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Dwelling on the problems 26 February 2015

Would you recognise a “building” if you saw one ?  This turns out to be a surprisingly important question for residential tenants.

In passing, we have a definition of building in the Energy Performance of Buildings regulations: “a roofed construction having walls”.  But that is not relevant in the case of the Landlord and Tenant Act 1985 (the 1985 Act).  Perhaps surprisingly, it turns out that the Act does not contain a definition of “building”.  This matters a lot, given that in order to have the protections conferred by that Act, a person has to be the “tenant of a dwelling”, and “dwelling” is defined (in section 38) to mean “a building or part of a building occupied or intended to be occupied as a separate dwelling …”.

We all agree that a caravan is not a building.  It is a chattel (a large one, but nevertheless a chattel).  So is a garden shed.  At the other end of the scale, a house constructed in conventional manner using bricks, with foundations dug into the soil, will definitely be a building.  Somewhere along the continuum between those two, an item changes from a chattel to a building.  To enjoy the protections conferred by the 1985 Act, one needs to be on the correct side of the dividing line.

The “lodge” (to use a neutral word) that was the subject of the recent case of Caddick v Whitsand Bay Holiday Park Ltd [2015] UKUT 63 (LC) turned out to lie on the wrong side of the dividing line.  This was a “Park home” manufactured by Omar Park Homes Ltd in 2004.  It was made up of two separate timber-framed sections, each brought onto the holiday park and joined together.  It rested on timber blocks, and was chained onto a concrete base to stop it from blowing away.  Originally it had had wheels but these had been removed.  A wooden screen concealed the gap between the floor and the ground.  Mains services were connected and a wooden decking had been built around the perimeter.

Experts agreed that it would be possible to move the “lodge” without any material damage, and relocate it to a different site.  From the judge’s description, it appeared to be the sort of object that is frequently seen (in two separated halves) on the back of a lorry on a motorway.  It is large, but it does not need an escort so long as it remains on main roads.

Mr and Mrs Caddick owned a lodge on a plot on the Whitsand Bay Holiday Park near Plymouth under a 125 year lease.  They, with other leaseholders, applied to the Leasehold Valuation Tribunal for the determination of service charges payable under section 27A of the 1985 Act.  This would only be available to people who were “tenants of dwellings”.  In this decision, an appeal to the Upper Tribunal, the judge had to decide whether the lodge was a building, and hence a dwelling, within the meaning of section 38.  He decided it was not a building.  (Technically the decision is obiter for reasons that do not need to concern us, but it is still of considerable value.)  He referred to the House of Lords case of Elitestone Ltd v Morris [1997] 1 WLR 687, in which a bungalow was held to be part of the land on which it stood, principally because it could not be removed without being demolished.  This “lodge”, on the other hand, could easily be removed without being demolished.  Evidence was given to this effect from an expert whose company specialised in selling and siting new mobile homes and in relocating them.

So this was not a building, and therefore was not a dwelling, and therefore the protections for residential tenants in sections 18-30 of the 1985 Act did not apply. This is a major disadvantage for occupiers of such properties.

Two other thoughts occur to me but I have had no time to address them in detail yet.  First, perhaps the Mobile Homes legislation might provide some protection to occupiers of such constructions.  I have never looked at that legislation but I suspect that whatever protection it contains will not be as comprehensive as the protection given to tenants under the 1985 Act.  Secondly, could it be that this issue has been entirely overlooked in other cases?  In particular, could it have been overlooked in Phillips v Francis [2014] EWCA Civ 1395, which concerned the manner in which the service charge provisions in the Landlord and Tenant Act 1985 operate (see my article “Service charge consultation requirements with residential tenants: as you were” on 3 November 2014).  The properties in that case were wooden lodges that may well have been similar to the one in this case.  If so, the reasoning in this case could be the thin end of an extremely large wedge.

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Why “boilerplate”? 24 February 2015

I am writing some PowerPoint slides about lease negotiation, and this week I am looking at what lawyers call “boilerplate”.  This is all the dull stuff that seems to be the same (or more or less the same) whichever firm drafted the document.

