The month in brief
Welcome to the October issue of the Technical Update. This is a busy time of year for the IRPM with a full programme of regional seminars underway around the country. If you want to bring your skills bang up to date or just meet up with other property managers in your area, this is an ideal opportunity to do just that. If you live in or near Bristol, Manchester or London, you haven’t missed the boat. Scroll down to IRPM News to click on the link for tickets.
The big news this month is the publication of the Law Commission’s consultation on leasehold enfranchisement. The IRPM will be responding and we urge members to do the same. The legal framework around lease extensions and freehold purchase is long overdue for reform and now is your chance to have your say. See Topic of the month for a link to the consultation paper and online response form.
In other news, Theresa May’s promise of £2bn additional funding has been welcomed by the social housing sector; Housing secretary James Brokenshire has announced a ban on combustible cladding and an early October date has been set for the second reading of the Tenants Fees Bill. Property law specialist Mark Loveday reports from Tanfield Chambers’ recent Service Charges and Management conference held in September and the Suzy Lamplugh Trust has some must-read advice for property management companies on safeguarding their staff when they are working alone.
As ever, if you have a comment or an opinion to share, why not join the info@irpm.org.uk with title "IRPM Update Idea - FAO Marketing". We value your insights and opinions.
IRPM News
Chairman's column:Time for action | Understanding leasehold: new consumer guides | Last call for regional seminars
In the press
Housing secretary set to ban combustible cladding | May pledges £2bn for affordable housing development | Investment trust to compete against Buy-to-let and B2R | Brokenshire warns private firms about cladding costs
What's new in HR?
Managing sick pay made easy
Social housing
'Huge significance' of Mays NHF speech outweighs funding
Health and safety
Fine for exposing residents to dangerous fumes
Fire safety
Survey reveals flaws in fire door use but better knowledge overall | Warning over safety of block car parks | Hackitt: impossible to rule out another Grenfell | Landlord fined for putting tenants at risk | Future proofing fire safety
PRS and B2R
Lib Dems call for mandatory licensing | Major B2R development for Glasgow | New landlord licensing scheme for Brighton | New tower for East London | Wearable tech on offer from B2R developer
Scotland and Wales
More affordable homes for Scotland | Hike in affordable housebuilding for Welsh provider
Legislation
Changes to Section 21 legislation | Energy performance certificates - what do you think? | Tenants' Fees Bill: date set for second reading | HMOs now brought into mandatory licensing
Legal Update
When can an interim charge be deemed 'reasonable'? | Other must-read cases | What's new in service charges and management?
Talking point
Prioritising personal safety in property management
Topic of the month
Leasehold enfranchisement consultation
Events
Who is doing what, when and where?
IRPM news
We predicted; we delivered. The summer labours of the Law Commission and MHCLG are now paying off, says Andrew Bulmer. And an IRPM Newsflash reporting the first tranche of Law Commission work sped to your inbox the morning it came out, keeping you informed.
Stand by for more and soon; civil servants are very busy pulling those regulation / Ombudsman / qualifications / codes of practice / Dame Judith Hackitt safety review projects together as you read this. And while Brexit leads the headlines with politicians on both sides straining for power, note well that all main parties are finding time to talk about housing. Our sectors are in the news and this is going to be a lively autumn. Stand by!
The ‘flight to quality’ continues, with a noticeable uptick in candidates enrolling for the Housing and Property Management Apprenticeship. Early courses centred around London but our co-provider Catch-22 has now ramped up delivery across much of England and Wales. Every business I speak with is telling me it is increasingly difficult to recruit qualified managers. Forward thinking firms are now 'growing their own' professionals and with government paying 90% of the cost (or levy-paying big businesses receiving a 100% rebate) the apprenticeship scheme is worth a serious look.
Meanwhile, the fourth cohort of Build-to-Rent candidates started their course in September with a trip around the remarkable Olympic Village, now managed by Get Living. A fascinating and enjoyable insight into this large and successful PRS scheme for tomorrow’s BTR leaders.
If you are quick, there is still time to book for your regional seminars in Bristol, Manchester and London (see below). We have had great feedback from the Brighton and Birmingham events, with packed and thought-provoking agendas focussing on safety, service, cyber-security, industry trends and those essential technical/legal updates. Plus an enjoyable workshop to pit your wits against. Brilliant CPD for the (member) rate of just £75 for the day, with lunch. Absolute bargain! Come and join us.
Andrew Bulmer is CEO of the IRPM
Understanding leasehold: new consumer guides
In response to demand from leaseholders for clear and comprehensive information both at point of sale and on taking possession of their new home, a group of leading property organisations has come together to produce a new suite of consumer guides.
The IRPM has taken an active role in this initiative and we are pleased to announce that the guides are now available to download free of charge from our website at (Consumer Leasehold Guide link)
Topics include:
- What is a lease
- Who is who in a block of leasehold flats?
- Who has responsibility for what?
- Carrying out alterations or improvements
- What costs will I have to pay each year?
- Common misconceptions about leasehold
- Glossary of common terms
We believe the new guides will not only be of practical help to potential and existing homeowners but also help to underline the importance of using professionally qualified agents, property managers, valuers and conveyancers when considering letting, purchasing and/or living in a leasehold property. The guides illustrate the complex nature of property management and - in light of government calls for mandatory qualification of property advisers – they also demonstrate the clear need for highly skilled, professional managers in the residential block sector.
