section 60.

In the Upper Tribunal (Lands Chamber) case of Friends Life Ltd & Anor v Jones [2014] the central issue was whether a binding agreement as to the amount of the solicitors’ conveyancing fees occurred, or was made, when the residential tenant’s solicitor paid, without demur, the completion monies requested by the intermediate and head landlords, at completion of the extension lease, on 22 March 2013.

The Tribunal determined that there was no agreement as to costs because by its surveyor the residential tenant had five weeks earlier issued an application in the LVT under section 92(1)(d) of the 1993 Act seeking determination of the reasonable costs payable and, a week prior to the completion of the extension lease, the LVT had issued directions without hearing requiring the intermediate and head landlords to send a detailed statement of the costs which they sought under section 60(1) of the 1993 Act.

Seen in that context, the payment of the completion monies could not amount to an unequivocal acceptance of the 22 March 2013 cost figure. Rather, the payment of the full completion fees accorded with section 56(3) of the 1993 Act, which requires that where the amount of costs is not agreed the tenant cannot require completion of the extension lease without tendering the amount “so far as ascertained” of the costs for which the tenant is liable under section 60. Here the amount of the costs was “ascertained”, and full payment had been tendered and made, even if the amount of the costs had not been “agreed” because any costs in excess of £722 plus disbursements and VAT were disputed as was clear from the residential tenant’s surveyor’s section 92(1)(d) application.

In short, the payment of the costs on 22 March 2013 was merely the provision of full “security” so as to enable completion of the extension lease to take place pending the outcome of the residential tenant’s surveyor’s section 92(1)(d) application to the LVT. The fact that the tenant was acting by two representatives, or agents, did not affect that conclusion. Their separate acts were to be treated as the joint acts of the principal i.e. the residential tenant.

So the LVT had jurisdiction to decide the cost issue. That jurisdiction had not been ousted by any “agreement” as to the amount of costs recoverable under section 60.

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

Lenders had priority over Vendors in “sale and lease back” deals

Homeowners have agreed sale-and-leasebacks deals with investors to overcome debts.

In Scott-v-Southern Pacific Mortgages Ltd (2014), properties were sold to buy to let investors on the understanding the homeowners could remain as the tenants after the sales were completed.

However the sale contracts made no reference to the lease-backs to the sellers.

Some of those landlords had mortgages and failed to maintain mortgage payments.

The lenders were not told about the lease-backs to the sellers. They were informed that the properties were being bought with vacant possession. So they had not consented to the lease-backs.

Did those mortgages take priority over the agreements between the buyers and sellers or were the lenders bound by the agreed lease-back arrangements?

The sellers said they had overriding interests in the houses based on the promised lease-backs which were protected by them being in actual occupation when the sales were completed.

The Supreme Court said the rule that a buyer becomes the equitable owner of the property sold on exchange of contracts “applies only as between the parties to the contract and cannot be extended so as to affect the interests of others” i.e the lenders.

Accordingly the court were unanimous that exchange of contracts had not prior to completion empowered the buyers to confer equitable proprietary rights on the sellers capable of taking priority over the lenders.

So all the sellers had were personal claims against the buyers.

The acquisition of the houses may have been a vital precursor to a mortgage but where a property buyer needs a loan to finance a purchase, the purchase and mortgage form a seamless whole because the buyer would never have got the property without the loan.

The sellers’ claims against the buyers changed from being purely personal claims to being proprietary claims against the properties, capable of binding third parties, when the buyers completed their purchases from them and acquired the legal estates in the houses, but by then it was too late for the sellers to get priority over the mortgages taken by the lenders as an integral part of the house purchase completions.

The decision has important implications for other property transactions where the priority of derivative interests depends on the person granting them already having the legal estate in the property at the key time. The transactions potentially affected include commercial sales and lease-backs.

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

Information omitted from Collective Enfranchisement notice was fatal to it

Where a notice is served under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), claiming the right to acquire the freehold of a residential block, using the collective enfranchisement provisions of the 1993 Act, the information on the Section 13 notice is intended to include and disclose:

– the number of qualifying tenants in the premises (section 3(1)(b)),
– whether the total number of flats held by the qualifying tenants is not less than two-thirds of the total number of flats in the premises (section 3(1)(c)) and:
– whether the section 13 notice has been given by qualifying tenants of not less than half of the number of flats contained in the premises (section 13(2)(b)).

