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Archive for the ‘Landlord’ Category

Wednesday, June 23rd, 2010

CRC Efficiency Scheme

David Goddard notes that a further imposition has been put on Landlords and Tenants with the Governments CRC Efficiency Scheme, as this article by by Reynolds Porter Chaimberlain explains.

The CRC Energy Efficiency scheme is a mandatory scheme affecting the whole of the UK, which requires participants to annually buy and surrender allowances priced in pounds per tonne to cover the amount of CO2 a participant emits each year. It is part of the 2008 Climate Change Act, which was introduced to try to meet the Government’s target of reducing greenhouse gases by 80% by 2050. The scheme’s main purpose is to drive down energy consumption.

Read the full article here

Posted in Commercial, Landlord, Managing Agent, News, Residential, Shopping Centre, Tenant, service charge | No Comments »

Tuesday, April 13th, 2010

What is a “fair” apportionment of service charges?

Another legal decision has been published in an article by Shoosmiths about the ‘fair’ apportionment of service charges between tenants in a new build development of residential flats.

The article concludes:

It is important that landlords and managing agents consult before setting service charge levels because in this case, the service charges amounted to more than 100% of the landlords costs.  This encouraged the tenants to seek a legal decision to vary their leases in order to adjust the apportionment between the leaseholders to a more “fair” share.

This decision should not be seen as a get out of jail card for landlords in getting the service charge percentages wrong, provided they all add up to 100%. Rather, it highlights the difficulties in calculating fair service charge proportions especially when dealing with premises of different sizes and in larger estates where different parts get the benefit of different services.

It is in no one’s interests that tenants should feel aggrieved by what they perceive as an unfair service charge, and in new developments in particular it should be possible to avoid this. An essential element of doing so is a robust analysis of the service charge as early as possible in the scheme.

Read the full article here.

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Wednesday, April 7th, 2010

Procedural requirements for residential landlords

An article by John Levy of Lewis Silkin solicitors

The Landlord and Tenant Act 1985 (as amended) imposes stringent procedural requirements on landlords who wish to carry out repairs to residential premises and recover the costs from the tenants. The Leasehold Valuation Tribunal (“LVT”) has power to dispense with those requirements if it is reasonable to do so.

In the case of Daejan Investments v. Benson and others, Daejan sought to recover approximately £270,000 from five leaseholders. The leaseholders complained that Daejan had not complied with a number of provisions of the Act. The LVT upheld that complaint.

The Lands Tribunal of the Upper Chamber examined each of the breaches and found, with one exception, that the breaches had not prejudiced the tenants to any significant extent. However, it agreed that the curtailment of the period within which the tenants could examine the estimates was capable of being a serious breach. The final words of the judgment are interesting: “we are unable to say that LVT has erred in principle, or that its decision was clearly wrong. The financial consequence may be thought disproportionately damaging to the landlord, and disproportionately advantageous to the lessees, but, as we have said, that is the effect of the legislation.”

It could be inferred that the Upper Chamber felt that the decision was wrong, but not ‘clearly wrong’, and on that technicality Daejan was only able to recover £250 from the five leaseholders, rather than £270,000.

So, a rather expensive mistake. And a salutary lesson that, if there is a clear set of rules, stick to ‘em!

Field Fisher Waterhouse also wrote about the same case

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Thursday, March 25th, 2010

Tenancy Deposit Scheme - legal case outcome

Steven Wood of Coffin Mew solicitors has written an article about a recent court case regarding Landlord, Managing Agent and Tenant rights surrounding the Deposit Protection Services (DPS) and access to monies deposited with it.

He concludes,

Most landlords are now aware of the legal requirement to protect deposits taken in connection with shorthold tenancies. To date there has been little reported litigation under the provisions of Chapter 4 of the 2004 Act and this case is a useful benchmark of the courts’ attitude and interpretation of the Act. Crucially, it serves as a reminder that until such time as a deposit is properly protected the landlord is precluded from utilising the accelerated possession procedure set out in s.21 of the Housing Act 1988 and which is one of the main reasons why landlords choose to use shorthold tenancies. Perhaps less obvious though is the hidden cost for the landlord if it gets it wrong – the deposit in this case was relatively high at £2,700 but, even so, the cost of the legal proceedings will have far outstripped the amount of money at stake. The moral of this case is simple: ignore the deposit protection provisions at your peril.

Read the full article.