Commenting on the launch, IRPM CEO Andrew Bulmer said: “IRPM is delighted to support the publication of these new guides, which aims to get the right advice to consumers in a simple, easy-to-access format”. He continued: “In the past, despite the considerable endeavours of multiple stakeholder bodies and the good work of IRPM professionals, our industry has witnessed behaviours from a minority that are inappropriate and have caused harm to some leaseholders. The world has changed and the industry must move on. Industry is raising its game. IRPM is committed to promoting professional skills and qualifications in a sector that directly impacts on the safety, welfare, finances and happiness of millions of people in the UK”.
Last call for regional seminars – don’t miss out
There is still time to book your ticket for your local IRPM Regional Seminar – coming to a city near you in the next few weeks. The regional seminars are a great opportunity to update your technical knowledge, meet other property managers in your area notch up five hours’ worth of CPD points!
In addition to the legendary and essential legal updates, hear the latest developments on Dame Judith Hackitt's proposals for safety in buildings, on government proposals for regulation and how IRPM is meeting these challenges for its members.
Speakers and workshop sessions will tackle reinstatement cost assessments (Steve Johnson), cyber security (Gwilym Lewis) and violence and property management (Gudrun Burnet). The IRPM regional seminars will be visiting:
Bristol - 10 October
Manchester - 23 October
London - 1 November
In the press
Housing secretary set to ban combustible cladding
Housing secretary James Brokenshire took the opportunity of his keynote address at the Conservative party conference to announce a ban on combustible cladding (source: Building).
Speaking on 1 October, Brokenshire announced that he is outlawing the use of combustible cladding, which is to be banned on all new residential buildings above 18 metres, as well as on schools, care homes, student accommodation and hospitals.
“I can confirm that I will change the building regulations to ban the use of combustible cladding for all high-rise residential buildings, hospitals, care homes and student accommodation. And bring about a change in culture on building safety,” he said. The ban is not expected to be applied to buildings where materials have already been fitted.
May pledges £2bn for affordable housing development
The government’s announcement of £2bn of new funding for affordable housing was welcomed by housing associations and local authorities in September (Source: Inside Housing) Speaking at the National Housing Federation Summit in central London, prime minister Theresa May announced new funding for housing associations, which will allow them to build social and affordable housing. Housing industry leaders welcomed the announcement, saying the long-term nature of the funding is significant.
Chartered Institute of Housing deputy chief executive Gavin Smart said: “Long-term certainty will give housing associations the confidence they need to invest. And long-term partnerships will enable more housing associations to take the lead in developing their own land and reduce their reliance on private developers, helping to boost the numbers of new homes we build as a nation.” But he added: “It’s crucial that government investment helps housing associations to build the right kind of homes at the right prices. In practice this means building more homes at the lowest social rents – which is often the only truly affordable option for people on lower incomes.”
Paul Hackett, chair of the G15 group of housing associations and chief executive of Optivo, said: “The housing association sector has been calling on government to enter into long-term strategic funding deals for some time. Fixing the housing crisis requires long-term solutions”.
And Ben Denton, managing director of Legal & General Affordable Homes, said: “Whilst good news, there is still more work to be done. Over the past decade, only 3,000 affordable homes have been delivered each year, highlighting the need to smooth the way for more institutional money to enter the sector.”
Investment trust to compete against buy-to-let and B2R
An investment trust has been launched and looks likely to be competing for individual investors who may see it as an alternative to the increasingly complex buy-to-let market (source: Inside Housing).
In the UK most REITs have targeted commercial property but the Multifamily Housing REIT is the first listed vehicle to focus exclusively on pre-built rental homes; it says it will ultimately float on the London Stock Exchange and hopes to raise £175m.
Brokenshire warns private firms about cladding costs
Housing and communities secretary James Brokenshire wrote to around 60 building owners and developers in September threatening “enforcement action” if they do not strip unsafe material from their residential blocks (source: Inside Housing).
The firms include Lendlease, Pemberstone, Paddington Development Corporation and GLA Land & Property – a subsidiary of the Greater London Authority.
Building owners that do not take urgent steps to remediate buildings clad in flammable ACM could be restricted from accessing government schemes, the Ministry of Housing, Communities and Local Government (MHCLG) said.
In August, 293 private sector residential high rises had been identified as being clad in ACM, which is unlikely to meet building regulations. MHCLG has not been informed of action plans for 200 of these buildings.
What’s new in HR
HMRC has designed a new online guide for employers that’s interactive, easy to use and available when you are. Suitable for new employers and those wanting to refresh their knowledge, the guide covers:
- periods of incapacity for work (PIW)
- waiting days
- qualifying conditions
- linking periods
- how much to pay and for how long
- managing attendance
- occupational sick pay.
You can visit any section at any time, depending on what you need to know and when, so take a look at the online guide here.
Social Housing
‘Huge significance’ of May’s NHF speech outweighs funding
Social housing leaders have hailed the ‘huge significance’ of Theresa May’s vote of confidence in housing associations, following her speech to the National Housing Federation conference in September (source: Inside Housing), saying the change in political tone outweighed the significance of her £2bn funding announcement.
Boris Worrall, chief executive of Rooftop Housing Group, said: “The speech reflected a complete shift in how the government thinks about social housing as part of the solution, not the problem… It’s an absolute game changer for me.”
