UK Commercial Lease Registration - Land Registry

Who moved them goalposts?

As you assure yourself that you have dotted all the “I’s� and crossed every singe last “T� for the completion of the lease on a new office, the solicitor calls and asks nonchalantly “Can you send over the Lease Plan?� the deafening 3 second silence on the your end of the phone has long given away the clue, that you don’t think you have one!

The Land Registration Act 2002, which came into force on 13 October 2003, has many implications for commercial landlords and businesses occupying properties under commercial leases.

One of the major changes are after 13 October 2003, all new leases with terms over 7 years or existing leases sold or assigned with 7 years left to run must now be registered with Land Registry. Not only will the property acquire its own leasehold title number but it will be noted on the Landlord’s freehold title. This will bring many more High Street shops, cafes, restaurants, industrial units and offices onto the Register.

As part of the registration a compliant Lease Plan of the lease demise must be submitted. In order to be compliant the plans must be drawn to a metric scale (normally 1:100 or 1:200), have a scale measurement bar, have the scale noted on the plan, a 1:1250 scale location map (for urban areas) full address including post code and a north point. The internal layout the office – for example internal offices etc – are not necessary, however indicative locations of comm. Areas and adjacent stair lobbies should be provided for orientation.

So that wavy walled 30 timed photocopy of the original 1962 hand sketch with a finger thick felt pen line obscuring all detail; will have to be resigned to the big drawing board in the sky.

So the race is on to get a new lease plan before the whistle is blown, and you score an own goal.

Article supplied by Ed James - Plan-London Limited

www.leaseplans.co.uk

The Home Information Pack

Article Supplied to LandlordZONE by www.myhousedata.co.uk
Mark Pearson, Director

Introduction:

The government’s Home Information Pack (the rebranded ‘Sellers Pack’) is to become compulsory in 2007, with a limited trial during 2006.
Against a backdrop of delay and disagreement between government and housing market professionals, plus a lack of public awareness for the proposed initiative, some question whether it will ever be put into practice.
The aims of the initiative are universally recognised and welcomed. No right minded person could object to house buyers making a better informed choice, provided by a quicker more user friendly system.
However opponents continue to maintain that rather than streamlining the house buying and selling process, the Home Information Pack will merely add to the stress, cost and complication of an already tortuous system.
Those in favour see it as the urgently needed solution to a longstanding, and much resented problem.

The story so far:

In response to universal and well publicised concern about delays and unfair practices in the residential property market, the government responded by researching the methods used elsewhere, to try and improve the house buying and selling process in England and Wales.
Their mission was to ‘make the home buying and selling process more transparent, more certain, consumer friendly and faster.’
Their solution was to oblige sellers to produce a pack of information and documents, prior to marketing a property – a solution used successfully in the USA, Australia and some parts of Europe.
The first limited trial in Bristol in 1999, received a mixed response, and prompted a polarisation of opinion on whether this approach would fix the problem or add to it. That debate has rumbled on for a number of years.
The amended legislation was finally made law in The Housing Act of 2004, with the Home Information Pack scheduled to be introduced in 2007.
Given repeated delays, residual opposition, practical problems with its universal introduction, some people still question whether it will ever happen. The Conservatives have even pledged to abolish it altogether.

The Problems with the present system:

The original Sellers Pack idea was the government’s response to the widely recognised problems associated with buying and selling residential property in England & Wales. These included:
§ Excessive delay in the process. The process of property acquisition typically takes around 11 weeks, and is dependent on the correct and timely input of a number of agencies - searches, surveys, mortgage provision, conveyancing - into the process in order for things to run smoothly.
§ Unexpected breakdown of sale transactions at a late stage, often as the result of a failure in a buying ‘chain’, or an unsatisfactory valuation or survey report.
§ Prolonged uncertainty. Buyers and sellers can withdraw or seek to renegotiate terms at any time during this long and vulnerable period when the property is effectively sold, but the contract is not binding because legal formalities are not yet complete.
§ The expense of abortive fees when the transaction breaks down, plus the stress, inconvenience and disruption on family, personal or working life when this occurs.

How would a HIP work?:

By getting the vendor to provide a lot more information about the property, plus most of the required legal paperwork at an early stage in the process, it should in theory cut delay, help purchasers reach a firm decision and generally streamline the buying and selling procedure.