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Sunday, March 21st, 2010

Possible change to VAT treatment of service charges for common areas

A law report summarised by Charlotte Wicks of Cambridge solictiors, Mills & Reeve discusses the implications for UK service charge VAT treatments in the light of a recent European Court of Justice case.  She writes

A recent decision of the European Court of Justice has cast doubt on HMRC’s long held view that service charges relating to common areas follow the VAT treatment of the services supplies under a lease.

If service charges are treated as a separate supply then an additional charge to VAT would arise on both commercial and residential properties where the landlord has not opted to tax.

Landlords of commercial property which is VAT opted are not affected by this issue. However, if HMRC practice does change, landlords of residential property or un-opted commercial property will need to start to charge VAT on service charges. This may require landlords to register for VAT (if they are not registered already). Landlords should now seek to amend old leases and agree new leases to ensure that VAT can be charged on service charges pertaining to common areas. Action should not be required on old leases which are silent as to VAT because with these leases it ought to be possible to add VAT to the service charge if a change in HMRC practice starts to apply the standard rate.

Tenants who can recover VAT but do not currently pay VAT on such service charges may see this as an opportunity. They could ask their landlords for a VAT invoice on these service charges in order to recover the input VAT incurred.

In all likelihood given the uncertainty over the case, this is an issue which will be litigated in the UK courts. Watch this space!

RLRE Tellmer Property sro v Financní reditelství v Ústí nad Labem (2009) STC 2006

Posted in Commercial, Landlord, News, Residential, VAT | No Comments »

Tuesday, March 16th, 2010

UK Government advises “Check your service charge statement”

Residential tenants are reminded by the COI (Central Office of Information) that they have a right to challenge service charges.

  • check your service charge demands
  • understand the law relating to challenges to service charges
  • read your lease
  • you can still challenge if you have paid your bill
  • challenges are often based on charges been unreasonably high or workmanship being unacceptable

The Leasehold Advisory Service is a free service run by the government giving free legal advice for Landlords and Tenant leaseholders.

Read the full article.

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Friday, December 4th, 2009

10 things you need to know about the Companies Act 2006

The Companies Act 2006 made substantial changes to private company management.
1.  There is no need to appoint a company secretary unless you want to.  If you do he/she will have same responsibilities as now.

2.  All companies must have at least one actual person as a director.  All directors must be at least 16.

Directors file service addressed on the public record with residential addressed held as protected information at Companies House.

3.  Private companies will no longer hold an AGM. 10% of shareholders can demand a meeting (5% in certain circumstances). If private company meetings take place they require a 14 day notice period.

4.  Written resolutions will become easier to use, requiring a simple majority (for ordinary resolutions) or 75% (for special resolutions) of eligible votes.

5.  Arrangements can be made so that communications can be sent and received in certain ways, especially electronically if shareholders agree emails and websites can be used more than at present. Individual members can still ask for hard copies.

A company’s name, number, registered office and other particulars currently required to be displayed on business letters and other documents must now also be provided on electronic documents as well as the company’s website.

6.  Companies formed under the new Act can choose to have new streamlined default model Articles. Existing companies can also choose to take advantage of these new model articles in whole or in part.

7.  The Statutory rule that private companies can’t give financial assistance to buy their own shares has been abolished.

8.  Private companies must file their annual report within nine (previously ten) months of the year end.

The medium-sized group exemption form preparing consolidated accounts has now been removed.

9.  There is now a simpler solvency-based procedure to enable private companies to reduce capital without court approval.

10.  The amount companies have to do has been greatly reduced and they can take steps to take advantage of the deregulatory benefits of the Act.

Transitional arrangements will make it as easy as possible for companies to take up these benefits.

Source: BERR

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Thursday, December 3rd, 2009

Ian Stubbs demystifies the Companies Act changes

THE SIMPLE FACTS ABOUT THE COMPANIES ACT 2006

Decisions taken by shareholders

Written resolutions no longer need to be signed by all the shareholders instead a simple majority of the eligible shares for ordinary resolutions or 75% for special resolutions.

Companies can choose to make more use of electronic methods and resolutions can be circulated by email or other electronic methods such as websites, with shareholders agreement.

Shareholders Meetings Streamlined

Private companies will no longer hold an annual general meeting although shareholders can demand a meeting if at least 10% (5% in certain circumstances) wish to. Shareholders still have the right to receive accounts.

Shareholder meetings for private companies can now all be on a 14 day notice period, unless different arrangements are specified in a company’s Articles.

Company Secretary

Private companies will not have to appoint a company secretary unless they choose to do so.

If they choose to do so they will have the same authority and responsibilities as now and will continue to be registered at Companies House.

Filing Directors Addresses

Directors will be required to file a service address on the public record at Companies House. This may for example be their company’s address, rather than their private home address.