One definition, from Websters New World Law Dictionary (a US publication) is:

“Any standardized (sic) language or working that is almost always found in certain legal documents such as contracts and deeds. The terms are often in fine print and typically deal with matters that are either non-controversial or non-negotiable.”

So I started to wonder, for the umpteenth time, why it’s called “boilerplate”.  What possible connection could there be between the steel used for making boilers and the dull stuff in a contract ?  As usual, the answer is in Wikipedia.

The original meaning of boilerplate (in the sense of words) was text made available to newspapers in standard form, so that every paper printed exactly the same column or advertisement.  The key to the name was that this text was supplied in a form that was already typeset and ready for the printing press, stamped (for durability) into sheets of steel – presumably the same material used for making boilers (although I imagine not quite so robust).  This was termed “boilerplate text” or just “boilerplate”.

The term then became used for any text that is used in an unchanged form, including text in legal documents.  In a standard form contract, of course, the text really is unchangeable.  However, even in a document intended to be negotiated, such as a contract for the sale and purchase of property, or a lease, much of the text (such as the clause relating to interpretation) is rarely altered in practice.

And yet, as I shall be telling people in my lease negotiation talks, that does not mean that you do not need to read it – and amend it where necessary.  Who knows what horrors might be hidden away in the boilerplate provisions.  One law firm’s lease precedent includes within the boilerplate a provision that says that the landlord is not liable after assigning its reversionary interest.  Any alert tenant’s lawyer might want to take a red pen to that.

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Opportunities for surveyors to hear about the Model Commercial Lease 18 February 2015

Here are some opportunities for surveyors to hear me speak about one of my passions, the Model Commercial Lease, at full-day conferences organised by Professional Conferences.  The conference is called “Current Property Issues 2015” and has been running very successfully in this format for many years.

My talk is one of seven sessions during the day.  At the recent Professional Conference event in Bracknell earlier in the month I received some generous feedback including –

“Difficult slot to cover but interesting and useful insight info model leases”

“Knowledgeable and informative”

“A good review of leases and drafting”

(Other, marginally less enthusiastic opinions were also available, but I was covering the after-lunch slot!  And wouldn’t life be boring if everyone shared the same opinions.)

The other talks during the full-day conference are all by experts in their field including such luminaries as Philip Freedman, Lesley Webber and Paul Clark, and will include a variety of topics including landlord and tenant case law update, alternative dispute resolution (ADR), negligent valuations, current sustainability issues and development disputes.

The cost for attending each event is an astonishingly low £105 plus VAT for the whole day.  A hot lunch costs a few pounds more.  Please mention my name if you are booking as a result of seeing this article.

The speakers and their topics vary slightly between locations.  For information about the sessions at each of the conferences below, click on the location name.

Venues

12 MarchBristol (Filton Holiday Inn) – waiting list only

18 MarchManchester (The Mere Golf Resort, Knutsford)

30 AprilLeeds (Royal Armouries)

7 MayBasildon (Holiday Inn)

9 JunePeterborough (Holiday Inn)

16 JuneNottingham (Nottingham Belfry)

30 JuneSouthampton (Novotel) – sadly I cannot speak on that date so the talk on the Model Commercial Lease will be ably presented by Paul Clark

Other than in Southampton, therefore, I hope to see you there !

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Punny you should mention that 15 February 2015

It’s time for another round-up of appalling puns in the headings of law firms’ articles.

The recent case in which “celebrity chef and restaurateur” Gordon Ramsay claimed that he was not bound by a guarantee in a lease of one of his restaurants (which I wrote about under the snappy title “Gordon Ramsay’s case turns on whether his CEO had authority to apply a signature” on 26 January 2015) deserves our attention.  Some of the headings are actually quite imaginative.