In the speech, Ms May specifically cited the Barking Riverside development by L&Q and the Thamesmead regeneration from Peabody as examples of the results associations can achieve. John Lewis, executive director for Thamesmead at Peabody thought the speech was hugely positive. “What was really nice to hear was the prime minister truly backing what housing associations can do,” he said.
Brian Cronin, group chief executive of Your Housing Group, a leading UK landlord and social housing provider with more than 28,000 homes across North West, Yorkshire and the Midlands also welcomed the prime minister’s sentiment saying: “Like the government we want to change the nature and perception of the social housing sector… Our aim is for our residents to be proud to rent".
Ben Denton, Managing Director of Legal & General Affordable Homes added: “We are pleased that the Government has announced increased funding towards affordable housing today. This will help to deliver more homes at levels that residents can afford in areas which need it most. This additional funding will be allocated over a much longer period - to 2028/9 - allowing developers and housing associations to plan with much more certainty.”
Health and safety
£1.25m fine for exposing residents to dangerous fumes
Willmott Partnership Homes Ltd has been fined after exposing members of the public to carbon monoxide fumes. A number of gas installations at Hamilton House in Wolverton were found to be either immediately dangerous or at risk after the smell of gas was reported by a householder in December 2014.
The HSE’s investigation found that Willmott Partnership Homes Ltd built the flats several years before the incident and in 2014 some remedial work was needed on an external wall. During the demolition and reconstruction of the wall, many live flues of gas boilers were removed, damaged and blocked, exposing the residents to a risk from carbon monoxide poisoning.
The construction firm pleaded guilty to breaching Section 3(1) of the Health and Safety at Work etc Act 1974 and was fined £1.25 million with costs of £23,972.33.
Fire safety
Survey reveals flaws in fire door use but better knowledge overall
Fire Door Safety Week ran this year from 24-30 September, aiming to raise awareness with both property professionals and residents of the importance of effective, properly fitted and fully compliant fire doors.
A survey carried out by maintenance specialists Horbury Property Services to mark Fire Door Safety Week found that despite considerable attention now being paid to fire safety, those living in flats and apartment buildings may still have cause for concern.
Of those residents polled, 57% said they had not been given any fire safety information by their landlord. Just under a third (33%) of respondents had been given only basic information and only 14% would consider the information they were given on fire safety to be good.
Despite this lack of information, fire safety knowledge was found to have improved since the 2017 Fire Door Safety Week survey. An encouraging 68% of those surveyed knew that a fire door should be inspected every six months, whereas in the same survey 12 months ago, only 40% of those surveyed answered correctly. There was also a good level of knowledge when questioned how long a standard CE marked fire door should withstand smoke and flame, with 81% answering correctly at 30 minutes.
When asked what would make them feel safer, the top answer (45%) was tighter building regulations on fire safety, the second most popular answer was fire sprinklers (36%) and third was more regular fire door checks (18%).
Warning over safety of block car parks
Fire safety experts have warned that buildings which have open-sided car parks at their base should be reassessed by inspectors amid concerns that they could be at risk in the event of a blaze.
The comments come on the back of a report released by Merseyside Fire and Rescue Service, reported in Inside Housing, which suggests that a fire in a car park in Liverpool on New Year’s Eve last year could have been contained if sprinkler systems had been installed. It also blamed the initial spread of the fire on the building’s drainage system, which allowed the flames to travel between levels. Ramps within the building also later allowed the spread of the blaze, which eventually engulfed the entire building.
Current building regulations do not require open-sided car parks to have a sprinkler system fitted, and although the latest government report into containing car park fires acknowledges that they can help prevent spread, it concludes that their use is “limited”.
Hackitt: impossible to rule out another Grenfell
Dame Judith Hackitt has warned it is impossible to rule out another ‘catastrophic event’ like the Grenfell Tower tragedy if changes are not made to the regulatory system.
Speaking at the Institution of Safety and Health (IOSH) 2018 annual conference in Birmingham, Dame Judith said she was “truly shocked” about standards in the built environment when she started her independent review into fire safety and building regulations last year. “The system for fire safety in high-rise and complex buildings was weak and ineffective. Unless we fix the system, we have no way of guaranteeing that there won’t be another catastrophic event,” she told delegates at the conference. “We need to get to a point where people those who construct a building are as responsible for those who use it over the next 10 or 20 years as they are for employee safety."
Following publication of Dame Judith's final report in May, industry groups and the government are now looking at how to implement some of the measures she recommends. This includes bringing together bodies such as the Health and Safety Executive, local authority building control and fire and rescue authorities. IRPM is a member of the working group assessing the role and responsibilities of the building safety manager/coordinator.
Dame Judith also warned there needs to be stronger powers of enforcement, to prevent cost-cutting. “Right now, the level of penalties when people are caught out is not strong enough,” she said. “There is no deterrent.
Landlord fined for putting tenants at risk
A landlord who allowed his tenants to occupy a property without working smoke alarms, too few fire doors and an external escape route that was in a poor state of repair, even after repeated warnings from the local council, has been fined £177,000 for serious breaches of fire safety regulations.
Philip Anthony Brotherton, the owner of Cresctcourt Properties Ltd, accepted that he put the lives of his tenants at risk by not having sufficient fire safety measures in place when he appeared before Reading Magistrates' Court. Brotherton pleaded guilty to four charges under the Regulatory Reform (Fire Safety) Order 2005.
