As prices have risen over the last few years more and more owners have decided to extend their homes as a cheaper alternative to moving. Many of these alterations will put adjoining properties at risk of damage and structural movement which is why they fall within the scope of The Party Wall etc. Act 1996.

Many owners believe that the Act only covers work which involves alterations to a party wall but the scope of the Act is much wider than that. It also covers adjacent excavations (such as those for the foundations of extensions) and under the Act ‘adjacent’ means within three or six metres depending upon the depth of the excavation. This means that as well as loft conversions most domestic single storey extensions, even on semi-detached or detached houses, require notice to be served under the Act.

So how can you ensure that you are given the opportunity to examine the proposals, and if necessary appoint a surveyor, before work commences? The procedures laid down in the Act are actually very helpful to adjoining owners if only owners planning building work followed them.

The Act requires notice to be addressed to the owner at their current address or alternatively to ‘The Owner’ at the adjoining property. If it is addressed to ‘The Owner’ it should be pinned in a prominent position on the adjoining property rather than posted. This is all very well but as it is usually the owner, as opposed to a surveyor, serving the notice they are unlikely to be aware of this caveat and simply drop it in the door of the neighbouring property only for it to sit on a hall table until your next property inspection.

There are two important time periods associated with party wall notices. The first is fourteen days and is the time allowed for an adjoining owner to consent to the proposals and the second is the notice period, which is either one or two months depending upon the type of notice.

The problem is that owners planning work assume that if the notice has not been replied to by either of those dates they are free to start work. Fortunately this is not the case as your tenant will almost certainly not have passed the notice on to you by the first date and possible not even by the second. If you do not reply to the notice you are deemed to have dissented and must appoint a surveyor. The surveyor will then prepare a Party Wall Agreement (known as an ‘Award’)

So what can be done if you only become aware of the work when it is already underway? If you catch it early you can request that work stops until you appoint a surveyor. Owners and builders normally do not react kindly to such a request as it is very disruptive but if they had followed the rules they wouldn’t be in that position.

If they refuse to stop work you can apply for and should obtain an injunction. There are two problems with this; if the notifiable part of the work has already been completed an injunction is no longer an option (the Act does not allow for retrospective awards) and injunctions are expensive. It is better all round if you receive the notice and reply to it before work is due to commence.

So the next time you give your tenant that list of reminders at the start of the tenancy, asking them to keep the heat on low on frosty nights or report and leaks immediately, remember to include a request to pass on all post immediately, even the boring looking brown envelopes from the Local Authority, and to make you aware if scaffolding starts to go up outside the neighbour’s property.

Article by Justin Burns BSc MRICS of Peter Barry Party Wall Surveyors

Introduction

The tenancy deposit schemes came into force on 6 April 2007. The idea of the schemes is to safeguard tenancy deposits and to provide ADR methods of resolving disputes in relation to deposits. From that date it has been necessary for every deposit taken by a landlord in respect of an assured shorthold tenancy to be protected by a tenancy deposit scheme. If it is not it will not be possible to serve a s21 notice and thus obtain possession (Housing Act 2004, s215).

See also para 7B(d) of the revised form N5B (Accelerated procedure claim form) which states:

“If your claim for possession is in relation to an Assured Shorthold Tenancy where a deposit was taken after 6 April 2007, you must provide evidence that such deposit is safeguarded with a tenancy deposit scheme (TDS) authorised under Part 6 of the Housing Act 2004”.

The scheme applies to any deposit taken in relation to a new assured shorthold tenancy granted on or after 6 April 2007. It is not applicable to continuation tenancies, ie where the tenant stays in occupation as a statutory periodic tenant (Housing Act 1988 (HA 1988), s 5)).

Compliance

Within 14 days of accepting a deposit the landlord must enter it into a government designated tenancy deposit scheme and provide the tenant with prescribed information.

A “deposit” is defined in s213(8) as “a transfer of property intended to be held (by the landlord or otherwise) as security for – (a) the performance of any obligations of the tenant, or (b) the discharge of any liability of his, arising under or in connection with the tenancy”.

“No person may, in connection with a shorthold tenancy, require a deposit which consists of property other than money” (s213(7)). If any such non-monetary deposit is taken “no s21 notice may be given in relation to the tenancy until such time as the property in question is returned to the person by whom it was given as a deposit” (s215(3)).

One effect of Section 213(7) is that the tenant is precluded from giving a credit card impression or writing a cheque that is not banked.

The landlord also needs to provide the tenant with prescribed information such as the name and address of the administrator, procedures to be followed if a dispute arises etc (HA 2004, s 213 and para 2 of the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 (SI 2007/797)).

If that information is not given once again a s21 notice may not be given until the information is given (s215(2)).

The schemes

Presently, there is one custodial scheme and two insurance backed schemes.

The Deposit Protection Service ( www.depositprotection.com) is the only custodial scheme which is free to join for landlords, but the actual deposit must be paid over to the scheme. The obvious disadvantage here is that the landlord loses control over the deposit monies.

The Dispute Service (www.thedisputeservice.co.uk) and Tenancy Deposit Solutions (www.mydeposits.co.uk) are insurance backed schemes, whereby the landlord registers the particular deposit with the service but does not have to hand over the deposit. There is a fee for these schemes.

Sanctions

As stated in the introduction, for so long as the requirements are not complied with a landlord will not be able to serve a notice pursuant to HA 1988, s 21 (HA 2004, s 215). Essentially the new defence available to tenants against landlords who do not comply with the scheme is merely a delaying measure. The landlord can then ensure he complies with the scheme and re-serve a s 21 notice, which will then be entirely valid.

If a tenant is concerned that his deposit is not protected by a scheme and/or he has not been provided with the prescribed information and/or the scheme administrator does not confirm that their deposit is protected then he can commence proceedings against the landlord under HA 2004, s 214. Although it appears that if, by the time of the hearing, the landlord has complied with the requirement there is no sanction. If the court finds that the landlord is in breach then it must order up to three times the amount of the deposit to be paid to the tenant within 14 days (s 214(4)) as well as ordering the deposit to be paid either into the custodial scheme or to the tenant (s 213(3)).