Please can I have your autograph Mr Ramsay! (Reed Smith)

Gordon Ramsay’s court room nightmare (Kingsley Napley)

A case to digest (Penningtons Manches)

Gordon Ramsay case a sign of the times? (Hogan Lovells)

Hell’s Courtroom (BHW Solicitors)

Gordon Ramsay’s signature dish is rejected by the court (Clarke Willmott)

Gordon Ramsay – Out of the frying pan and into the court (Brabners)

and my favourite (which I have to admit I toyed with before abandoning the idea, because it makes no sense at all in the context – but that didn’t worry this firm):

No such thing as a free lunch (Collyer Bristow)

 

The other case that I think ought to have attracted a lot of attention pun-wise, but strangely didn’t, is the one in which the court held that being a squatter in a residential property (now a criminal offence) does not prevent the acquisition of title by adverse possession (ie being in the property for a sufficiently long period – the origin of the phrase “possession is nine-tenths of the law”, I suspect).  The squatter’s name was Mr Best.  In spite of all the opportunities, we were able to enjoy such headings as:

Criminal trespass and adverse possession (Dentons) – a tad disappointing, I feel

It was the best of times (which no-one actually used, sadly)

Best foot forward (ditto)

Obtaining title by criminal adverse possession (Lamb Chambers)

Court of Appeal clarifies law on adverse possession of residential buildings (Nabarro) – accurate but a bit lengthy

Effect of criminal trespass on claim for adverse possession (Practical Law)

Adverse possession through criminal squatting (Pennington Manches)

and my favourite (which you might think shows undue favouritism):

Adverse possession of residential property: all for the best (Falco Legal Training)

I really think this showed a serious lack of imagination on the writers’ part.  Too much emphasis on the criminal aspect and not enough on the need for a pun.  Must try harder.

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Minimum Energy Efficiency Standard Regulations for non-domestic properties 12 February 2015

This is a very long article. I have therefore prepared a PDF version of it, to make it easier to read and print out.

PDF version of this article

The Department for Energy and Climate Change (DECC) published its response to the consultation on the forthcoming Minimum Energy Efficiency Standard Regulations on 5 February 2015.  I wrote about the response – so far as it relates to non-domestic properties – in my article entitled “Publication of Minimum Energy Efficiency Standard Regulations for non-domestic properties” on the same day.

That article just copied out text from the Government’s response.  Now here are some thoughts, after having read the Government’s response in full, and the draft regulations as well, to enable me to write an article for next weekend’s Estates Gazette.

In passing, let me remind you that the MEES regulations apply to both residential and commercial properties.  But I am going to concentrate (in this and future articles) on commercial properties, as that is my area of (ahem) expertise.

I will split up the article into three: what we already knew, what is new, and areas that I don’t fully understand yet.  Remember what follows applies only to commercial properties. Different rules may apply for residential properties.

WHAT WE ALREADY KNEW

The Government made its intentions pretty clear in last year’s consultation paper, and there are few changes to what was proposed.

Timing – MEES will apply to new leases as from 1 April 2018 and to existing leases as from 1 April 2023.  I continue to feel that the 2023 date is too early.  If it had been five years later, many fewer leases would have been brought into the net and landlords’ lives would have been that much simpler.  And I’m not sure that very many opportunities would have been missed for improving energy efficiency.  I think the opportune time to carry out improvements is when a property is empty.

But the 2023 date will only bite for those properties that already have an EPC, as section 49 Energy Act 2011 says that MEES applies only where there is an EPC for a property. Obvious really.  There is, incidentally, nothing in the MEES regulations that requires a landlord to obtain an EPC.  The main EPC regulations continue to govern that aspect (construction, sale and letting are the only triggers).

EPC rating – this will be E as widely expected, but this is included in the regulations themselves.  So varying the rating will require varying the regulations.  I had anticipated a separate set of regulations containing the rating.

An EPC for this purpose has to be a valid EPC (obviously, but the regulations still say it). So an expired EPC is not an EPC for this purpose.

There is a great definition in the regulations – “sub-standard”.  That describes a property that falls below the E rating.  I think I suggested introducing a definition like that, but I didn’t coin the phrase.  Well done to whoever did.

Scope of properties – MEES covers properties that need an EPC under the EPC regulations.  So properties that do not need an EPC will be outside MEES.  The key ones will be listed buildings – assuming the Government corrects the existing EPC regulations.  The current definition has been botched by a lousy bit of copying from the EU directive.  It makes no sense and no-one knows whether listed buildings need an EPC or not.  I wrote about what needs to be done in my article “EPCs and listed buildings” on 18 August 2014.  It is now VITAL that this is sorted out.  It is arguably ridiculous having two Government departments dealing with these different areas (DCLG for EPCs and DECC for MEES).

