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A Clampdown on Freeholders and Landlords?

This information has been prepared by Sykes Anderson Perry Limited as a general guide only and does not constitute advice on any specific matter. We strongly recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of any information or advice given or omitted.

In the latter part of 2018, the Government pledged to crackdown on Freeholders and Landlords in an effort to tackle leasehold abuse, prevent rising ground rents and provide greater protection to tenants. This note explores just a few recent legal developments which demonstrate a move towards the protection of leaseholders and tenants.

Government publishes guidance for local authorities to tackle rogue landlords

On 9 April 2019 the Ministry of Housing, Communities & Local Government published guidance to help local authorities tackle rogue landlords. This guidance follows confirmation by the Housing Minister on 14 January 2019 that an additional £2.4 million of funding will be provided to local authorities to assist them in taking action against rouge landlords.

Whilst most landlords provide suitable and satisfactory rented accommodation, there is a minority who continue to take advantage of vulnerable tenants. Tenants are often unaware of their rights or what actions and remedies are available to them.

The toolkit, available online, provides information for local authorities by setting out their powers to take action against rouge landlords. It also includes practical advice on how to apply their powers ineveryday situations.

The Ministry of Housing, Communities & Local Government has also published anonline user-friendly guide for tenants and landlords which sets out the rights and responsibilities they have when renting or letting a property.

Tenants Fees Act 2019

The Tenants Fees Act 2019 will come into force in England on 1 June 2019.The Act controls what costs are payable by tenants to landlordsand/or letting agents in connection with tenancies in England.

Under the Act, all tenant fees are essentially prohibited unless a payment is specifically permitted.For example, deposits are permitted although the maximum deposit is limited as follows:

  • Where the yearly rent is less than £50,000, the maximum tenancy deposit allowed is five weeks.

  • Where the yearly rent is £50,000 or more, the maximum tenancy deposit allowed is six weeks.

Fees for referencing, inventories, credit checks and guarantors as well as admin charges and check-out fees will not be permitted under the Act.

The Government has also published guidance for tenants, landlords and letting agents on how the Act will affect them. This informs tenants of their rights and explains what steps they should take in the event that they believe there is a breach.

Landlords and letting agents will still be able to charges fees contained in existing tenancy agreements up until 31 May 2020, as long as the tenancy agreement has been entered into before 1 June 2019. After 1 June 2020 the Act will apply to all applicable tenancies regardless of whether the tenancy agreement pre-dates the Act.

A breach of the Act including charging tenants prohibited fees will ordinarily result in a fine of up to £5,000 although criminal charges can be brought against repeat offenders.

An industry pledge to crack down on onerous lease terms

Over 40 property developers, freeholders and managing agents have signed an industry pledge to help leaseholders tackle unfair treatment by no longer using unreasonable lease terms.

Those who have signed the pledge have committed to stop using onerous lease terms such as doubling ground rent clauses that can result in ground rents soaring over a short period of time. They have also committedto removing such clauses from existing leases.

However, the pledge has received criticism from leaseholders and campaign groups who argue that this does not satisfy the Government’s commitment to legislate on abusive practices by freeholders, but instead puts those responsible for the exploitation of leaseholders in charge of regulating themselves. They point out that in essence, the same signatories are responsible for the implementation of doubling ground rent clauses in the first place.

The Government also plans to address the legal loopholes that result in leaseholders who wish to challenge fees or increases in service charges at court running the risk of being forced to pay the freeholder’s legal fees. This is the case even if the leaseholder wins at court and they can still be forced to pay the freeholder’s legal costs in accordance with the lease terms.

Those who have signed the pledge are listed on the Government website.

Triplerose Ltd v Stride [2019] UKUT

This recent Upper Tribunal case concerned an application by the landlord under section 35 Landlord and Tennant Act 1987 to vary the tenant’s lease to increase the tenant’s liability to pay service charges.

Section 35 allows for a lease to be varied where the lease fails to make satisfactory provision for service charges. In this case, according to the lease,the tenant was only required to pay service charges towards the cost of external painting. The landlord wanted to vary this so that the tenant was also responsible for contributing towards repairs to the structure of the building and management costs.

The tenant successfully resisted the application to vary the service charge provision in its lease.The Upper Tribunal acknowledged that the lease was badly drafted but emphasised that the service charge provisions were not unsatisfactory within the meaning of section 35. They commented that it was not the purpose of section 35 to allow an old lease to be updated. Therefore, the service charge provisions could not be varied.

May 2019

Alice Williams
Trainee Solicitor