Dispute resolution

If the landlord and tenant cannot agree as to payment of the deposit at the end of the tenancy then the dispute can either be resolved through alternative dispute resolution (ADR) or through the courts.

Alternative dispute resolution

One of the requirements of HA 2004 was that the scheme providers must provide a dispute resolution service (HA 2004, Sch 10, para 10) and so each scheme has its own ADR process. All three schemes operate a similar adjudication process but reference should be made to the particular scheme for details of the procedure and to obtain the relevant forms. The timetable and requirements for each scheme are set out below:

The Deposit Protection Service (DPS)

1. Landlord and tenant complete, within 28 days of the end of the tenancy, a joint repayment form notifying the Deposit Protection Service (DPS) of a dispute and requesting referral to adjudication and agreeing to submit to the same.

2. On receipt of that form, DPS issues a landlord’s evidence form, which must be completed and returned within 14 days. This must set out the basis of the dispute and attach all relevant documents, ie tenancy agreement, inventory, invoices, photographs etc.

3. DPS then provides to the tenant a summary of the landlord’s evidence and a tenant’s response form. The tenant must return their form within 14 days with supporting documents.

4. Failure by either party to provide the documents in time will result in DPS paying the deposit to the non-defaulting party.

5. The landlord then has a further seven days in which to accept or disagree with the tenant’s evidence and may put in further evidence.

6. DPS will then forward the forms to the adjudicator who will make a decision within 28 days of receipt of the papers. In the meantime, the adjudicator may call for further information from the parties.

7. DPS will pay out according to the adjudicator’s decision within 10 days.

Tenancy Deposit Solutions

1. A disgruntled tenant completes a dispute notification claim form and attaches any relevant evidence.

2. Tenancy Deposit Solutions notifies the landlord of the dispute and within 10 days the landlord must pay the deposit to them and submit a counter claim on a response form attaching any evidence and agree to submit to ADR. The landlord must also provide rebuttal evidence—defined as: a signed copy of the tenancy agreement, original receipts for damaged or destroyed items and estimates, invoices or receipts for any repairs and rent account statement.

3. Failure to lodge the deposit will disqualify the landlord from using the ADR service and may result in their removal from the scheme entirely.

4. Tenancy Deposit Solutions will then pass the papers onto the adjudicator who will make a decision within 28 days and in the meantime may call for further information including oral evidence.

The Dispute Service

1. The parties are encouraged to raise the issues between themselves within 20 days of the end of the tenancy. They then have 10 days to resolve the matter. If that fails it should promptly be referred to the adjudicator.

2. Either party may instigate the dispute by submitting a notification of deposit dispute form to the adjudicator. If the landlord starts the dispute they must also lodge the deposit with The Dispute Service or within 10 days of notification that a tenant has sent in notification of a dispute.

3. Evidence in response should be submitted to the adjudicator within 10 days of notification of the dispute.

4. Failure to do so may result in disciplinary action and The Dispute Service will take
steps to recover the sum.

5. The adjudicator may at their own discretion pay the deposit to the tenant where
the landlord has:

(i) not paid their subscription;
  (ii) not paid in the deposit;
  (iii) not provided a written tenancy agreement;
  (iv) not provided sufficient information about The Dispute Service;
  (v) not provided a check-in or out inventory;
  or
  (vi) unreasonably delayed the dispute.

The courts

If the parties do not agree to submit to adjudication or have missed any deadline for submission to adjudication, ie 28 days from the end of the tenancy for the DPS scheme, they must then litigate through the county court. Given that a tenancy will not be an assured shorthold tenancy if the rental is over £25,000 per annum and that the deposit is unlikely to be more than six weeks rent, a claim for a deposit alone will undoubtedly be allocated to the small claims track and proceed as a small claim. This is likely to take longer and require an oral hearing. Apart from an issue fee, the general rule is that costs are not awarded in small claims cases.

If the tenant gets a court determination in their favour then they can use that against the scheme administrator to obtain their deposit. Payment should be within 10 days of notification.

Making a claim

If the tenant decides that there is no other option but to take the landlord to court this can be done by issuing a claim in the normal way under Pt 7 of the Civil Procedure Rules (CPR) as a money claim using form N1 (available from www.hmcourts-service.gov.uk). It is also worth bearing in mind that claims can now be issued online at www.moneyclaim.gov.uk.

ADR or litigate?

The ADR schemes appear to be far better suited to deposit disputes than the courts. They are cheaper (free), quicker and the adjudicators presumably will be handling many similar disputes and will begin to build up experience of this particular type of claim.

As has already been highlighted, by issuing in the county court the parties will usually be committed to paying their own costs and if they instruct solicitors and/or counsel costs could easily surpass the value of the claim. Although one would expect a claim to be issued fairly soon after the end of a tenancy, using the courts has the advantage that the claimant has up to six years to bring the claim.

No response

Where one party refuses to engage in any process or is untraceable then HA 2004 provides for the other party to be paid out on submission of a statutory declaration confirming that 14 days have passed since the end of the tenancy and the other party cannot be contacted and there is no known address.

Conclusion

Six months after the beginning of the scheme, as of October 2007, over 600,000 deposits had been protected; over 3,300 new deposits per day. One of the insurance schemes reported that they were protecting deposits totalling over £283m. As one of the scheme providers recorded that about 20% of tenancies resulted in a dispute, it is important that landlords and tenants have a clear, quick and efficient way of dealing with the deposit at the end of their tenancy. Obviously, this is not always going to be the case and sometimes the tenant may have to resort to litigation, which is more expensive and time consuming.

Given the perceived success of the scheme in its first six months it would be a welcome extension if it were extended to cover tenancies other than assured shortholds. This would obviously give protection to those tenants who currently fall outside the scheme, such as tenants whose rent is over £25,000 per year.

However, on the whole the introduction of free adjudication services is a good way of diverting litigation from the courts and meeting the needs of landlords and tenants by giving the parties an easier and swifter resolution to their problems.