Short and long leases not in scope – as expected, short leases (six months or less) and long leases (99 years or more) are not in scope.  The six months exception is subject to a 12 month maximum period of occupation (as assessed at the date when the latest lease is granted).  I suggested using the same wording (slightly improved) that is used in section 43(3) of the 1954 Act for the exemption, which has been adopted.

Exemptions – there is to be an exemption where the landlord cannot obtain necessary consents.  The list of people from whom consents are needed is illustrative not exhaustive (which is good).  I still think that tenants are likely to say no more often than yes, just to avoid the inconvenience of having the landlord carry out works to the building during the currency of the lease.

There are other exemptions (mentioned in the next section).

Length of time for exemptions – exemptions will last for five years.  After that time, the landlord must comply or demonstrate a new exemption. Originally it was proposed that an exemption would end when a tenant who had refused consent left.  I think that has been abandoned but I’m not 100% sure.

WHAT IS NEW

Quite a lot is new.

Lease renewals – are within scope (I’m even beginning to write like a civil servant now).  I still think this is nonsense.  The essence of MEES is that the landlord has a choice whether to bring the property up to standard and grant the lease, or not bring the property up to standard and forgo the letting.  So being required to upgrade the property when being compelled to grant a renewal lease (under the 1954 Act) doesn’t make sense.

Even worse, DECC says a lease renewal is within MEES but DCLG says that no EPC is needed for a lease renewal.  They can’t both be right.  Actually, it’s DCLG that is wrong. I’m sure a lease renewal under the 1954 Act is a “letting” for the purpose of the EPC regulations.  But people don’t like to hear that, and the guidance says it isn’t, so we are in a very strange position with renewals.

It gets worse.  As mentioned above, section 49 Energy Act 2011 says that MEES applies only where there is an EPC for a property.  So a lease renewal is within MEES when by chance there is already an EPC but not within MEES when by chance there is no EPC.  That really penalises a landlord who has voluntarily obtained an EPC.  Talking of which:

Voluntary EPCs – there is no distinction made between an EPC obtained in advance of a transaction and a voluntarily-obtained EPC.  I suspected that that would be the case, as (a) the two are indistinguishable on their face and (b) an EPC obtained voluntarily may have been used later for the purpose of a transaction, meaning it is no longer voluntarily obtained (sort of).  Anyway, there is no distinction.  I suspect it is unimportant.  Most landlords who obtained EPCs voluntarily will either (a) have modern energy-efficient buildings or (b) have granted leases recently (or both) so the EPCs are no longer voluntary.

Leases granted with no choice – as well as renewal leases, there are a number of different situations listed (suggested by me, originally, with help from a certain person now no longer living in the UK) where the landlord had no choice over granting the lease.  This includes a contractual obligation, an overriding lease under the 1995 Act and a lease by operation of law.  In such cases I wanted the landlord to be exempt.  Instead the regulations provide that the landlord has six months after the date of the grant in which to comply with MEES (subject to exemptions applying).

A lease granted to a guarantor after the disclaimer of the lease by the tenant’s liquidator was meant to be included as well, but the wording in the draft regulations has become scrambled. Not sure if that can be rescued now.  I think Parliament has to approve or reject the draft regulations in their entirety.  Perhaps there is a “slip rule” to correct obvious errors.  I will speak to DECC about it.

Buyers – this came out of the blue.  It was not mentioned in the consultation although it might have been discussed in roadshows.  An exemption from MEES will not transfer to a buyer.  A buyer of a non-compliant property will either need to bring a property up to an E rating within six months of acquisition or establish a new exemption.  I think that logically this can apply only from 2023, because until then MEES applies only to new lettings.

Cost-effective improvements – this is the most complicated part of MEES and I have not fully got to grips with it yet.  Landlords will be exempt from reaching an E rating for five years where they have carried out all possible cost-effective improvements.  This may be established by using the Green Deal’s golden rule (as originally envisaged) or under a new provision that requires improvements to pay for themselves within no more than seven years.  I’m confused as to whether these are conjunctive or disjunctive (ie – is it “either/or” or “both/and”).  While there is no commercial Green Deal, that doesn’t matter, I suppose.