The pack has to include:

• draft sale contract
• evidence of title
• a questionnaire about the condition and works history of the property
• copies of any planning, listed building and building regulations consents and approvals;
• any guarantees or warranties
• replies to local searches
• a new type of survey called a home condition report

The Cost:

The government office responsible for overseeing this new legislation – the Office of the Deputy Prime Minister (ODPM) – estimates the cost at £635, but claim that this work would need to be done anyway, so this approach is not adding cost, merely shifting it to an earlier stage of the process.
Opponents say the cost will be nearer £1,000, and that there is a hidden cost in keeping the information up to date, particularly if a house does not sell quickly and items like searches and surveys need to be repeated.
Vendors can charge a ‘reasonable‘ sum for a copy of their pack, to cover costs and the certification of copy documents, but the market has yet to establish what that might be.
The up front cost has been cited as a deterrent by members of the public, and there has been general affordability concerns for poorer areas, where house values are low.
Interestingly the legislation allows the seller the right to refuse to hand over a pack if they have reasonable grounds to suspect that the ‘purchaser’ has neither the intention nor means to proceed with the deal..!

Will HIPs solve the problem?

Before forming a view, you need to re-examine where the problems arise in the present system, and assess whether the new system will deal with them effectively. This does not necessarily mean a perfect solution, but at least an improvement to a level that the public and the market would find worthwhile.
Reviewing the problems with the present system described earlier, we see a mixed picture. Some issues are squarely addressed, other problems are endemic in the system and will remain unaffected by this legislation, and in some areas the new methods may introduce different problems of their own:

Delay:

The slowness of solicitors relying on paper documents passing backward and forward through the post is usually blamed for the delay in conveyancing.
Failure in timely provision of any one of the necessary components of this paper chase - searches, mortgage offers, surveys, valuations, sellers property questionnaires can bring it grinding to a halt. By getting much of this documentation prepared in advance HIP makes a good case for speeding up the process.
However just as it can be argued that costs are just being brought forward, rather than added, is the same true of delays?
Estate agents are concerned that they can not lawfully begin to market a property until the pack is in place, which could take three or four weeks. This means once a decision to sell is made, the vendor faces a frustrating delay before the property can be put up for sale.

Transaction breakdown:

Having more information available at the outset can only be a good thing. It would enable prospective purchasers to make an informed decision before making an offer, but it is unlikely to avoid all of the ‘nasty surprises’ which can crop up later in the process.
Long buying chains will always be vulnerable to collapse, in the absence of any binding legal commitment. Peoples’ lives are subject to unforeseen changes at home, at work and in their personal and financial circumstances.
The longer the process takes, the more likely such an ‘event’ is likely to occur, and it only needs one person in the chain to change their mind for it to collapse.

Prolonged Uncertainty:

Under Scottish law the written offer to buy, resolution of queries and conditions, and acceptance of the offer from the sellers solicitor usually makes the deal binding on both parties within about a fortnight. That degree of certainty does not exist under English Law.
During the initial trials the Sellers Pack managed to cut the time between offer and exchange of contracts by about two weeks, to an average of around 8-9 weeks, which is a significant improvement but, still longer than the 6-7 weeks average in most other countries. This period of uncertainty would still allow an unscrupulous buyer or seller to withdraw or renegotiate terms in order to squeeze the maximum out of the deal.

Cost:

There is no doubt that the present system wastes time and money in failed transactions and abortive fees, but cost is often a question of perception rather than figures.
Surveys show consumer resistance to stumping money up front in order to sell their house. If it smoothes out the process and makes it more reliable it will be perceived as cost effective, and should in any event deter frivolous test marketing.
Much depends on whether buyers trust the Home Condition Report paid for by the seller (estimated cost around £300) or feel obliged to commission their own survey.

Surveys and Valuations:

Adverse surveys and valuations often account for breakdown of a deal, so including a Home Condition Report in the pack will be beneficial in providing information early on, but poses other problems:
- Since the scope of the Home Condition Report falls short of a full structural survey, how far will the purchaser trust it?
- If the HCR is not intended to provide a valuation either, it is likely that some purchasers will continue to pay to have their own survey/valuation done, thus diminishing the cost and time saving arguments?
- It remains to be seen whether the various training and accreditation bodies will succeed in providing enough qualified HCR inspectors by 2007. Difficulties remain too in getting Professional Indemnity Insurance for the inspectors, particularly since there may be a liability to both buyer and seller for the accuracy of the information.
- The government is commissioning a computerised on-line database for all the Home Condition Reports. The process has hardly begun and their track record of implementing reliable, large scale IT systems to time is not encouraging.

