Industry comment, updates and news from the Websters team.
The government hopes that the new plan to allow landlords of social housing to charge up to 80% of market rate, will fund 150,000 affordable homes by 2015. However, there is concern that, if the services charges on these properties are not be included in the definition of affordable housing, the real cost to residents could be closer to market rent; thus endangering the success of the project.
Read the full article in Inside Housing here
The Landlord and Tenant Act 1985 sets out detailed requirements and preconditions, which must be observed by landlords when they seek to recover the cost of works to a property from residential tenants by way of service charge. In an article by Paris Smith LLP, it is noted that in the case of Daejan Investments Limited v Benson, the statutory consultation requirements were not observed in their entirety by the landlord and the Court of Appeal concluded that the consequences for the landlord being unable to recover the service charge fully was significant and wasn’t a relevant factor when deciding whether or not to waive the consultation requirements. In consequence, the liability of the five residential tenants was restricted to £250 each (substantially less than they would have been liable for had the landlord complied with provisions of the 1985 legislation).
Read the full article here
With the economic climate remaining uncertain, service charges are continuing to give rise to tensions between landlords and their tenants. Tenants are scrutinising service charge accounts for unjustified costs and best value whereas landlords are more cautious about incurring costs unless recovery through the service charge is likely.
The Practical Law Company has posted the revised RICS code on service charges in commercial leases, which has been released for comment.
Obtain a copy of the draft here
A technical release has been developed by the Institute of Chartered Accountants to provide guidance on accounting for residential variable service charges and covers the treatment of service charges in the accounts of the ‘landlord’ or other entity that levies service charges for the maintenance of the common parts of the property. The guidance also covers independent accountants’ reports on service charge accounts, based on agreed-upon procedures, where the terms of the relevant lease or leases do not require an audit to be carried out. The guidance focuses on accounting for service charges by residents’ management companies and similar, ie, companies where the members are also leaseholders paying variable service charges, because experience shows there to be widespread confusion about the interaction of the statutory accounting provisions of the Companies Act 2006, the information requirements of the property lease or leases, and the statutory trust provisions of the Landlord and Tenant Act 1987. Commercial landlords are equally subject to the provisions of the Landlord and Tenant Acts (LTAs) 1985 and 1987, but the issues are more clear-cut because there is generally no overlap between landlord/members of the landlord company, and leaseholders/tenants paying variable service charges. The guidance does not, therefore, deal with the statutory accounts of such entities, although the material on the trust status of service charge monies, and on the preparation of service charge accounts themselves, does apply. Obtain a copy of the Technical Release here
Confusion can often arise surrounding the precise identity of the landlord, which has been the subject of much litigation in recent years, as this article from Shepherd and Wedderburn points out.
The latest example of this is the recent case of Standard Life Investments Property Holdings Ltd v W & J Linney Limited [2010] EWHC 480 (Ch) (reported in July 2010), another example which illustrates the importance of a tenant knowing the identity of its landlord. Here, the tenant……
Read the full article here.
Housing Minister Grant Shapps has called on the country’s housing associations to follow the Government’s lead and throw open their books and expose how they spend money. He feels that all institutions that receive public money should be subject to the same scrutiny. Read the full article here.
At the end of last week the Second Edition of the Guide for Landlords and Tenants relating to the CRC Energy Efficiency Scheme was published by the working party set up by the BPF, IPF, BCSC and others.
This Guide has been issued following the industry wide consultation which took place earlier this year and the unsuccessful attempt to try and achieve a consensus between landlords and tenants as to how the real estate industry should respond in relation to incorporating CRC in leases.
Get a full copy of the Guide here.
Maxine Quinn of Shepherd and Wedderburn notes that, following the concerns from homeowners and tenants, in Scotland, regarding excessive administration charges and lack of remedies against such practices, the Scottish Government launched a public consultation on a self-regulatory accreditation scheme for property factors. However, Patricia Ferguson MSP introduced a Bill to the Scottish Parliament on 1 June 2010 suggesting a more robust registration scheme. Read the full article here.
HMRC and the Treasury appear to be on a new offensive to collect overdue tax. In an article by Olswang LLP Alicia Videon explains how landlords or managing agents might wish to protect themselves.
The very significant increase in the number of winding-up petitions and administrations linked with HMRC and the Treasury since the July election (an approximate doubling), has raised a clear flag as to the government’s intentions towards companies that are behind with their tax payments.
Read the full article here