Ensuring that block alarm systems are working efficiently is a top priority for property managers but they don’t always know when systems have developed a fault and often rely on maintenance teams and even residents to alert them to problems. Faulty systems often lead to complaints from flat owners, who are fed up with alarms blaring for lengthy periods or window vents opening, letting rain water in and damaging the common areas when there’s no sign of fire or smoke. Call-outs for non-existent emergencies waste both time and money.
But help is at hand, as Bradley Parker from Future Fire Systems explains. “Auto-notification devices are now on the market that alert users to any problems with their fire alarm systems via real time signalling from blocks where there is no one permanently based on- site.” One product in particular can be retro-fitted into an existing control panel. It can send signals to a cloud-based App’ via a 4G SIM and even to an old fashioned desk top. Once installed and connected, users are linked in real time to their property management company and have the peace of mind of knowing their systems are fully operational. A ‘fault’ signal can either be sent to an individual property manager or RTMCo director, or to a group of users who are linked to the device/property. To find out more, contact Bradley at bradley@future-fire.co.uk
PRS and B2R
Lib Dems call for mandatory licensing
At their party conference in September, the Liberal Democrats once again called for the introduction of mandatory licensing for PRS homes as well as a publicly available database of rogue landlords.
Aside from licensing, the Liberal Democrats also called for the promotion of longer private tenancies, with inflation or wage linked rents, a ‘right to buy’ for sitting tenants when a landlord sells, a cap on upfront tenant deposits, as well as a ban letting agents’ fees.
According to a recent report in Landlord Today, while many people will welcome the Lib Dems pledge to tackle the growing housing crisis in this country, others, including most landlords, will not welcome the party’s call for mandatory licensing for PRS homes.
Ahead of last year’s general election, RLA chairman Alan Ward warned that the Lib Dems’ proposals for the PRS could force some landlords out of the market altogether if the party was elected. “As we have said time and time again the PRS needs effective enforcement, not more regulation. Mandatory licensing would merely punish good landlords who would be hit with hefty licence fees, while the criminals continue to operate under the radar.”
Major B2R development for Glasgow waterfront
Ongoing revitalisation of Glasgow’s waterfront is poised to take a major step forward with the submission of a detailed planning application for a 500-apartment build-to-rent development on the banks of the River Clyde.
The project at Central Quay, is being led by major investor developer and property manager PLATFORM_ and will deliver “high-quality, state-of-the-art homes to cater for a range of people living and working in the city”, says the company.
With planning permission anticipated at the end of 2018, PLATFORM_ hopes to start construction of the apartments by the second quarter of 2019, with a scheduled completion date of summer 2021.
New landlord licensing scheme for Brighton
Brighton and Hove Council has given the go-ahead for new selective landlord licensing to be introduced across 12 wards in the city. A three-year license will cost a landlord £460, while those accredited by the National Landlords Association (NLA) will be charged the reduced rate of £410. Landlords will also have to take responsibility for the safety of their tenants by keeping their rental homes up to the appropriate standard and reacting to anti-social behaviour.
City councillor Tracey Hill, who worked on the scheme, which is expected to affect about 27,000 properties, said: “This will allow us to raise standards in more privately rented homes in the city and help us make sure that tenants in the sector can live in safe, healthy and well-managed homes.”
Property developer Ballymore has announced the launch of Douglass Tower at their Goodluck Hope development on Leamouth Peninsula. Standing at the gateway to London on the River Thames, the developer expects the thirty storey high tower to transform the east London skyline. Goodluck Hope is a new riverside neighbourhood comprising of 804 homes located adjacent to London City Island.
Wearable tech on offer from B2R developer
In the first tie-up of its kind in the housing market, B2R provider Moda has just announced a partnership with a new health and fitness platform called Hero. The aim is to give residents access to a training club in their block that will use wearable tech and 3D body scanners to measure their fitness and create tailored exercise and diet regimes for them. Residents will also have access to personal advice from Premier League coaches and nutritionists. And Hero will also provide 'mental health first' training for Moda’s on-site management staff.
Scotland & Wales
More Affordable homes for Scotland
The Scottish Government is on track to meet its ambitious affordable housing target, new statistics show. The figures show an increase of 745 homes (4%) across all sectors, from 18,683 in 2016-17 to 19,428 in 2017-18. This is the fifth consecutive increase and the highest annual figure since 2008-09.They also show that affordable housing approvals total 11,926 homes, up 12% (1,252 homes) on the previous year.
Commenting on the figures, housing minister Kevin Stewart said: "I am immensely proud that this government has now delivered more than 78,000 affordable homes since 2007. I am delighted that these figures show we are on track to deliver at least 50,000 affordable homes over this Parliament, including 35,000 for social rent. This is backed by more than £3 billion - the single biggest investment in, and delivery of, affordable housing since devolution and we are determined to see it benefit all parts of Scotland."
Hike in affordable housebuilding for Welsh provider
Wales & West Housing, which owns around 11,500 homes across the country, plans to build 6,000 affordable homes in the next decade. According to Inside Housing this is the first time the association has entered into 10-year contracts.