Conclusion

You can not legislate for human nature As it stands the HIP will reduce but not eliminate the length of time when gazumping and renegotiation can take place.
It will probably reduce the time between offer and exchange for the majority of transactions.
Purchasers will no doubt welcome the additional information available, and feel more empowered to make a right decision.
Whether the cost and effort involved is perceived as worthwhile by the seller, remains to be seen. Much depends on how the market responds and the ease speed and cost at which packs can be assembled by the various providers who will emerge as the system gets going.
After a difficult journey on to the statute books, the government is cautiously planning for a ‘dry run’ in late 2006 to test the system and iron out any remaining problems.
Supporters regard this as a sensible, gradual introduction of measures which will have a major impact on what is recognised as an individual’s most expensive and crucial purchase – their home.
For opponents it underlines the controversy and uncertainty, which has accompanied this initiative from the outset.
What is beyond doubt is that everyone is genuinely hoping for a buying and selling procedure that is as the legislation intends ‘ more transparent, more certain, consumer friendly and faster.’
It seems we will have to wait another couple of years to know for certain whether The Housing Act 2004 will deliver its promise.

© Mark Pearson

About the Author:
Mark Pearson is a director of Housedata Ltd which provides an Interactive LogBook and Maintenance Manager from their website myhousedata.co.uk
MyHouseData’s interactive services and e-tools let owners create a complete service history of their property to simplify maintenance and to maximise asset and resale values.
The required property information can be provided as a ‘plug in’ to the proposed Home Information Pack.

Landlords - How to avoid Identity Fraud and Identify Theft.

LandlordZONE and TenantVERIFY

Landlords are particulalry vulnerable!

Through recent media reports most people are now aware of the problems of identity theft and fraud perpetrated by criminals who scour our waste bins for personal details on carelessly discarded bills and other documents.
In fact the problem goes beyond this, and landlords are particularly vulnerable – to find out why and what you can do about it, read on.
Personal details can be obtained without resorting to midnight searches through bins: sophisticated fraudsters can pick up this information from the Internet or insiders do it from banks, firms and organisations of all types.
For example, if you are a company director your personal information is available on the Companies House website for a small search fee. One recent case, involving massive credit card fraud, resulted from obtaining details in this way.
People are now asked for personal details for all sorts of reasons, including registering for services on-line. One survey organisation found that people were willing to part-with the most intimate personal details including DOB, mother’s maiden name, telephone, e-mail, address etc simply for the promise of free theatre tickets.
Another vulnerablility is the time when you are doing viewings, either on lettings or on property sales. Often owners or landlords are showing complete strangers around the property. Apart from the personal security risks, the viewer has potential access to all sorts of personal belongings and documents, often left lying around, and also to complete information on the house security arrangements.
In fact, as the law currently stands, identity theft per-se is not a crime: it’s only when this “theft� is acted upon, when the information is used to perpetrate fraud that it becomes criminal.

So, why are landlords vulnerable to this new and insidious activity?