Further information can also be obtained on the Communities and Local Government website: here

Daniel Dovar is a barrister at 33 Bedford Row and co-author of Residential Possession Proceedings (7th Edition) published by Sweet & Maxwell.

Michael Walsh is a pupil barrister at 33 Bedford Row and a visiting academic tutor at King’s College London.

Reproduced with permission from: Gary Webber
Property Law UK
Web : http://www.propertylawuk.net

Never rely totally on our standard answers and general content. Before taking action or not, always do your own specific research and seek appropriate professional advice with the full facts of the case and all documents to hand. LandlordZONE.co.uk®

Commercial Rent Arrears Recovery - PainSmith Solicitors Legal Update - April 2008

The provisions are anticipated to come into force later this year and they are firstly
set to abolish the well recognised common law right to distrain1 for arrears of rent.
In its place will be CRAR which replaces the traditional remedy with a clear modern
day system which will allow commercial landlords to instruct enforcement officers
(i.e bailiffs) to collect arrears of rent. If a landlord seeks to utilise this statutory
remedy they will be required to follow a more stringent procedure which involves
the satisfying of some strict pre-requisites including the service of notices and the
obtaining of a Court Order.

Definition of Landlord

The first pre-requisite for anyone seeking to implement the CRAR procedure is to
satisfy the definition of a landlord under s73 (3) of the Act which requires him to
be “entitled to the immediate reversion” in the property comprised in the lease.
Joint landlords, mortgagees in possession and receivers also fall under the
definition. An important exclusion to the provisions is found under s 74 (2) of the
Act which states that for a landlord to be able to utilise the CRAR remedy they
must have a written agreement. Verbal agreements will not be sufficient in
permitting a landlord to distrain goods via CRAR. A further important exclusion
affects mortgagees who may only utilise CRAR where the lease has been created
with their knowledge and not contrary to the provisions of the mortgage.

Lease

Under s 74 the provisions stipulate that they will not apply unless there is a lease.
Where circumstances can be interpreted to have created a mere licence the CRAR
procedure will not be available. It entails that unless exclusive possession has been
granted with a clear landlord and tenant or lessor and lessee relationship,
alternative remedies will have to be considered. Other forms of agreement can
give rise to CRAR, such as a tenancy at will2; however, this is subject to certain
conditions. A tenancy at sufferance 3 is excluded under s 74.

Commercial Premises

The provisions do not apply where some part of the premises is let as a dwelling
and will only apply to premises used solely for business purposes. If the premises
are used as a dwelling, the only way the CRAR procedure can be exercised is if the
lease or any superior lease prohibits this and therefore by using the property for
residential purposes the tenant has committed a breach of the lease or superior
lease.

This particular condition which is found under s 75 is likely to cause some landlords
a problem with mixed use of a property meaning that CRAR cannot be employed.
Whilst this is not unfamiliar when using distress, it is essential that landlords seek
to preserve the remedy of CRAR by inserting a strict user clause in their lease. For
example: “The Tenant must not use the Premises for any purpose other than as
offices connected with the business of marketing, selling and letting residential
properties.”

It is important to note that the new Act prohibits any form of variation or
modification of the provisions which Landlords may try and implement to extend
their rights. Under s 85, any clause within a lease which goes beyond that set out
under the Act, such as to allow the application of CRAR in premises used partly for
residential use, will not be enforceable.
Recovery of Rent Only

The provisions do not operate for recovery of anything else other than rent. Unlike
with distress, the definition of rent is solely those sums payable, in advance or in
arrears, for possession and use of the demised premises. This definition under the
Act cannot be altered via the lease as is commonly done in a commercial lease and
so arrears of rates, service charges, council tax, insurance, maintenance and
repairs will not allow use of the CRAR process. For these types of arrears, a
landlord will have to use court proceedings to recover their losses.

In addition to the above, the rent recoverable must be “due and payable”; it must
be calculable with certainty; and net unpaid rent must be no less than the
minimum amount as dictated by the regulations. It is this last condition which
could have a detrimental effect on whether the landlord may utilise CRAR since to
calculate the net amount interest, VAT and permitted deductions must be
considered. Consequently, this could mean that set off for permitted deductions
such as where a landlord has breached a term of the lease or where compensation
is payable to the tenant for improvements this may result in the landlord not
satisfying the minimum amount and not being able to use CRAR. Should this occur
an alternative remedy will have to be considered such as issuing court proceedings.

After the end of lease

Subject to exceptions, s 79 permits the use of CRAR after a lease has ended. Some
of the conditions under s79(4) which preclude CRAR being used include where
forfeiture has been utilised; the tenancy has ended more than six months ago; and

Sub Tenants

Much like distress, under s 81 of the Act landlords can require sub tenants to pay
rent directly to them following service of a Notice. In comparison with the preexisting
common law procedure, CRAR is far more restrictive in that it only applies
to commercial properties and, unlike the law of distress, CRAR cannot be used
where the premises are of mixed use or purely residential.

In summary, the introduction of the CRAR procedure will not have too much of a
unfavourable effect on Landlords. Aside from the loss of some of the flexibility
which has been introduced via some strict requirements relating to rent and the
use of the premises, generally, Landlords will still have a valuable remedy available
to them. Whilst the requirement for a court order is still not required in all cases,
the service of notices in some circumstances may encourage both landlords and
tenants to attempt to negotiate a settlement without the need for heavy handed
tactics to be implemented or, alternatively, court costs to be incurred.

As for tenants, the impetus for such reforms being a Human Rights Act – compliant
system clearly benefits tenants who have in the past suffered abrupt and illegal
attempts of enforcement. The opportunity which is open to tenants to make
applications to the court following the service of a notice of enforcement is
something which has, to a degree, been there before; however, the setting out of
these provisions has leant clarification to exactly what a tenant’s rights and
remedies are.

Gemma Hadlow is a solicitor with PainSmith Solicitors, a niche practice
specialising in residential landlord and tenant law. She can be contacted on 01420
565310 or by email at gemma@painsmith.co.uk. If you wish to subscribe to the
free legal updates service then you should send an email to email updatesubscribe@
painsmith.co.uk.