In the Court of Appeal case of Natt & Anor v Osman & Anor [2014] the Section 13 notice failed to comply with section 13(3)(e) of the 1993 Act because it did not give:

– the names of one of the qualifying tenants in the building,
– the address of the flat of that qualifying tenant, and,
– the particulars of that qualifying tenant’s lease as specified in section 13(3)(e)(i).

The Court of Appeal said that for the reasons in the preamble to this blog the omitted information was fundamental to the collective enfrancisement process.

Furthermore:

1. Paragraph 15 of schedule 3 to the 1993 Act had specifically said which inaccuracies in Section 13 notices would not invalidate them and the circumstances in which they could be amended, and,

2. Since the Landlord challenged the validity of the original Section 13 notice, there would have been nothing to prevent the immediate service of a fresh Section 13 notice “without prejudice” to the tenants’ contention that the original notice was valid. Section 13(9)’s restriction on the service of a new Section 13 notice within 12 months after the withdrawal or deemed withdrawal of a Section 13 notice only applies if the original notice was valid.

The invalidity of the notice was upheld and the applicant’s appeal was dismissed.

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

Receivers could serve Section 21 notice to end Assured Shorthold Tenancy

Section 21(4) of the Housing Act 1988 (“HA 1988”), imposes a duty on the court to make a possession order of a dwelling held under an Assured Shorthold Tenancy (“AST”) if it is satisfied that any previous fixed term AST no longer exists and the landlord or, at least one of them, has given to the tenant not less than two months’ notice in writing that he requires possession of the dwelling-house.

In McDonald v McDonald & Anor [2014] the landlords were the tenant’s parents. The parents had borrowed off Capital Homes Ltd (“CHL”), to buy the property and the loan was secured by a mortgage over the property. The tenant paid the rent with housing benefit and her parents used that money to pay the sums payable to CHL.

The mortgage conditions forbade any tenancy to a tenant assisted by social security. Other tenancies had to be ASTs previously approved by CHL. The parents failed to apply for approval. A further condition said the parents must advise CHL if they proposed to let to a family member. They did not do this either. They later fell into arrears and CHL appointed receivers of the property, (“the receivers”).

Under the mortgage conditions, they had the same powers as CHL, and they were the agents of the borrowers.

When the receivers were appointed, the tenant was in possession under the terms of an AST expiring on 14 July 2009. She kept possession after then under a statutory periodic tenancy which was subject to the landlord’s power to terminate and get a possession order under section 21(4) of the HA 1988.

The receivers claimed to use their powers under the mortgage to serve a notice (“section 21 notice”) in their own names on the tenant under section 21(4)(b) of the HA 1988 and to commence possession proceedings in the name of the landlords.

The section 21 notice was given by the receivers and not the landlords. Had they power to do this?

If the receivers had power to give the section 21 notice, they could do so in their own names because under section 45 of the HA 1988 the word “landlord” includes any person deriving title from the original landlord, and that would include CHL. Also, under the mortgage conditions the receivers could exercise all the powers that CHL were able to exercise.

On the other hand if they did not have power to give the section 21 notice, then their section 21 notice would be of no effect and the tenant’s statutory periodic tenancy would have continued as before.

The Court of Appeal said that the mortgage conditions had to be interpreted purposively. Their purpose was to enable the receivers to realise the mortgaged property in an orderly and efficient way.

The powers specified in clause 9.2.1 of the mortgage conditions included the power to sell the property and to take possession of it.

The powers conferred on the receivers must include power to do anything which is necessarily incidental to the exercise of the powers specified in the mortgage.

Here, service of the section 21 notice was an act which the receivers had to do to get vacant possession and thereby to sell the property at the best price.

The fact that:

– the mortgage conditions might have been drafted more widely so as to confer an express power on the mortgagee to give a section 21 notice; or

– that the mortgagee might have been able to serve the notice by virtue of being within the definition of “landlord”

did not mean that the receivers could not do so where they had that power under the mortgage conditions.

So the receivers had been entitled to serve the section 21 notice on the tenant and the tenant lost the appeal.

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