Well, they are vulnerable on two counts: (1) tenants who come with a false identity, and (2) tenants who steal the landlord’s or previous tenant’s identities.
Tenants who come with false identities are obliviously intent on avoiding rent payment and will probably evaporate into the either at some point, having run-up horrendous rent arrears and will perhaps have damaged the property to boot?
The irony is, the law will protect any resident regardless of their identity and landlords will be unable to obtain possession against a recalcitrant tenant quickly – in fact it can take months to get an eviction if the tenant chooses to stay put.
Tenants, who steal identities, either that of the landlord, or those of previous tenants, are even more of a problem. It’s often easy for tenants to do this as mail is delivered to the address long after previous residents have left, and in my experience, even when the Post Office has been instructed to re-direct.
If the property has previously been the landlord’s own residence, which is very common, then the landlord is vulnerable, as are any previous tenants.
A recent case highlights this: The landlady, being out of the country yachting instructing for a year, rented out her own home. Although the agents did credit checks, the tenant came along with a false identity, and the checks showed up OK for the identity the tenant had.
Foolishly, the landlady had left all her personal documents locked away in an attic room, including the deeds to her house. The tenant proceeded to sell her property. Fortunately for her, one sale fell through and the second was not completed before the fraud came to light.
Basically, all the identity fraudster need do to take out a loan, a mortgage or run up huge credit card debts in your name is obtain two utility bills. The problem is, you only become aware of the crime much later when the credit card or loan companies track you down with demands for payment, or threaten legal action.
At the end of the day this type of fraud should not cost you a penny, unless you have been really negligent. However, in the mean time you may have to pay out money to defend yourself, you will need to prove that you are the victim of identity fraud, which can takes hours and hours of work on your part, not to mention the stress of it all.
In addition, if the courts and debt collectors are involved you may end up with a CCJ (County Court Judgement) against you, which will adversely affect your credit rating.
If you do become a victim you will need to gather all the information and proof you can including consulting the lender and a credit reference agency before reporting the crime to the police, who will give you the all-important crime reference number.
This type of crime is new and it is growing at an alarming rate: between 1999 and 2002 the number of cases jumped by nearly 400%. Statistically, therefore, the chances of being caught out are increasing.
The UK’s Fraud Prevention Service CIFAS, which is a not-for-profit financial services membership association, solely dedicated to the prevention of financial crime, originally estimated that in 2004, 20,000 deceased impersonation frauds were perpetrated. They concluded that in the last 4 years these amounted to around 51,000 cases, all of which would cause great distress, both to the deceased relatives and the victims of fraud.
In fact through ongoing research CIFAS now believe their figures seriously underestimate the magnitude of this crime in the UK and that the 2004 figure is nearer 70,000 cases with the four-year total nearer 180,000.

How can landlords protect themselves?

1) Check all your bank and credit card statements as soon as they arrive – if you spot any unusual entries or payments that have not arrived you need to investigate.
2) Carefully shred or tear-up important documents before discarding them.
3) Store your important documents safely – old statements, chequebooks, credit cards, passports, licences, vehicle documents, property deeds etc are all valuable to a thief – hide securely or store them under lock and key.
4) Have a secure system of storing your passwords and usernames.
5) Don’t keep chequebooks, credit cards and passwords all together in the same place.
6) Never give out personal details unless you are sure they are to a secure process.
7) If you move house have your mail re-directed and check with the new occupants regularly for mail that gets through the net.
It’s particularly important for landlords who rent out their own home: make sure that your tenants have been thoroughly checked – see below.
9) You can also check your credit reference reports every 6 months to make sure no one is applying for loans in your name.
10) Another option is to register with CIFAS on the Protective Registration Scheme – see http://www.cifas.org.uk/protective_registration.asp

Tenant Checks

It’s very important to avoid these problems in the first place by making sure that you never rent out your properties to criminals – a proper tenant screening process is the only answer. You must be thorough in the way you carry out identity, credit checks and references.
Credit checks on their own are not sufficient, though they are an important part of the process: a basic check will verify financial stability, but it will not necessarily verify identity. A comprehensive check goes further by taking up references. It would be unlikely that a comprehensive check would not uncover identity fraud, but in theory it’s just still possible.
The starting point for the whole process is the Tenant’s Application Form. A good application form is as important as the tenancy agreement itself.
The application form gives a sound basis to the relationship between the landlord and tenant: it provides all the personal and financial details needed to carry out further checks. It gives the landlord (or his agent) permission to carry out the checks, and should the tenant subsequently abscond, it gives vital skip tracing information. In addition, and a very important point for landlords, should the applicant make any false statements, the document provides evidence for eviction on Ground 17.
However, the application form cannot of itself guarantee identity: this involves additional proof. National Insurance numbers, passports, drivers licences can all be forged or stolen.
One very simple but very effective method is to request sight of 6 moths’ bank statements. An identity thief may be able to obtain two utility bills, but it’s very unlikely they would be able to obtain 6 months’ banks statements from anyone.
Secondly, the sight of 6 months’ bank statements gives you an excellent insight into the tenant’s financial standing a lifestyle: remember, no tenant should be paying more that one-third of earnings in rent.

Tenant Checks – the checklist – see the LandlordZONE article Tenant Screening for a full rundown.

1) Have your prospective tenant complete a comprehensive application form.
2) Follow-up to confirm residences and identities by checking documents and following-up references.
3) Obtain at least on copy of a document with a legible photograph or copy of one – a good photocopy of a passport or photo-driver’s licence should suffice.
4) Carry out either a basic or a comprehensive Tenant Check

Useful Links:

UK Government Crime Reduction Web Site

Australian Government Identity Theft Kit in .pdf format

© Tom Entwistle 2005 - all rights rserved