Eight firms are reported to have been awarded the deals: P&B Builders, Jehu Group and Hale Construction in South Wales; T Richard Jones and WB Griffiths & Son in Mid Wales; and Brenig Construction, Anwyl Construction and Seddon Construction in North Wales. Wales & West said the contracts will secure hundreds of jobs and 500 new apprenticeships.
Legislation
Changes to Section 21 legislation
From 1 October 2018, all Assured Shorthold Tenancies (ASTs) will need to comply with new guidelines on serving a Section 21 Notice to terminate a tenancy agreement. Form 6A must now be used by landlords and letting agents in England, which combines the two previous types of notices into a single notice for both periodic and fixed-term tenancies. From the same date, landlords must also:
- publish the property’s Energy Performance Certificate where one is required;
- tell tenants which deposit protection scheme is being used; and
- where the property is licensed, provide a copy of the licence to all tenants.
In addition, under the Deregulation Act 2015, anyone wishing to issue a tenant with a Section 21 Notice must have previously issued the How to rent: the checklist for renting in England guide, made sure the property has an up to date Gas Safety Certificate and checked that tenants have seen it.
Energy Performance Certificates: what do you think?
The Government has issued a Call for Evidence in relation to energy performance certificates (EPCs). Respondents are invited to answer a number of specific questions, looking at the way in which the EPC regime works at present and seeking comments on ways in which this could be improved including quality of EPCs and operation of the open register. The deadline for responses is 19 October 2018.
Tenants' Fees Bill: date set for second reading
The next stage of the Tenants’ Fees Bill through Parliament will be its second reading in the House of Lords, scheduled for Wednesday 10 October.(Source: Letting Agent Today).
Its first reading in the House of Lords - a formal process which did not involve a debate - took place in September, following the third reading in the House of Commons earlier the same day.
During the third reading, the House of Commons rejected an amendment from Conservative MP Daniel Kawczynski for fees to be capped at £300; it also voted down Labour shadow housing minister Melanie Onn MP’s proposal to increase potential maximum fines from £5,000 to £30,000.
Typically, a Lords Second Reading lasts half a day, with a government minister introducing the measure followed by a debate. At a later date the Bill will go to the Lords Committee Stage, where it will be examined line by line. The bill - which is expected to place a ban on the levying of letting agents’ fees on tenants in England - is still on course to receive Royal Assent and become law next year.
HMOs now brought into mandatory licensing
More houses in multiple occupation (HMOs) are being brought into the mandatory licensing regime which came into effect on 1 October. The new licensing requirement applies to all properties that meet the following criteria:
- is occupied by five or more persons
- is occupied by persons living in two or more separate households
- and meets:
- the standard test under section 254(2) of the Act
- the self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats, or
- the converted building test under section 254(4) of the Act.
Properties that fall into scope of the new definition but are already licensed under a selective or additional scheme, will be transferred into the new scheme free of charge.
However, the National Landlord’s Association (NLA) is concerned that local authorities are not prepared for, or are still unaware of, the mandatory licensing for HMOs.
NLA chairman Richard Lambert commenting on the new regime in September, said:
“We have been contacted by a number of our members who have tried to apply for licenses, but the local authority has purported not to know anything about it or simply didn’t have the systems in place to process the applications. Our advice to landlords who have encountered this is to apply for an HMO license using the existing process, even if the council hasn’t updated their forms.”
Legal update
When can an interim charge be deemed ‘reasonable’?
Mark Loveday looks in detail at the recent Upper Tribunal case of Wigmore Homes (UK) Ltd v Spembly Works Residents Association Ltd
In the recent case of Wigmore Homes (UK) Ltd v Spembly Works Residents Association Ltd, [2018] UKUT 0252 (LC), Upper Tribunal, 20 August 2018, the tenant owned a flat in a converted office building in Central Chatham. The landlord was a lessee-owned residents' association which ‘self managed’ the property.
Clause 5.1 of the lease of the flat provided that the tenant was to pay "a proportionate sum on account of Service Charge ... as the Landlord shall consider is fair and reasonable" and to pay the balance “on receipt of the Certificate”. The “Certificate” was defined as a fair summary of the landlord’s “annual expenditure”, with the tenant being entitled to inspect the receipts in respect of such expenditure. The landlord demanded payment of interim service charges for 6-month periods between 2010-16.
The tenant argued the landlord had failed to supply the relevant certificates in accordance with the lease and that the demands exceeded the expenses incurred. In particular, it pointed out that the amount demanded by way of interim charges came to approximately twice landlord’s actual expenditure on the block.
Decision
The Upper Tribunal decided that certificates were not a condition precedent to liability for the interim service charges. But it found in favour of the tenant because:
- Clause 5(1) of the Lease meant that the interim had to be a “proportionate sum on account of” the landlord’s anticipated expenditure. It could not be more than 100% of anticipated expenditure.
- Under s.19(2) Landlord & Tenant Act 1985, the sum claimed must be “objectively reasonable”.
- The reasonableness of the demand has to be assessed by what is known at the time the tenant's liability arises (see Knapper v Francis [2017] UKUT 3 (LC)).
- In this instance, at the time there was no reason to believe the landlord would not have had some idea of the actual expenditure incurred historically by the date of the first interim service charge demand.
- Also, the fact the amount demanded for each year was precisely the same was a clear indication that (1) the landlord had not carried out a careful assessment for each year, and (2) that the figure claimed was not based on a genuine estimate of the likely expenditure.