PainSmith Solicitors Legal Updates are provided for information only and are not legal advice. If you do have a legal problem, you should talk to a lawyer or adviser before making a decision about what to do. You may wish to use the CLS/CDS Directory (www.justask.org.uk/public/en/directory) to locate an adviser. The information provided here is written for people resident in, or affected by, the laws of England and Wales only. You should note that date given in the update and be aware that the information given may become inaccurate due to changes in the law or its implementation.

Notes:

* 1 The common law remedy which can enable a commercial landlord to seize or hold goods
to compel payment of arrears.

* 2 A tenancy which permits the use of premises for a limited period but where the tenant
cannot assign their rights under such an agreement and the landlord maintains the right to
re-occupy the property on limited notice.

* 3 Such a tenancy is the equivalent to a periodic tenancy and it occurs after a tenancy has
expired but before a landlord has served notice to recover possession.
the tenant has not given vacant possession. Landlords who have assigned their
interest in the let property are also not able to use CRAR, nor are the assignees;
because to allow this would be inconsistent with the definition of a landlord.

Arbitration is governed under the Arbitration Act 1996 which was designed to set
out a quick, effective, but thorough form of arbitration to be used in the United
Kingdom. The Act has been so effective in so doing that its forms have been
adopted by other countries and it is the de facto standard for international
arbitration.

There is no purpose in arbitrating for sums under £5,000. In point of fact the
Arbitration Act makes it an unfair term under the Unfair Terms and Consumer
Contract Regulations for any clause to be included in a contract which demands
arbitration for sums of less than £5,000. In practice, the existence of the small
claims track in the County Court system and its relatively low cost makes it wholly
unnecessary. Where arbitration clauses truly come into their own however is for
claims in excess of £15,000.

These claims would normally fall into the multi track within the county court. Since the recent alteration of the court fee structure these claims are now relatively expensive and the court fees alone will amount to in excess of £1500 for a claim that goes all the way to a final hearing, with the consequent legal fees to be added on top. It is also worth remembering that a case in the small claims track will usually take in excess of 6 months to reach a final decision so it is not particularly speedy. By contrast, an arbitrator will usually cost somewhere in the order of £1,000 and he will often render a decision within a month or two and he can therefore provide an economic and timely solution.

It is important not to confuse arbitration as provided for in arbitration clauses with
adjudication as is commonly used by Tenancy Deposit Protection schemes.
Adjudication is designed to be a quick and cheap interim settlement of a problem.

It is not designed to give a thorough, or necessarily final, decision. In fact
adjudication is not final and binding unless the parties specifically agreed that it
should be which is why all Tenancy Deposit Protection schemes require that the
parties agree that the adjudication should be final and binding before they can
resort to it. Arbitration, by contrast, is designed to be final and binding and the
courts will recognise it as so. Indeed the courts will not overturn an arbitration
award unless it has been so poorly conducted that there has been significant
prejudice to one or other of the parties, and the Arbitration Act sets out the
mechanism by which this should occur.

The biggest downside with arbitration awards is that they are not currently directly
enforceable and if one or other party absolutely refuses to abide by the award then
it is necessary to resort to the High Court. However, even then this is usually
better than following through the multi track of the County Courts as any costs
associated with resorting to High Court enforcement will be met by the party
refusing to abide by the arbitration award. In addition arbitration awards are
internationally recognised and can often be easier to enforce in foreign
jurisdictions than Court judgments.

So what does an Arbitration Clause need to set out. Most importantly it needs to
set out what sorts of dispute should be rendered to an Arbitrator, and what should
not. In particular for our purposes it should certainly set out that only disputes in
excess of £15,000 should be rendered to an Arbitrator as it will not be economic to
do so for lesser value disputes. There should also be an effort to set out the
method by which the arbitration will be commenced. For example, who is to be
notified of the dispute, in what detail they need to notified of it, and how they
should be notified.

It is also important to set out how the Arbitrator will be appointed. This can be done in a number of ways. Either the parties can agree a list of Arbitrators or one Arbitrator in advance who will be appointed to arbitrate any dispute. Clearly, a list of Arbitrators is preferable in the event that a single named Arbitrator has retired or is unavailable for some other reason.

Alternatively, the parties might hope to agree an Arbitrator at the time of a
dispute however it would be unwise to rely on an agreement being reached and
some other provision should be included. Usually this will involve asking an
appropriate body to select an Arbitrator from a panel. The two most commonly
used bodies in these circumstances are the Royal Institute of Chartered Surveyors
and the Chartered Institute of Arbitrators.

The President of one of these bodies would be asked to select an Arbitrator from his panel and the parties will then consent to that Arbitrator being appointed to determine the dispute. It is important to realise that if this method is going to be chosen that the President will charge a fee, typically in the order of £300, for making that selection and that it is therefore best wherever possible to agree an Arbitrator in advance. Other issues which parties may wish to agree in advance are timescales by which the arbitration should be conducted, for example on submission of documents and rendering a decision and also aspects of how the arbitration is to be conducted for example is it to be conducted solely on paper or is the Arbitrator to hold a hearing for which both parties can submit full evidence.

It is worth remembering that an arbitration agreement can equally require that
other means of dispute resolution are to be used before arbitration. So, for
example, an arbitration agreement could require that the parties seek adjudication
- a cheap interim remedy of a dispute - first with the option of taking the result of
the adjudication onto arbitration if either party was dissatisfied with it.
Alternatively the parties might wish to seek mediation of their agreement and
attempt to settle their dispute more amicably before resorting to a more formal
arbitration process.

Once an Arbitrator has been appointed he has full authority to decide how he will
conduct the arbitration unless the arbitration agreement already sets out how he is
to operate. The Arbitrator is also empowered under the Arbitration Act to decide
as to whether he has been properly appointed and whether the arbitration has
been properly commenced. In these respects his powers are very similar to those
of the Court. Finally, the Arbitrator will have power to make a decision on the
merits of the parties’ cases and also, assuming the arbitration agreement allows
them to do so, to decide who should pay the cost of the arbitration.

