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Service Charges and Notices

The Courts have recently considered a case concerning the service of service charge demands.  Although the Upper Tribunal eventually found in favour of the Landlord the case serves as a useful reminder to check the small print and the service of notice provisions under leasehold documentation. To get it wrong can be costly for either landlords or tenants.

A lease of a flat contained a notice provision that provided:

“Any demand for payment notice or other documents required or authorised to be given to the Lessee shall be well and sufficiently given if sent by the Lessor or the Lessor’s Agent through the post by registered post or recorded delivery letter addressed to the Lessee at the flat or attached to the door or doors thereto Any demand notice or other document required or authorised to be given by the Lessee shall be well and sufficiently given if left or sent through the post by registered or recorded delivery letter addressed to the Lessor at the last known address or registered office of the Lessor and any demand notice or other document sent by post shall be deemed to have been served forty-eight hours after such posting.”

The landlord sent service charge demands by ordinary second-class post. The tenant claimed that it was a mandatory requirement of the notice provision that if the demands were posted, then it must be by registered or recorded delivery post. The Leasehold Valuation Tribunal (LVT) agreed with this interpretation and found that the service charge demands were not validly served. As the demands were invalid, no service charge was payable in respect of four service charge years.

The Upper Tribunal (Lands Chamber) over-ruled the decision of the LVT. The Upper Tribunal held that the clause was not mandatory and did not require documents served by post only to be served by registered post or recorded delivery. The Upper Tribunal concluded the clause did not prevent service by other means.

The Upper Tribunal concluded that if documents were sent by registered post or recorded delivery then they would be “well and sufficiently given”. If all demands had to be given by registered post or recorded delivery, the words “well and sufficiently given if sent” would be unnecessary.

The Upper Tribunal regarded the deeming provision in the final sentence as only relevant where documents were sent by ordinary post. In that sentence, “post” meant ordinary post and did not encompass registered post or recorded delivery (now known as special delivery) where documents are tracked.

Buying from a Mortgagee – it has its advantages

An Association may find itself buying a property from a mortgagee exercising its power of sale.  This might be because a mortgagee wants to surrender a shared ownership lease rather than staircasing or is exercising a power of sale over a property surrounded by other properties owned by the Association. 

The involvement of a mortgagee does not make a great deal of difference to the conveyancing process.  The mortgagee will want to complete the sale as quickly as possible.  It will not want to negotiate documents and will not provide extensive replies to enquiries.  Accordingly, the transaction is likely to move much more swiftly than a standard residential purchase. 

There are a few points which are worth noting:

The mortgagee will not give much information and will exclude itself from any liability in respect of ownership of fixtures and fittings.  This means that the purchaser needs to be careful not to dispose of any items left at the property which may still be owned by third parties under rental agreements etc.  It may be prudent to store any such items before disposing of them.

  • Special provisions will be inserted to assist the mortgagee in defending any subsequent claims that the property may have been sold at less than its proper market value.  This may include provisions permitting entry to the property within a certain period of time following completion in order to carry out further valuations.  There may also be a requirement that the mortgagee must be notified of any subsequent sale within a limited period (e.g. six months) so that it is made aware of any uplift in the price. 
  • The mortgagee will not need to provide a discharge of its charge registered on the title.  Instead, a special type of Transfer will be used (Land Registry form TR2) which will automatically release the charge when the Transfer is completed.
  • A mortgagee is not exempt from the requirement to provide an EPC.  This will still be required by the purchase as it can re-let or sell the property. 
  • An Association will need to check that there is no underlying Section 106 Agreement which may restrict its proposed use of the property.  Some Section 106 Agreements contain wording which will reactivate the affordable use requirements of property where they fall back into the ownership of a registered provider.

Despite the few differences and points to note mentioned above, transactions with mortgagees do usually proceed smoothly and are more straightforward than standard purchases.

NEW PARTNER JOINING SHARRATTS

We are delighted to announce that Jane Sewell will be joining us as a Partner from 5 January 2014. Jane will be joining us from Winckworth Sherwood where she is currently a Partner. Jane will be working within our Development Department, focusing predominantly on working with our existing Registered Provider client base.