- The onus was on the landlord to establish the reasonableness of the estimate.
- It might or might not be reasonable for the estimate to turn out to be approximately twice the expenditure in any given year. It was for the landlord to justify it. But when that happened on a consistent basis it became more and more difficult to justify.
Therefore, the interim charge was not “reasonable” within the meaning of s.19 and, as a result, the Upper Tribunal reduced the interim service charges by 50%.
Practical Points
It is not uncommon for interim service charges for one year to be set before managing agents know the actual expenditure incurred during the previous service charge year.
This decision makes it clear that in such a situation it is risky simply to “roll over” the interim charges demanded in the previous year. It is always safest to prepare a new budget every year based on fresh assumptions. That budgetary process can then be documented in case of challenge under LTA 1985 s.19(2).
Other recent must-read cases include:
Klosterkotter-Dit-Rawe v Greyclyde Investments Ltd [2018] UKUT 0289 (LC), 3 September 2018.
There was no condition precedent to liability to pay an interim service charge that the landlord should certify the amount of those charges.
CQN RTM Company Ltd v (1) Broad Quay North Block Freehold Ltd (2) Broad Quay Management Company Ltd [2018] UKUT 0183 (LC), 31 July 2018.
In a contested Right to Manage application, an F-tT found that the premises were ‘structurally detached’ from other premises within the meaning of the Commonhold and Leasehold Reform Act 2002 s.72(2). The Upper Tribunal upheld that decision on the facts. In this context, 'structural' meant “appertaining or relating to the essential or core fabric of the building”.
What’s new in service charges and management?
More than 130 management professionals, solicitors and property owners attended the Tanfield Chambers Service Charges & Management Conference 2018 in September. The conference, which coincided with the publication of the fourth edition of the leading legal textbook with the same title, featured some 16 barristers and legal experts on property management and took a closer look at a range of current legal issues.
Fire safety and defective cladding
The importance of fire safety and cladding post-Grenfell was marked by two separate sessions on the subject, by barristers, Amanda Gourlay, Robert Bowker and Nicola Muir, with guest solicitor Gurpreet Sanghera of EMW Law LLP.
These covered the general success experienced by landlords in recovering the costs of “waking watches” and cladding replacement – such as in the recent cases of E&J Ground Rents v Lessees at Fresh Apartments, Salford, Firstport v Leaseholders at Citiscape Croydon and Pemberton Reversions v Lessees at Cypress Place/Vallea Court, Manchester.
The two sessions also explored the need for landlords to comply with the Regulatory Reform (Fire Safety) Order 2005 in relation to blocks of flats and HMOs with common parts and systems. Amanda Gourlay, a barrister in Citiscape, explored what actually happened in the case, including some of the misreporting of the issues by press and politicians.
Double-hatting
The frustration of property professionals with the costs and complexity of legal proceedings featured in a session on Flexible Judicial Deployment (or 'Double Hatting') in the tribunals.
Tribunal Judge Mark Loveday explained the current pilot projects which enable tribunal judges to sit simultaneously as County Court judges in property management disputes. The object is to end what a leading judge has described as the “legal ping pong” of management cases being transferred and re-transferred between courts and tribunals – often at great cost to the parties.
Participants were taken through the unpublished 2015 Practice Guide on the Deployment Pilot and the procedure to be adopted. Barrister Richard Alford explained the lessons to be learned from the recent Upper Tribunal decision in Avon v Childs, which was critical of some aspects of the pilots. This is very much the way forward, and Double Hatting is set to be rolled out far more extensively in the courts and tribunals over the next year.
Consents
Another hot topic was the issue of landlord’s consents for alterations, change of use and (of course) underletting and Airbnb. Tim Polli QC and Stan Gallagher explained the rationale behind the different types of consent covenant and what was a “good” and “bad” refusal. The tricky position with consents where there is an RTM Company or a Tribunal-appointed Manager was also covered since Reiner v Triplark.
Caselaw
The keynote talk by Head of Chambers Philip Rainey QC covered some 26 recent cases decided in the courts and tribunals over the past year. Mr Rainey, who appeared for parties in a number of these leading cases, covered the thorny issue of conditions precedent, insurance, major works and cost recovery.
The future
Some 2,700 service charge and management claims have been issued in the past year in the tribunals alone. The conference demonstrated that the courts and tribunals are already grappling with new issues such as cladding and Airbnb, and developing new approaches to resolving these and other more established legal problems.
Mark Loveday is a leading Barrister with Tanfield Chambers specialising in leasehold management and enfranchisement work
Talking point
Prioritising personal safety in property management
Does your company have a lone worker policy? If not, employees may be put at risk while going about their day-to-day tasks, This article from the Suzy Lamplugh Trust offers some important advice for managing agents to consider.
Lone working is a necessary part of many jobs, but when you work without close or direct supervision, it may be more difficult to manage challenging situations. Without the immediate support of your colleagues, you might sometimes be more vulnerable to violence and aggression, and must be able to resolve issues quickly and keep yourself safe when alone.
Those working in the property management sector are likely aware of this challenge. Sadly, it is not unusual for people in public facing jobs to face violence and aggression at work, and when employees work in other people’s homes, the level of risk can be even higher. For example, when lone workers deliver bad news to a tenant, they need skills to manage other people’s expectations and emotions, and react appropriately if the situation becomes unsafe.