Paying through the Green Deal is obviously preferable, as the costs are then passed down to the tenant, so there really is “no upfront payment” for the landlord.  The alternative method means the landlord ends up paying itself, which was never envisaged when the policy was devised in about 2010.

There is a complex explanation of what “paying for itself within seven years” means.  I’m not going to comment on it here, as it’s lengthy and it needs discussion with valuers and surveyors.  There is a formula in paragraph 28 that will raise a few eyebrows.  I have tried to reproduce it but failed.  I sense there will need to be an entire blog article devoted to just this one issue before too long.

The list of all possible improvements that landlords must consider in this alternative scenario is by reference to Table 6 of the Building Regulations Approved Document L2B.  I haven’t looked at it, nor do I have any idea at present how one is actually meant to approach the question of which improvements will need to be costed, to see whether they fall within the seven-year payback test.  Then, if they do, how does one decide if one on its own will be sufficient to get you above E, or whether a combination will be needed ?  This is all thoroughly mysterious at present.  Relying entirely on the Green Deal was so much simpler.

DECC is promising some guidance (non-statutory, I imagine).  I hope there is a long chapter on this aspect.

Exemption for works that would devalue the property – this was raised in the consultation document.  DECC has plumped for a reduction of 5% in value, as certified by an independent surveyor (and “independent” is actually defined!).  The exemption is limited to five years.

Unexpectedly, there is another exemption (for five years, once again) where wall insulation required to improve the property would damage the property.  I think that is addressing the concern that external wall insulation (EWI) can trap moisture within buildings in certain cases.  We need to understand more about that.

Register of exemptions – DECC is to create a centralised register in which landlords will need to log evidence of exemptions, such as (presumably) a letter from a tenant refusing consent.  DECC will make the exemptions public, it appears.

An exemption will not be valid unless it has first been registered.  This is actually quite clever.  It creates a stigma for “sub-standard” properties.

Penalties – Enforcement will be the responsibility of local authorities.  Penalties for breach could be significant – up to £150,000 although local authorities will have considerable discretion.  There will be a complex appeal system.  The regulations do not state whether local authorities will be permitted to keep the proceeds of penalties.  If this proves to be the case, this will be a massive incentive on local authorities to enforce the MEES regime.

The future –  There was a suggestion that the regulations would provide for the EPC rating to be progressively raised over time, to encourage long-term investment in energy-saving measures.  The government has not gone down this path.  Instead it says that MEES will be reviewed in 2020.

WHAT I DON’T YET UNDERSTAND

Cost-effective improvements – discussed above.  I need to see the guidance, and discuss it with a surveyor or ten.

Guidance is needed urgently – the regulations are a first step, but without the guidance on how to work out which cost-effective improvements to pursue, investors are still all at sea.

What does seem clear at this stage is that if you have a tenant under a lease that will run beyond 1 April 2023 and you don’t currently have an EPC that will be valid on that date, don’t commission an EPC voluntarily now.  So long as you have no EPC on 1 April 2023, you will not be under any obligation to do anything.

On the other hand, if you are granting a lease between now and 2018 that will last beyond 2023, you will simplify your life immensely (and make your property more saleable) if you bring the property up to an E rating before you grant the lease.  Speak to your friendly sustainability consultant about how best to achieve this.  Changing a few light-bulbs can effect a remarkable improvement, apparently.

How consent needs to be sought – I still do not understand what order steps have to be taken in.  If I have a tenant whose consent I will need after 2023 in order to carry out works, do I cost the works and then ask the tenant, or ask the tenant first (on the basis that if it says no, I don’t need to waste time costing the works)?  But if the tenant doesn’t know what I am planning to do, how can it reasonably consider my request?  This will be covered in the guidance, we are promised.  (The landlord’s obligation is “reasonable efforts … to obtain third party consent” – paragraph 31 of the draft regulations.)