The use of arbitration does not necessarily avoid the use of lawyers altogether. It
would usually be advisable to instruct solicitors and possibly barristers to represent
parties and assist them in drawing up arbitration papers and representing them at
any arbitration hearing if one should be used. It may of course also be necessary to
instruct lawyers in respect of enforcement of arbitration. However, the need to
utilise lawyers should not be seen as a disadvantage of arbitration as they would
certainly be required in respect of any multi-track claim and time which is spent
preparing for arbitration should be far less than that required to pursue any case
through the courts.

In all, while arbitration is certainly not cheap, for higher value claims it is a far
superior alternative to the use of the court system and will often provide an
answer much more quickly. A sample agreement which can be incorporated into a
tenancy agreement to allow for arbitration on the terms set out in this article is
included below although it should be recognised that this is for illustrative purposes
only and anyone wishing to place an arbitration clause of this sort into an
agreement is strongly advised to seek legal advice.

Sample arbitration agreement:

i. The parties agree that any dispute arising out of or in connection with the
tenancy created by this agreement save for disputes relating to its
existence, validity, or termination where the sum in dispute exceeds
£15,000 (fifteen thousand pounds sterling) shall be submitted to arbitration
by a single arbitrator to be agreed between the parties.

ii. Should the parties be unable to agree an arbitrator within 28 days of wither
party requesting arbitration then either party may apply to the President
for the time being of the < Surveyors/Chartered Institute of Arbitrators>> to ask them to appoint a suitable arbitrator.

iii. The seat of the arbitration shall be London, United Kingdom and the law of
the arbitration shall be that of England and Wales.

iv. The Arbitration Act 1996 will apply to the arbitration.

v. The notification of arbitration will be deemed delivered on the second
working day after posting to the landlord if it is sent by first class post to
the landlord (or to one of the landlords if there are more than one) or his
agent at the address given for landlord or agent in the tenancy agreement
or such address as has been notified to the tenant during the term of the
tenancy if different.

vi. The notification of arbitration will be deemed delivered on the second
working day after posting to the tenant if it is sent by first class post to the
tenant (or to one of the tenants if there are more than one) at the property
address or such other address as the tenant(s) may have provided or if it is
sent care of the tenant’s agent if one has been appointed.

vii. The arbitrator will have full authority to determine how the costs of the
arbitration shall be apportioned including all legal costs and expenses, any
expert fees and witness expenses, the arbitrator’s fees, and any costs or
fees associated with the appointment of the arbitrator.

David Smith is a trainee solicitor with PainSmith Solicitors, a niche practice
specialising in residential landlord and tenant law. He can be contacted on 01420
565310 or by email at david@painsmith.co.uk. If you wish to subscribe to the
free legal updates service then you should send an email to email updatesubscribe@
painsmith.co.uk.

PainSmith Solicitors Legal Updates are provided for information only and are not legal advice. If you do have a legal problem, you should talk to a lawyer or adviser before making a decision about what to do. You may wish to use the CLS/CDS Directory(www.justask.org.uk/public/en/directory) to locate an adviser. The information provided here is written for people resident in, or affected by, the laws of England and Wales only. You should note that date given in the update and be aware that the information given may become inaccurate due to changes in the law or its implementation.

Energy efficiency improvements cost less than you think. Central heating, insulation, and double glazing can increase the long-term value of your properties and make them more attractive to renters. What’s more there are many grants available and they can reduce your income tax bills.

Here are some simple things you could do to improve the energy efficiency of your properties:

- Top up your loft insulation and insulate your walls. Your energy supplier is offering big discounts on prices for insulation right now – make the most of them!
- Update your heating system with a high-efficiency condensing boiler and effective heating controls
- Take advantage of significant discounts and buy a new, more energy efficient washing machine, fridge or freezer

Your tenants will benefit from lower running costs and a warm, comfortable living environment, making them more likely to stay longer in your property.

Energy efficiency improvements can also help you meet your legal requirements, whilst supporting your reputation as a landlord who takes the quality of their properties seriously and delivers a professional service for tenants.

Energy Performance Certificates

From October 2008 all rental properties in England and Wales will be required to have an Energy Performance Certificate (EPC) prepared by an accredited Energy Assessor. These will offer opportunities for landlords to differentiate their property from their competitors and gain a distinct marketing advantage.

The energy efficiency and environmental impact of your property will be rated on a scale from A-G (where A is the most efficient and G the least efficient). Current running costs for heating, hot water and lighting will also be shown on the certificate, together with a list of recommended energy saving improvements.

An example of what the certificate is likely to look like is available at: www.communities.gov.uk/documents/housing/pdf/energy-certificate

Help is at Hand

A network of Energy Saving Trust advice centres operates across the UK. They provide impartial information on home energy efficiency and can advise you on any grants and offers that may be available to help you with the costs of installing measures.

To contact your local centre, simply call 0800 512 012. They are open from
09:00 – 17:00 Monday to Friday.

Useful Links

General Information

Energy Saving Trust – general information about energy efficiency in the home
www.energysavingtrust.org.uk

Useful information for landlords about energy efficiency www.cen.org.uk/landlords

Energy Efficiency: The Guide - everything you need to know about energy efficiency in your properties www.est.org.uk/housingbuildings/localauthorities/theguide/

What to buy? Energy Saving Recommended products – a list of the most energy efficient household appliances and heating systems available
www.est.org.uk/myhome/efficientproducts/recommended/

Funding Information

A searchable database of grants available across the UK for energy efficiency improvements. www.est.org.uk/myhome/gid/

The Landlords Energy Saving Allowance – an income tax allowance for private landlords
www.hmrc.gov.uk/budget2004/revbn31.htm

Details of the Warm Front grant (England only) – for energy efficiency measures if your tenants are in receipt of certain benefits
www.warmfront.co.uk

Technical Information

The Housing Health and Safety Rating System – What It Means For Landlords www.communities.gov.uk/publications/housing/housinghealth

Guidance on integrating energy efficiency into property refurbishment
www.energysavingtrust.org.uk/uploads/documents/housingbuildings/CE83%20-%20Energy%20efficiency%20refurbishment%20of%20existing%20housing.pdf

Making Private Rented Housing Energy Efficient – the Flagship Home case study
www.est.org.uk/download.cfm?p=1&pid=741

Article supplied to LandlordZONE by SE2 Limited - http://www.se-2.co.uk/

CgMs Consulting
P l a n n i n g & D e v e l o p m e n t , A r c h a e o l o g y & H i s t o r i c B u i l d i n g s

The planning system is seen to be contributory factor in restricting competition in the grocery trade by limiting the construction of new food stores on out of centre or edge of centre locations and by imposing costs and risks on smaller retailers and potential entrants.