This year, a national survey by Inside Housing magazine found that there had been a minimum of one physical or verbal assault against a frontline housing worker every 35 minutes in 2016-17. It is not surprising that 99% of housing workers asked said that they felt as unsafe, or less safe than they did last year.
As a personal safety charity which offers training to lone workers, we hear reports of assaults on people who work in housing and property management all too often. One lone worker told us that a client's spouse had attacked them as they were leaving an appointment. Another reported that he had been held at knife point by a client during a home visit.
It should go without saying that violent and aggressive behaviour like this is unacceptable and that perpetrators should be reprimanded, but for many lone workers an important question takes precedent: what can I do to make myself safer?
To begin with, it's worth remembering that employers must provide a safe place of work for all their employees. This includes lone workers and those who work away from the office; these members of staff should not be put at more risk than any other worker and the unique problems that they could face should be risk assessed and addressed.
To avoid their staff coming to any harm, employers should take reasonable precautions. While it may be necessary for a property manager to attend a site visit alone, the hazards associated with this job should be identified ahead of the visit and management strategies should be put into place. From actual physical harm, to aggressive behaviour and threats, there must be a framework which assesses dangers and provides tangible solutions to help all staff stay safe.
Another helpful safety tool is your company's lone worker policy. This policy should clearly explain what risks workers could face; what employers and employees are expected to do if a dangerous situation arises; and what procedures are in place to protect staff from harm. Everyone who works for the company should know where they can find this policy, and it should take all working environments faced by staff into consideration.
Policies and procedures will vary. No organisation or job is exactly the same, so no personal safety policy should be the same either. It’s important that you use your expertise, either as an employee who experiences their job daily or as a manager who can spot potential issues while overseeing jobs, to decide what is best practice for your workforce. Procedures can include anything from having a buddy on-site, to using personal alarms and lone worker devices. All these systems are designed to protect people and make sure that problems are identified quickly.
Finally, personal safety training can be invaluable when staff face danger. Personal safety systems, lone worker devices and company policies are only useful if people know how to use them. By providing personal safety training, you and your employees can better consider the circumstances which affect your day-to-day safety, and how you can improve the safety decisions you make. There is no one-size-fits-all when it comes to training; courses should, and can, fit your unique needs.
Overall, prioritising personal safety is key. While policies can help with staff safety, employees must also be given the information and skills they need to respond safely in different situations. By offering robust training and emphasising the importance of personal safety, employers can address any gaps in staff knowledge and embed personal safety into their organisation’s culture.
To find out more about the Suzy Lamplugh Trust, creating lone worker policies, and personal safety training call us on 020 0791 0014 or email us at training@suzylamplugh.org
You can also visit the website at: www.suzylamplugh.org
(This article was kindly provided by the Suzy Lamplugh Trust and was first published on the ARMA website)
Topic of the month
Leasehold enfranchisement
In September, the Law Commission published its consultation on enfranchisement Leasehold home ownership: buying your freehold or extending your lease as part of its 13th programme of law reform. Over many years, there have been wide-ranging criticisms aimed at the legislation governing residential leasehold enfranchisement, including inconsistency, complexity and unfairness. So in collaboration with industry stakeholders the Commission has undertaken a root-and-branch review of enfranchisement law, in particular looking at ways to simplify the procedure and to make valuation fairer and more transparent.
The consultation paper itself stretches to over 540 pages, and sets out comprehensive provisional proposals to reform the law relating to leasehold enfranchisement in England and Wales. The aim is to simplify the legislation and to make it easier, quicker and cheaper for leaseholders to buy their freehold or extend their lease.
The consultation poses four key questions:
- What should the enfranchisement rights be?
- Who should be entitled to exercise enfranchisement rights?
- How should enfranchisement rights be exercised?
- What should it cost to enfranchise?
The Commission’s terms of reference required it to consider valuation options that ensure sufficient compensation is paid to landlords to reflect their legitimate property interests and so the calculation of the premium that must be paid to a landlord is dealt with, as well as the technicalities of how leaseholders’ enfranchisement rights can be exercised.
The proposals set out by the Commission include:
- Replacing the existing legislative framework with a single enfranchisement regime.
- Retaining any existing rights to a new lease but increasing the length of the lease extension to 125 or 250 years (currently 50 years for houses and 90 years for flats).
- Retaining existing rights to acquire the freehold but these rights to be extended to enable multiple buildings on an estate to act collectively to acquire the freehold of the whole estate, rather than just one building. A new corporate body would be formed for that purpose.
- Bringing in a new “right to participate” whereby leaseholders who do not participate in the original freehold purchase can join the enfranchisement company at a later stage on payment of a specified sum.
- The enfranchisement process should be simplified and standard forms prescribed.
- The “complex division of responsibilities between the court and Tribunal” should be changed so that all disputes would be dealt with by the First-Tier Tribunal (Property Chamber) (England) or Leasehold Valuation Tribunal (Wales).
Cost Valuation is considered to be overly technical and complex. The paper seeks views on whether to prescribe a formula (e.g. a multiple of ground rent; percentage of capital value) or prescribe a methodology by which certain factors must be taken into account or excluded.