Deliberately not obtaining an EPC – as I said in my consultation response, penalties for breaching the EPC regulations are relatively low.  I am not recommending anyone to do this, but completing a new letting without getting an EPC seems to avoid MEES, with its potentially significant penalties, completely.  This is a very perverse incentive indeed.

Other issues – I’m sure there are plenty of issues that I haven’t yet thought of.  I anticipate we will need a further article on MEES next week.

Training and raising awareness of MEES – I’m already booked to speak about MEES (along with Charles Woollam of SIAM) at an evening talk at the CPD Foundation on 26 March 2015.  Perhaps I will see you there.

Otherwise I am happy to present a one-hour talk on MEES in-house for you and/or your clients.  My rates are remarkably reasonable.

Your thoughts – please do e-mail me (info@nullfalcolegaltraining.co.uk) with any thoughts.  Or you could try leaving a comment at the end of this article.  This system is being tested as I write this.

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England and Wales: becoming increasingly different 11 February 2015

It is rare – although of course not unknown – for lawyers to be dual-qualified in Scotland and in England-and-Wales.  I have the utmost admiration for people with that ability.

Until recently, the idea of becoming capable of advising in England or in Wales – but not in both – was not on anyone’s radar.  Surely this could not be necessary?  Increasingly, however, the law in the two countries is diverging, and I provide three examples below.  The first two are still at a draft stage, although I think they are inevitable.  The third has already happened.

Obviously, the Welsh Government is entitled to legislate as it wishes, with the consent of the people of Wales.  But law that differs between England and Wales causes at least three problems for solicitors, it seems to me.

First, it is novel.  To lawyers physically working in England, in particular, it is an unfamiliar concept and it will require a new way of thinking.  It is a particular issue with property law and landlord and tenant law, of course.

Secondly, it is not going to be easy to remember when the law in Wales differs from the law in England.  Even researching whether the law in Wales is different from the law in England may not be very easy.  (In a number of cases, in fact, the dividing line as to where the Welsh Government has jurisdiction is a bit blurred, although that is a separate issue.)

Thirdly, even when you know the law in Wales is different from the law in England, you will have to become familiar with both laws.  While we were talking about differences in the Use Classes Order (there is no Class A4 or Class A5 in Wales, for example), that did not pose too many problems.  The first and second examples that I provide below will require a great deal more time devoted to them.

SOME EXAMPLES

So here are three examples.

Residential tenancies

The Welsh Governmnent has just published the Renting Homes (Wales) Bill.  The Bill seeks to implement the Law Commission’s Renting Homes Bill (published as long ago as April 2006, and since ignored by the Government in Whitehall), but not quite as we know it, Jim.

This is not a subject with which I am familiar, and so I recommend that you read this post “Let’s all move to Wales” from the wonderful Nearly Legal website.

If you are going to advise on residential tenancies in both England and Wales, and this Bill becomes law (as I imagine it will do), you are going to have to learn a lot of new law – and remember where the law in Wales differs from the law in England.  Similarly if you are an investor or a RSL in both countries, I imagine that you are going to have to change some of your practices.

Stamp Duty Land Tax

This is scary.  The Scots currently pay SDLT, but will be switching to a different land tax in April – Land and Buildings Transaction Tax.

Now it looks as if the Welsh might be switching from SDLT to their own land tax as well.  Yesterday the Welsh Government issued a consultation document entitled Tax devolution in Wales – Land Transaction Tax.   Responses have to be submitted by 6 May 2015.  The proposed new tax would take effect in 2018.

I do not think that I will be responding to this consultation, but if you have views, you need to respond.  (Incidentally in relation to the Minimum Energy Efficiency Standard regulations – to be covered in a blog article tomorrow – DECC received just 49 responses to its consultation last summer.  This was cunningly timed to span exactly the summer holiday period – but surely more people are interested in such important topics.)

Residential tenancy deposits

The Housing (Tenancy Deposits) (Specified Interest Rate) (Revocation) (England) Order 2015 (SI 2015/14) might well be an example of where the law in England is diverging from the law in Wales, as opposed to the other way around, as in the two previous examples.