The Competition Commission recommends (see appendix 1 to this report all of the suggested changes to the planning system) that the planning system might have to be changed so that there are greater opportunities for foodstore developments on the edge of town centres, while maintaining constraints on out-of-town developments.

A key proposal is that the “retail needs test” should be revised and incorporate a
“competition test” that would have to be satisfied before the grant of planning permission.

The report seeks views on whether competition should now be a planning consideration in
the determination of retail planning applications and, if so, what the competition test should comprise of. The report makes the following suggestions:

1. This “competition test” could be framed so that a particular retailer would only be permitted to submit a planning application for a grocery retail store if the planned store would not result in its acquiring more than a certain percentage of the market in a given local area.

2. Changes to the planning system to permit local planning authorities to give fascia specific consents or impose fascia-specific restrictions (i.e. granting consent for a grocery retail store operated by a particular retailer, or granting consent with a restriction that a particular retailer does not operate from the store).

The report’s other key findings are:

• Some retailer land holdings and other practices, such as restrictive covenants, mean that competition is not as effective as it could be in a number of areas.
• The four largest grocery retailers own a significant number of landbank sites, as well as controlling further sites through leases to third parties, restrictive covenants and exclusivity arrangements.

The next steps

Parties are now invited to write to the Commission by 30 November with their reasons in
writing as to why these provisional findings should not become final. The final report is to be published by 8 May 2008.

Commentary
The report’s findings do not sit easily with existing planning policy in the form of PPS6 which promotes the “town centre first policy” via the application of the “sequential test” and the “retail needs” test.

The report’s recommendations, if implemented, would mean Local Planning Authorities
having to review their town centre boundaries and to identify sites in their forthcoming Local Development Documents for retail development in, and also at the edge of town centres.

However, because many Local Planning Authorities are so behind in the preparation of their Local Development Plans, retailers and developers will have to continue to have to make their case for additional retail space through planning applications, which increasingly are being assessed against out dated development planning policies.

The report’s recommendations also brings forward the prospect of the greater use of personal planning permissions to named operators. This approach is, however, not existing Government guidance as given in Circular 11/95 “The Use of Conditions in Planning Permissions”.

In the meantime, the report’s findings might need to be considered as part of the yet to be issued supplementary planning guidance that accompanies PPS6 on how to undertake retail need and impact assessments.

For further information please contact:
Mike Straw BA, BTP, MRTPI - Director
Tel: 020 7832 02052

Commission’s Recommended Measure to address Barriers to Entry from the Planning System.

(Appednix 1)

The CC is considering recommending changes to the planning system that would facilitate
greater availability of land for development outside the town centre. In particular the CC is considering and invites views on the following issues:

a) Whether the planning system should distinguish edge-of-centre sites from out-of centre sites, recognizing that edge-of-centre stores can benefit the town centre.

b) The extent to which a possible amended planning test should recognize quantitative
and qualitative aspects of need.

The CC is considering recommending measures that would result in a streamlining of the
planning system. In particular the CC is considering and invites views on the following issues:

a) Whether to recommend the abolition of one or more of the various tests included in the current system and if so how?

The CC is considering recommending changes to the planning system that would see the
inclusion of a ‘competition test’ at some point in the planning process. In particular, the CC is considering and invites views on the following issues:

a) Whether grocery retailers should be required to pass a competition test before being permitted to submit a planning application for a grocery retail store? If so:

(i) Whether all grocery retailers should be required to pass this test or whether the test should only be applied to certain grocery retailers and if so which ones?

(ii) Whether developers should also be required to pass this test if they wish to include a grocery retail store in a planned development (in relation to identifying which grocery retailers would be approved to move into the grocery retail store—see 28(b)(iii) below)?

(iii) How such a test should be framed? For example, should it be framed so that a particular retailer would only be permitted to submit a planning application for a grocery retail store if the planned store would not result in its acquiring more than a certain percentage of the market in a given local area, what would be the appropriate metric for that percentage, what would be the appropriate percentage limit, and how should a local area be defined?

(iv) Who should apply such a test? Should the test be applied by the OFT and if not by the OFT then by whom?

b) Whether the planning system should be changed to ensure that planning officers and local authority planning committees take account of the effect on competition of a proposed scheme in their decision on whether to grant consent? If so:

(i) How should competition be taken into account in the planning system? Should there be a relatively mechanistic test (for example based on number of fascia and/or shares of net sales area in a particular local area) or should competition be included in a list of factors to which local planning authorities should have regard?

(ii) Are local planning authorities well placed to apply any such competition test themselves or should a specialist body such as the OFT apply any such competition test? If a specialist body were to apply the test should that body have the status of a statutory consultee? Should that body be expected to take part in appeals on planning decisions that raise questions about the application of the competition test? How should any body applying the competition test be resourced to do so?

(iii) Should the CC recommend changes to the planning system to permit local planning authorities to give fascia-specific consents or impose fascia-specific restrictions (ie granting consent for a grocery retail store operated by a particular retailer, or granting consent with a restriction that a particular retailer does not operate from the store)?

In relation to all these possible remedies in relation to the planning system, the CC invites
views on how these (or other planning remedies) could best be implemented, bearing in
mind the differences between the systems in place in England, Wales, Scotland and Northern Ireland.