Housing Minister Heather Wheeler has welcomed the Law Commission proposals, describing the current regime as “outdated”. She also believes it is “unacceptable for leaseholders who want to buy their freehold or extend their lease to be faced with overly complicated processes and disproportionate costs” and re-iterated the government’s commitment to banning leaseholds for almost all new build houses and restricting ground rents to a peppercorn. Her counterpart in the Welsh Assembly, Housing and Regeneration Minister Rebecca Evans commented that “There has been widespread criticism of poor practice in the use of leasehold in Wales…this work is part of efforts to improve transparency and understanding for people who have leasehold agreements as well as those entering into leasehold transactions.”
Association of Leasehold Enfranchisement Practitioners (ALEP) member firms have also been heavily involved in the consultation process. “It is crucial that leaseholders are well informed and educated” says specialist leasehold solicitor and ALEP Director Mark Chick. He particularly welcomes the proposal to remove limitations on the right to enfranchise, including the requirement that leaseholders must have owned their property for two years before making a claim. “This will help to reduce the delay and costs for leaseholders,” he says.
Like other industry bodies, ARMA has welcomed the attention that is finally being paid to the leasehold sector, which encompasses more than 4 million households in England alone. ARMA chairman Dr Nigel Glen has broadly welcomed the Law Commission’s proposals to simplify the existing legislative framework around enfranchisement; in particular the proposed ‘right to participate’ which would make the regime fair for all leaseholders, regardless of when they purchased their property. However, “introducing new rules around compensation for freeholders raises a number of questions that need to be addressed if all parties are to be treated equably,” he says.
Jo Darbyshire agrees. She is the driving force behind the National Leasehold Campaign - which is calling for a government review into what she believes is another mis-selling scandal – and doesn’t believe the Law Commission’s proposals go far enough. I don’t blame the Law Commission,“ she says, “the problem is that the scope of the proposals is too limited and the terms of reference too skewed to help existing leaseholders who have suffered at the hands of unscrupulous developers and freeholders. However, she does welcome the proposed abolition of the so-called ‘two-year rule’, simpler rules around collective enfranchisement and the fact that leaseholders will no longer have to pay freeholders’ legal fees when making an enfranchisement claim. “I also like right of first refusal for houses, although the loopholes currently exploited on flats to avoid this need to be closed simultaneously”, she adds.
Enfranchisement barrister Piers Harrison from Tanfield Chambers believes the Law Commission is asking the right questions but freely admits that the proposals will not go as far as some people want, “A wholesale abolition of leasehold was never really on the cards,” he says. In general, Piers suspects there will be widespread agreement that the three main kinds of leasehold enfranchisement should be consolidated, with a common set of procedure. “Coming up with a clear universal code for flats and houses will be technically challenging. It would be sensible to re-use existing definitions as far as possible as there is a body of case law which aids interpretation.” He thinks bringing all disputes under the jurisdiction of the Property Tribunal is a good idea, as are the proposals to end the often sterile technical arguments about the validity of notices. However, it’s not all good news. “I for one, am sceptical about outlawing voluntary lease extensions and freehold house claims – which sounds impossible to enforce in practice,” he says. Piers thinks the biggest disappointment is the decision not to recommend any single way to simplify valuation. “It’s an odd decision to hand such a technical issue over to the politicians to resolve,” he concludes.
And a final word from LEASE: “Ending the doctrine of forfeiture for residential leasehold should be introduced as further reform.”
Property managers are frequently the first port of call for leaseholders considering purchasing their freehold or extending a lease and this is an important opportunity to help shape the future of enfranchisement and to simplify the legislative regime. Read the consultation paper in detail and to ensure your views are heard or download an online response form.
Comments may be sent by email to propertyandtrust@lawcommission.gsi.gov.uk or by post to:
Leasehold Enfranchisement Team, Law Commission, 1st Floor, Tower, 52 Queen Anne Gate, London, SW1H 9AG.
The deadline for responses is 20 November 2018.
Events
IRPM Diary dates
10 October 2018 – Regional Seminar – Bristol
23 October 2018 – Regional Seminar - Manchester
30 October 2018 - Member Exam in London & Manchester
01 November 2018 – Regional Seminar - London
06 February 2019 - Associate Exam Workshop - London
07 February 2019 - Associate Exam Workshop - London
26 February 2019 - Associate Exam - London & Manchester
26 March 2019 - Associate Exam - Glasgow
26 March 2019 - Member Exam - Glasgow
03 April 2019 - Member Exam Workshop - London
04 April 2019 - Member Exam Workshop - London
09 May 2019 - Member Exam - London & Birmingham
13 June 2019 – Annual Seminar
14 August 2019 - Associate Exam Workshop - London
15 August 2019 - Associate Exam Workshop - London
11 September 2019 - Associate Exam - London & Birmingham
11 September 2019 - Member Exam Workshop - London
12 September 2019 - Member Exam Workshop - London
15 October 2019 - Member Exam - London & Manchester
For more information visit our Events page
ARMA
To book ARMA training courses
IRPM members (associates and above) can attend ARMA courses at the discounted ARMA members rate.
LEASE Webinars
LEASE has many
Brethertons Webinars
IRPM members get a substantial discount on the charges for these webinars.
ARLA Propertymark
To book courses for 2018.
Chartered Institute of Housing
For more information on their events visit their website.
National Leasehold Group
For their seminar listings
RICS (open to non-RICS members)
For all RICS courses
