Industry comment, updates and news from the Websters team.
Jon Dickins in his blog ‘Digging the Dirt’ reports that the Office of Fair Trading has launched a consultation on draft guidance to estate agents and property developers, which aims to help businesses handling sales of property and land in the UK to comply with the law on misleading marketing and unfair business practices.
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Press Zoom notes that a new report from the London Assembly highlights issues within the service charges regime that affect more than half a million leaseholders in the capital and calls for a change of approach.
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The legal news from Out-Law.com points out that, according to a recent tribunal decision, residential service charges will not be recoverable if the address for service of notices contained in the demand letter is that of the landlord’s managing agent, rather than that of the landlord itself.
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Carl Brown of Inside Housing notes that sector experts have warned that proposed new rules could lead to fewer service charges being covered by housing benefit. Draft regulations for the universal credit, expected to come before parliament in the autumn following a consultation, redefine which service charges are eligible to be covered. Currently regulations list 10 types of service charge which are not eligible. The new regulations turns this on its head and instead lists just three types of charges which are eligible. As a result of the change, lawyers and housing consultants warn that a host of service charges could no longer be covered by benefit. This would mean extra cost to tenants or landlords, or a reduction in services for tenants.
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The Accounting Standards Board of the Institute of Chartered Accounts in England & Wales has issued an Information sheet setting out a proposed Urgent Issues Task Force Abstract ‘Residential Management Companies Financial Statements’. This is to assist residential management companies to determine whether they are acting as principal or agent when undertaking residential service transactions with third parties, and thereby determine which transactions should be recognised in their financial statements. It also deals with protecting the needs of users of Residential Management Companies financial statements (including tenants); and assisting preparers in fulfilling their statutory duties.
Full copy of Information Sheet here
Deborah Caldwell of Manches has reported a case where the landlord tried to defeat its tenant’s break right on the grounds of non-payment of insurance rent and material breaches of the tenant’s repairing covenant. However, the court found that the wording in the lease supported the tenant’s argument. The landlord could only demand the insurance rent once it had itself incurred the cost.
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Mark Vinall of Winckworth Sherwood has noted that a council that owns a block containing several flats has won its legal dispute with a tenant over the recovery of management charges. The case went to the Lands Chamber of the Upper Tribunal, which decided that no costs had been counted twice, since the council’s finances had been recorded transparently and that it had therefore acted appropriately.
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Siobhan O’Dwyer of the Independent.ie notes that owner Managed Companies (OMCs) are increasingly facing a funding timebomb caused by service charge “won’t payers” who are deliberately avoiding their legal obligation, making a mockery of the legal system and causing great hardship for their neighbours. A sortfall of 15pc-25pc each year can, over a number of years, adds up to a solvency crisis, which threatens the OMCs.
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DWF reports that the decision in the case of Jean-Paul v L.B Southwark [2011] the Upper Tribunal (Lands Chamber) is a reminder to landlords to make sure that they continue to comply with the detailed service charge consultation requirements, as non-compliance can result in a drastic reduction in the amount that the landlord can recover from the tenants.
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This Is Money reports that confidence appears to be returning to the property market with an increasing number of home movers expecting house prices to be higher in 12 months’ time, according to findings in a survey. Eight of ten of those surveyed believed house prices would either be higher or at the same level a year from now.
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