As noted in paragraph 14 above, in choosing its remedies the CC may have regard to
the way in which its remedies would interact with any wider public policy objectives. The CC therefore invites views on whether any of possible remedies in relation to the planning system, as outlined above, would work against the wider public policy objectives of the planning system and how any such tensions should affect its choice of remedies and their design.

Many agents will be familiar with the phrase “Subject to Contract” or some similar formulation as a method of accidentally making a representation to the tenant
which was not intended. This way any offer made is subject to its incorporation in
the final lease agreement. However, there are some other consequences of the use of
this phrase which are not so favourable and it may not always be the best course of
action.

First it is worth examining precisely what the Courts understand the situation to be
when the “Subject to Contract” formula is used. The Courts construe the formula
in accordance with the conveyancers understanding of the phrase. This is that a
negotiation for a conveyance of land which is expressed to be ‘subject to contract’
is not complete until there is an exchange of contracts.

There is an entire set of procedures for such exchange which are set out and agreed between solicitors. It is this position that allows for such situations as ‘gazumping’ where the seller suddenly pulls out of a deal because they have had a higher offer. In the case of Salomon v Akiens, the Court of Appeal had to consider whether this formulation should also be applied to a lease agreement.

The Court was clear that there was practically no circumstances in which a negotiation for a lease should be seen as any different from that for a sale and therefore the ‘subject to contract’ formula should apply equally to both.

Practical Consequences

What does this mean in practice? In the case of Longman v Viscount Chelsea the Court made clear that this means that the “relationship does not become binding … until there is an exchange of lease and counterpart, before which either party can
withdraw”.

In other words, until both the landlord and tenant have signed the agreement, the agreement has been executed, and the signed agreement has been passed to the other side then either party is free to withdraw.

Ending the Formula

Of course, there are other ways in which the ‘subject to contract’ formula can be
dealt with. The parties could agree that the formula should no longer apply which
is a common device in commercial or high-value leases where the parties will enter
into an agreement to make an agreement.

Alternatively, the parties can perform an action which sets the formula to one side. The most obvious of these is provision of the keys and the acceptance of rent and deposit payments. The formula comes into force once either party expresses an offer or acceptance of an offer as being ‘subject to contract’ and will remain in force even if following correspondence does not bear the same formulation until it is specifically brought to an end as described above.

Recovery of Expenses

The use of the formula also has implications for the recovery of costs and expenses. Where a party expends monies on the basis of an agreement which is subject to the formula it will be very hard to recover any monies expended on the basis of that agreement.

As the High Court made clear in Regalian Properties v London Dockland Development Corpn each party must accept that any monies spent are a calculated risk and there will be no recompense if no contract results. This is not to say that agents cannot take steps to ameliorate this risk and a welldrawn up holding deposit agreement is a great help in this regard.

Despite the fact that costs cannot be recovered in respect of actions taken under a belief that a contract that is subject to the formula was to be entered into there is no reason why a separate agreement taking a holding deposit from an applicant cannot be enforced.

Such an agreement would typically cover the costs of referencing, preparing the agreement and would therefore protect the landlord from incurring agents costs with no prospect of recovering them. Such an agreement has the added benefit of ensuring that the agent will be paid for their time as well!

Other Formulas

There are other, more limited, formulas of a similar nature which may also be of value. The most commonly seen of these is probably ‘subject to references’ or some such phrase. This will have an effect similar to the ‘subject to contract’ formula but will be more limited and will effectively expire once satisfactory references have been received or the parties make clear that they have moved beyond that stage.

By choosing to ignore them and agreeing a finalised contract, for example. The exact point at which these more limited formulas cease to be effective is not as certain due to the lack of Court decisions on the topic. In each case it will have to be decided at what point it was intended that the formula should come to an end and whether actions were taken to make it clear that it should no longer be effective.

Practice Points

Agents should consider in every case what is best for their client. In higher value properties where the landlord is unlikely to wish to pull out of the deal unexpectedly it may be best to avoid use of the ‘subject to contract’ formula to ensure that the tenant is tied into the contract as early as possible. In other circumstances, where the landlord is uncertain of the tenant or may want to pull out of the deal it may be wise to use the formula in order to preserve the landlord’s position.

Alternatively, it might be best to start negotiations ‘subject to contract’ but then agree at a later stage that the deal is finalised and that the formula should no longer apply, although this may be difficult where a deal is moving fast. As always, agents should take great care in the representations they make and how they are made to avoid invoking or rescinding the formula unintentionally.

Points to note

• Once the Subject to Contract formula has been invoked it will stay in force until it is specifically rescinded or the lease or tenancy has been signed and exchanged.
• Either party can withdraw from the contract without penalty while the formula is in force.
• Agents holding deposit agreements are not affected and therefore recovery can be made from this for expenses such as referencing etc.
• The formula should not be used automatically in every case and should be tailored to the specific requirements of each letting.
• Make sure you have a solid holding deposit agreement setting out what charges the tenant is liable to pay.

Subscribers to PainSmith Solicitors helpline services will find a sample clause in our document vault, included as part of the subscription, and accessible through our
website (www.painsmith.co.uk).

Dr David Smith is a trainee solicitor with PainSmith Solicitors, a niche practice specialising in residential landlord and tenant law. He can be contacted on 01420 565310 or by email at david@painsmith.co.uk. If you wish to subscribe to the free legal updates service then you should email update@painsmith.co.uk with the phrase “subscribe updates” in the subject of the email.PainSmith Solicitors Legal Updates are provided for information only and are not legal advice. If you do have a legal problem, you should talk to a lawyer or adviser before making a decision about what to do.

You may wish to use the CLS/CDS Directory (www.justask.org.uk/public/en/directory) to locate an adviser. The information provided here is written for people resident in, or affected by, the laws of England and Wales only. You should note that date given in the update and be aware that the information given may become inaccurate due to changes in the law or its implementation.

Most agents and landlords will be familiar with the need to serve a section 13 Notice to increase the rent in periodic Assured and Assured Shorthold tenancies. However, they may not be aware that it is perfectly possible to get round the provisions of s13 with a little forward planning. A recent Court of Appeal case has highlighted this point.