The statutory instrument mentioned above repeals the Housing (Tenancy Deposits) (Specified Interest Rate) Order 2007, which applies in both England and Wales – but the repeal applies only in England.  So this is creating a new kind of complexity.  As well as legislation that is stated to apply only in England from the outset, or to apply only in Wales from the outset, we now have legislation that used to apply in both England and Wales but now applies only in Wales because it has been repealed in England.  (In fact, I think that in this instance the repeal is taking place because the provision is no longer relevant – but that might not be the case in the future.)

In case anyone cares, the reason for the repeal of the 2007 Order is explained as follows:

“This Order revokes the Housing (Tenancy Deposits) (Specified Interest Rate) Order 2007 (“the 2007 Order”) in England only. The 2007 Order specifies the rate of interest payable by a custodial tenancy deposit scheme on amounts of deposits repaid to tenants and landlords by the scheme at the end of a tenancy. The 2007 Order was only relevant so long as the arrangements under section 212(1) of the Housing Act 2004 – that is, the arrangements under which the tenancy deposit schemes are established – provided for deposits repaid to tenants and landlords to be paid with interest. In England, those arrangements were changed in 2010 to provide that such amounts were no longer required to be paid with interest. The 2007 Order is therefore redundant in England.”

Notice that this explanatory note does not comment upon whether or not the arrangements that were changed in 2010 in England were also changed in Wales.  It is not clear therefore whether the 2007 Order is also redundant in Wales, or whether it still serves a purpose.  That is probably a question that is of interest only to connoisseurs of tenancy deposit schemes, and I don’t count myself among them.

This statutory instrument is, incidentally, a fine example of a statutory instrument that incorporates four words or phrases within brackets.  They are relatively rare.  I have yet to see a statutory instrument that incorporates more than four words or phrases within brackets.  No doubt readers will let me know if they are aware of one.

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Publication of Minimum Energy Efficiency Standard Regulations for non-domestic properties 5 February 2015

The Government has today published its response to the consultation on the forthcoming Minimum Energy Efficiency Standard Regulations in relation to non-domestic properties.

You can see a copy of the Government’s response document at this link.

And this is a link to the draft regulations.

I have yet to read the document and the regulations but this is a “copy and paste” job from the Government’s response document.

The regulations need to be approved by Parliament, but this is the Government’s proposal:

Scope

The regulations apply to the non-domestic private rented sector in England and Wales.

Non-domestic private rented properties are defined in the Energy Act 2011 as any property let on a tenancy, which is not a dwelling. In the regulations we will exclude from this definition any property which is let on a tenancy which is granted for a term of 6 months or less (provided the granting of the tenancy does not mean the tenant will have occupied the property for in excess of 12 months), and any property let on a tenancy for 99 years or more. All non-domestic property types are in scope of the regulations, except for those specifically excluded from existing Energy Performance Certificate (EPC) obligations, as set out in the EPC regulations.

The minimum standard

The minimum energy efficiency standard will be set at an E EPC rating, in line with the domestic sector. This will apply equally to all categories of non-domestic property.

Restrictions on making improvements

As explored in the consultation document, the regulations will include a number of safeguards to ensure that only permissible, appropriate and cost effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can evidence that one of the following applies:

  • The measures are not cost-effective, either within a seven year payback, or under the Green Deal’s Golden Rule
  • Despite reasonable efforts, the landlord cannot obtain necessary consents to install the required energy efficiency improvements, including from tenants, lenders and superior landlords.
  • A relevant suitably qualified expert provides written advice that the measures will reduce a property’s value by 5% or more, or that wall insulation required to improve the property will damage the property.

 

When and how the regulations apply

From 1 April 2018, the regulations will apply upon the granting of:

  • a lease to a new tenant, and,
  • a lease to an existing tenant.

 

From 1 April 2023, the regulations will apply to all privately rented property in scope of the regulations, including where a lease is already in place and a property is occupied by a tenant.

Where a tenancy is granted in certain circumstances, such as by operation of law, the landlord will have six months from the date they become the landlord under that tenancy in order to comply with the regulations. Similarly, where a non-compliant property occupied by a tenant is sold, or is transferred to a lender in the case of receivership, the new landlord will have six months to improve the property, or seek to demonstrate an exemption applies.