A director’ private address will be held as protected information at Companies House.

Reduction of Share Capital

Private companies can now choose to reduce their capital by special resolution supported by a solvency statement by each of the directors.

Financial Assistance to purchase Private Company’s own shares

The statutory rule that companies cannot give financial assistance for the purchase of their own shares has been abolished for private companies.

Directors Conflicts of Interest

Directors have always had a duty to avoid a situation in which they have an interest which conflicts or may conflict with the company’s interests unless the matter has been duly authorised. At the moment only shareholders can authorise such a conflict of interest.

In future in the case of existing companies, it will be possible for those directors who do not have an interest in the matter to authorise it if this is specifically permitted by the company’s Articles.

Forming a Company from October 2009

The Memorandum of Association will become a historic document which will simply record the facts at the time of incorporation.

The Articles will set out the principles covering the way the company conducts business.

New companies registering under the 2006 Act will be able, if they wish, to take advantage of a new default model Articles of Association for private companies. These are set out in a clear language and reflect the way many small companies operate.

Existing companies can also choose to adopt these new Articles.

In future neither the Memorandum or the Articles do not have to state the objects of the company. This means that companies need not be restricted in what they do, but they can choose to be restricted if they wish.

Electronic Documents

Electronic communications, including emails and websites will in future need to include the company’s name, number, registered office and other particulars.

Accounting Arrangements form April 2008

The deadline for private companies to file annual accounts and reports will reduce from ten months to nine.

The exemption from preparing consolidated accounts by medium sized groups has been changed so as to apply now only to small groups.

Directors

All companies must have at least one actual person as a director and cannot just have companies acting as directors.

A new minimum age of 16 is set for directors. Existing underage directors will cease to be directors when the age criteria comes into force.

The Companies Act 2006 confirms current law in respect of the duties of directors.

A summary of these 10 things you need to know will be published tomorrow.

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Wednesday, November 25th, 2009

London Business School research into service charges

The Estates Gazette published a summary of some LBS MBA students’ research into service charges and how they are the cause of friction between landlord, tenant and property managers.  Property Services sponsored the reserach and a summary of the work is on their website.

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Wednesday, October 28th, 2009

Effect of VAT ‘normalising’ on service charges

The short term reduction of the standard rate of VAT, from 17.5% to 15%, introduced from 1 December 2008 in a bid to help alleviate the effects of the recession is due to come to an end at 31 December 2009.

The rate will then return to 17.5%, unless the Government decides that the economy still requires the added stimulus that this reduction was designed to provide and extends the period beyond that date.

Our experience shows that when the rate was reduced some suppliers passed on the benefit of the reduced VAT rate, as the Government had intended, by keeping their net costs unchanged, resulting in a reduction in the gross cost. Other suppliers kept their gross costs unchanged, effectively taking advantage of a “hidden” increase in their net charges.

Presumably, when the VAT rate returns to 17.5%, the gross cost for the former group will simply return to the previous level, whilst the latter group will retain the increased net cost and apply the higher rate of VAT.

In terms of service charge situations the overall effect on a service costing £1,000 plus VAT prior to 1 December 2008 can be summarised as follows :-

Residential service charges Commercial service charges
Option to tax No option to tax
Prior to 1 December 2008 £1,175.00 £1,000.00 £1,175.00
Rate reduced to 15% :
1.) Net cost unchanged £1,150.00 £1,000.00 £1,150.00
2.) Gross cost unchanged £1,175.00 £1,021.74 £1,175.00
Rate increased to 17.5% :
1.) Net cost unchanged when rate reduced £1,175.00 £1,000.00 £1,175.00
2.) Gross cost unchanged when rate reduced £1,200.54 £1,021.74 £1,200.54
Assumes no inflationary increase in the cost of the service during the period.

Therefore, for residential tenants and tenants of commercial non-opted buildings there has been a short-term benefit of lower costs from those suppliers who “played fair” and passed on the benefit of the VAT rate cut, offset by a disadvantage of a higher cost base going forward from January 2010 for those suppliers who took advantage of a hidden price increase.

Watch out for your next service charge statement.

For commercial tenants of opted buildings there is no up-side from suppliers who passed on the benefit of the VAT reduction (other than in cash flow terms), only higher costs going forward from 1 December 2008 for those suppliers who took advantage of a hidden price increase.”

Alternatively, you could just use the first paragraph as a bald statement of fact if you think that my subsequent comments are a bit too cynical!

Posted in Commercial, Landlord, News, Residential, Retail, Shopping Centre, Tenant, service charge | 2 Comments »

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