It is important to understand the purpose of the Section 13 procedure. It is intended to allow landlords to have a means of increasing rent during periodic tenancies. It was envisaged that this would be important as the Housing Act 1988 specifically allows for periodic tenancies to occur and continue for substantial time periods.

However, the process is specifically subject to certain controls to prevent landlords getting rid of tenants by massively increasing the rent. This control process is the right for the tenant to refer the rent proposed by the section 13 notice to a Rent Assessment Committee for them to determine whether that rent is a fair market rent for the property.

In this, there arises a problem. The Rent Assessment Committee (“RAC”) is not always entirely consistent. Indeed, they are not under any requirement to be. Their decisions are also difficult and expensive to appeal against and there is no right of appeal at all in respect of decisions made by the RAC in regard to the appropriate level of rent.

However, the RAC does not have absolute jurisdiction. Subsection 5 of section 13 states: (5) Nothing in this section (or in section 14 below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent).

There is therefore nothing that prevents a landlord and tenant making some form of agreement about the rent. The most obvious way of doing this is to renew the tenancy for a new fixed term but it is not the only option. If it is anticipated that a tenancy will become periodic then an appropriate clause can be included to increase the rent periodically.

It is important to realise that this is an either/or option, there is no third way. So, for example it is unacceptable for a landlord to increase the rent by writing letters to the tenant. Without specific agreement between the parties such an increase will be void. Equally, it is impossible for a landlord and tenant to agree to involve the RAC when it should not be.

As Lord Neuberger said in Riverside Housing Association v White “the jurisdiction of a rent assessment committee is entirely statutory. As a matter of law, statutory jurisdiction cannot, unless the statute so provides, be reduced or enlarged by parties by consent.” In other words the section 13 procedure must be used unless there is some other form of agreement to alter the rent. If such an agreement exists then the section 13 process cannot be used.

Turning to rent increase clauses in more detail, it is sometimes thought that these must act to increase the rent by a specific amount such as set percentage or in line with the Retail Prices Index (RPI).

This is not the case. In the recent case of Contour Homes Ltd v Rowen Lady Justice Arden said “to reach the conclusion that the only sort of contingent rent review clause which is included is one which provides for an increase of a specified fixed amount upon the happening on the contingency involves writing words into section 13(1)(b), and I would therefore hold the judge was wrong to limit the clause to fixed amount rent review clauses.”

In this case the clause simply set out that the landlord would serve a notice increasing the rent by an amount to be set out on that notice which would not exceed the market rent at the time. Therefore there is no reason why an agent cannot have a relatively simple clause increasing the rent by a ‘market’ percentage to be determined by the agent.

Such a clause would have the effect of setting aside the section 13 notice process and avoiding the vagaries of the RAC. Using a ‘market increase’ also avoids the unsatisfactory effects of the RPI. In fast moving areas the increase in RPI falls well below that being achieved in the market. Central London is a prime example of this issue as rents are increasing by as much as 10% per annum in some areas while RPI has gone up by a paltry 3-4%. In such cases using a clause with an RPI increase is not really in the landlord’s best
interests.

In summary, agents should consider incorporating some form of rent increase clause into all Housing Act tenancies. This will allow for an increase without having to deal with section 13 notices or the RAC. However, it is important that such a clause is drawn up properly and allows for a large enough increase to protect the landlord’s interest as, if it is incorporated, it must be followed and the section 13 process will not be available as an alternative.

Subscribers to PainSmith Solicitors helpline services will find a sample clause in our document vault, included as part of the subscription, and accessible through our
website (www.painsmith.co.uk).

Dr David Smith is a trainee solicitor with PainSmith Solicitors, a niche practice specialising in residential landlord and tenant law. He can be contacted on 01420 565310 or by email at david@painsmith.co.uk. If you wish to subscribe to the free legal updates service then you should email update@painsmith.co.uk with the phrase “subscribe updates” in the subject of the email.PainSmith Solicitors Legal Updates are provided for information only and are not legal advice. If you do have a legal problem, you should talk to a lawyer or adviser before making a decision about what to do.

You may wish to use the CLS/CDS Directory (www.justask.org.uk/public/en/directory) to locate an adviser. The information provided here is written for people resident in, or affected by, the laws of England and Wales only. You should note that date given in the update and be aware that the information given may become inaccurate due to changes in the law or its implementation.

There are two key consultations which Landlords and the Agents may wish to respond to at the moment.

The first of these is by the Law Commission which is considering how to reduce problems relating to poor housing quality and harassment of tenants. Their current view is that all landlords should either be licensed or forced to use an approved Letting Agent.

All Agents are strongly advised to make their views known on this controversial topic. More information can be found at the Law Commission website on www.lawcom.gov.uk/housing_renting.htm

The DCLG has also published a consultation that will be of interest to Agents who deal with block management issues. This relates to planned changes to the Commonhold and Leasehold Reform Act and specifically to the rules on provision of statements of account to leaseholders and on the keeping of payments in designated client accounts.

From a managing agent point of view the proposals regarding client accounts which largely clarify the current position should be of significant interest and worth providing positive feedback to.

Further details including a downloadable version of the consultation can be found at
www.communities.gov.uk/pub/26/RegularStatementsofAccountandDesignatedClien
tAccounts_id1512026.pdf.

Dr David Smith is a trainee solicitor with PainSmith Solicitors, a niche practice
specialising in residential landlord and tenant law. He can be contacted on 01420 565310 or by email at david@painsmith.co.uk. If you wish to subscribe to the free legal updates service then you should email update@painsmith.co.uk with the phrase �subscribe updates� in the subject of the email.

PainSmith Solicitors Legal Updates are provided for information only and are not legal advice. If you do have a legal problem, you should talk to a lawyer or adviser before making a decision about what to do.

You may wish to use the CLS/CDS Directory (www.justask.org.uk/public/en/directory) to locate an adviser. The information provided here is written for people resident in, or affected by, the laws of England and Wales only. You should note that date given in the update and be aware that the information given may become inaccurate due to changes in the law or its implementation.