Enforcement

Local authorities will enforce the provisions, and we expect in most cases it will be Trading Standards who undertake enforcement activity, but local authorities may choose to use other functions to undertake this function.

Where a landlord considers an exemption applies allowing them to let their property below an E EPC rating, the landlord will need to notify this on a centralised register (the “Private Rented Sector (PRS) Exemptions Register”). DECC may use this information to assist local authorities in targeting their enforcement activity.

Compliance notices and penalties

[not reproduced – refer to the document itself]

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Memories of Jim Hacker’s “British Sausage” speech 5 February 2015

In a seriously gushing press release issued on 26 January 2015, headed “Coalition ministers change the law to protect the Great British pub”, the Government has announced that it will be withdrawing permitted development rights for pubs that have been registered as Assets of Community Value (ACVs).  This brings back fond memories of the Yes Minister episode about protecting the British Sausage.

Hidden among the platitudes in the press release (sample: “The Great British pub is a national treasure which is why we are determined to protect it”), I found this piece of information:

“We … plan to bring forward secondary legislation at the earliest opportunity so that in England the listing of a pub as an asset of community value will trigger a temporary removal of the national permitted development rights for the change of use or demolition of those pubs that communities have identified as providing the most community benefit.

“This will mean that in future where a pub is listed as an asset of community value, a planning application will be required for the change of use or demolition of a pub. This then provides an opportunity for local people to comment, and enables the local planning authority to determine the application in accordance with its local plan, any neighbourhood plan, and national policy. The local planning authority may take the listing into account as a material consideration when determining any planning application.”

When the concept of ACVs was originally devised a few years ago, I had originally assumed that registration as an ACV would be of relatively little concern, given that it does not prevent the landowner from actually selling the property.  It merely gives “the community” a breathing space in which to put together an offer to buy it, and find the finance.  And even then, the landowner is not bound to accept the community’s offer.  This is not the time to go into all of the detail, but here is a link to the Government’s guidance document on ACVs for local authorities.

But perhaps I was wrong.  Apparently over 600 pubs have been registered as ACVs. Withdrawal of permitted development rights today (or, more accurately, “at the earliest opportunity”).  What else tomorrow ?  Could there be an election in the offing ?  On 7 May 2015, at a guess ?

You can see the Government’s press release here.  Don’t read it immediately after eating.  I cannot be responsible for the consequences.

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Accidentally suing the right person 3 February 2015

Reeves v Sandhu (reported in summary last month) is the tale of a happy accident.  There are plenty of reports of litigants who bring proceedings against the wrong person, and therefore lose.  This case concerns a litigant who brought proceedings against the wrong person – and won.

Mr Sandhu granted a lease to Mr Reeves, and then assigned the reversion to his company (the circumstances are unclear, as no transcript is yet available).  The lease contained a covenant to maintain insurance in the normal way.  The company failed to do so, and the premises were damaged by fire.  Mr Reeves sued the original landlord for breach of the covenant to insure, which was apparently an error (whether on his part, or his solicitors’ part, is not yet clear).

At first instance, the judge held that Mr Sandhu, no longer the current landlord, could not be liable.  On appeal to the High Court, someone remembered that the manner in which the Landlord and Tenant (Covenants) Act 1995 operates on the sale of a reversionary interest is that the landlord is not released on assignment of the reversion.  He has to apply to the tenant to be released at the time of the assignment (or – strangely – at the time of a future sale), and is only released if the tenant agrees to the release, or fails to respond.  If the tenant says no to the release, the matter goes to court for a judge to make a decision on whether it is reasonable for the landlord to be released.

This landlord did not operate the release procedure, and so on appeal the tenant won.  The landlord was held liable (jointly with the company) for the breach of covenant relating to maintaining insurance.  Unfortunately it looks as if it was a paper victory, as the landlord was declared bankrupt.

There are of course no statistics for how often an outgoing (selling) landlord operates the machinery of the 1995 Act to ask the tenant for a release from the landlord covenants.  At a guess, I would say it is very rare.  This case may make people rethink the wisdom of this – although of course the level of risk has not changed.  It is just that people will be more aware of it.

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