Jane has over twenty five years experience acting for Housebuilders ( both in house and private practice) as well as for Registered Providers. Jane’s arrival will add further expertise and experience to our existing team.

CHANCEL REPAIR UPDATE

Chancel Repair liability will now cease to apply but only at the point of the first or next registration of a title after 12 October 2013 and following a Transfer made for valuable consideration.

This is not an end to chancel repair liabilty. Indiidual Church dioceses can still register potential liabilty against title but can only do so up to the point of first sale of a property for valuable consideration after 2013.

Therefore unless a property that is being acquired now has been the subject of a sale for valuable consideration since 12 October 2013 chancel repair liabilty insurance is still recommended.

How much delay deprives buyer of substantially the whole benefit of the contract?

The Court of Appeal has considered the effect of delay on a contract for a sale of a long lease of a flat that was to be built by a developer. Overturning the judge at first instance, the Court of Appeal held that, following Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577, it was impossible to conclude that a delay of approximately one month by the developer deprived the buyer of substantially the whole of the benefit of the contract so as to amount to repudiatory breach by the developer. This meant that the buyer had no right to terminate the agreement for lease.

The decision applies established law of contract and is a good illustration of the complexities of repudiatory breach and contractual time provisions.

Village Green Update

The new Growth and Infrastructure Act 2013 goes a little way to relieve some of the uncertainty that has existed around applications to register development sites as a village green.

Land may be registered as a village green if it has been used for recreational purposes for the preceding twenty years. Previously applications could also be made up to two years after the recreational use ceased.  The legislators have recognised that the Act has sometimes been used as a tool for frustrating development, even where there is little merit is such applications.

The Act reduces the two year cessasion period to one year. The Act also removes the right to apply to register land as village green where a defined Trigger Event occurs. Although consutlations are ongoing regarding further changes the most significant circumstances that would now comprise a Trigger Event are :-

1) When a planning application is first publicised.

2) When a development plan or neighbourhood plan consulations is drafted;

The right would again become exercisable if the Trigger Event circumstances ceased to apply.

Rent Increases permitted under Spending Review

In the spending review George Osborne announced that the Government will allow English Registerted Providers to increase rents by the Consumer Price Index measure of inflation plus 1% over 10 years from the year 2015/2016.   This will of course be a significant increase from the current limit of RPI plus 0.5% .

It is worth therefore bearing in mind when negotiating or considering the terms of Section 106 Agreements that Registered Providers are not caught out and separately tied in to the old rate of 0.5% and to ensure the terms of any such Agreements reflect the new Government proposals.

Time limit for submitting application for judicial review of planning decisions reduced

The Civil Procedure (Amendment No.4) Rules 2013 (SI 2013/1412) come into force on 1 July 2013.

Of particular interest is the amendment to Rule 54.5. The amended rule requires the claim form for an application relating to a planning decision to be filed within six weeks from the date when grounds for the application first arose. This is a reduction from the current time limit of three months.

The amendment does not apply to a judicial review application where the grounds arose before 1 July 2013.

Affordable Housing Guarantee Scheme opens for applications

On 20 June 2013, Housing Minister, Mark Prisk, announced, in a written ministerial statement, that the Affordable Housing Guarantee Scheme had opened for applications.

The government is making an initial £3.5bn available through Affordable Housing Finance (a newly formed subsidiary of the Housing Finance Corporation (THFC)). It will act as an aggregator of potential finance from the open market, and then offer loans to interested Registered Providers, backed by the government guarantee.

What should happen to a deposit when a statutory tenancy arises?

The Court of Appeal has confirmed that a fixed term assured shorthold tenancy (AST) which continues as a statutory periodic assured shorthold tenancy (statutory tenancy) under section 5 of the HA 1988, is a new tenancy. As a result, a deposit paid before 6 April 2007 and held by the landlord should be registered with a tenancy deposit scheme (TDS) when the statutory tenancy arises after that date. (Superstrike Ltd v Rodrigues [2013] EWCA Civ 669.)