Legal Update: Murphys Law by Gordon Kerr (ARP Strategic Consultant - Legal Services)

Legal Update for ARP Newsletter

 

Murphy’s Law

Welcome to this legal update, which is intended to provide ARP members with an overview of legal developments affecting UK relocation businesses.

The main issue covered in this update is the thorny problem of how you deal with a landlord who is being unresponsive to a tenant’s request for repairs to be carried out.  I also provide quick updates on some current legal issues, including

1. Anti-Money Laundering - HMRC gets tough on money laundering breaches
2. Right to Rent
3. Competition law – pricing agreements between competitors

I hope that you find this legal update useful.  Please feel free to share with me your own thoughts on the legal issues which are currently concerning you.

Finally, the usual “health warning”.  This update is for general guidance only and should not be treated as legal advice.

 

Gordon Kerr

EuRA Strategic Consultant – Legal Services

gordonkerr@gklegal.co.uk

 

 

1) Anti-Money Laundering

If your relocation business ever provides a purchasehome search service, then you are required to register your business with HMRC under Anti-Money Laundering regulations.  This is because a purchase home search falls under the definition of estate agency services.

Recently, HMRC carried out a series of unannounced visits to estate agents which it suspected had been “trading without being registered as required under money laundering regulations”. HMRC said that the agents would face fines and be “named and shamed”.

With registration comes a range of detailed requirements to carry out money laundering checks before starting work for a client.  Your business will also be subject to audit by HMRC.

Penalties for non-compliance can be quite severe.  Countrywide, whose 50 agency brands include Hamptons, Bridgfords and Bairstow Eves, has just received a £215,000 fine.  Behind fines such as this is concern about a lack of due diligence by the property industry on the rising number of wealthy buyers from Russia, China and the Middle East.

The message is clear: do not get involved in any aspect of property purchase or sale without getting fully up to speed on money laundering rules …. and be sure to register with HMRC.

 

2) Right to Rent

The High Court has recently held that the "right to rent" scheme (Immigration Act 2014) is incompatible with Articles 8 (right to respect for private and family life) and 14 (non-discrimination) of the European Convention on Human Rights (ECHR).

The Act requires landlords of residential properties to check the immigration status of prospective tenants and other occupiers, to be sure that those parties have the right to be in the UK.  So far it only applies in England and not the rest of the UK. 

The High Court held that the scheme caused discrimination by landlords, as some categories of people who were entitled to rent were finding it harder to find homes. The court ordered the following declarations:

• That sections 20-37 of the Immigration Act are incompatible with Articles 8 and 14 of the ECHR
• That, if the Home Office decides to commence the "right to rent" scheme in Scotland, Wales or Northern Ireland without further evaluation of its efficacy and discriminatory impact, it would be irrational and breach section 149 of the Equality Act 2010.

Despite the decision, landlords in England will still need to comply with the "right to rent" scheme, until the government amends the Immigration Act. It is also possible that the Home Office will appeal against the decision.

 

3) Competition law

We tend to think of competition law as only affecting major companies which conspire against the public by fixing prices.  But, in reality, smaller businesses can also be caught out when they engage in “friendly discussions” with competitors.  An interesting example has cropped up in the world of small-town estate agency.

On 27 February 2019, the Competition and Markets Authority announced that it is seeking the disqualification of two former directors of residential estate agents in Somerset that have already been fined £370,000 for breach of the Competition Act 1998.

The CMA fined Gary Berryman Estate Agents Ltd and Saxons PS Ltd for agreeing, with four other estate agents, to fix minimum commission rates of 1.5% for estate agency services in the Burnham-on-Sea area. 

One local estate agent, C J Hole, avoided a fine as it was the first company to confess its participation in the cartel.

The moral of this tale isdo not agree pricing with competitors. But if you do find yourself in this situation, make sure that you are the first to confess!

 

 

 

 

Main Article: When landlords fail to carry out repairs

It is a common complaint. A landlord is being unresponsive to a tenant who is asking for essential repairs to be carried out to their property. What can the tenant do? 

In law, the tenant has a number of options. The main one is to decide whether to carry out the repairs or to seek to require the landlord to carry them out. Which is more appropriate will depend on the terms of the lease, the scope, nature and cost of the repairs and all the facts and circumstances of the case, including whether the work required is of an urgent or emergency nature.

Unfortunately, there may not be a quick solution for a tenant with an unresponsive landlord. The tenant may prefer to avoid litigation, but this will not always possible.

• Landlord's obligation to repair

The Landlord’s repair obligations are contained in the lease and also arise by law:

a) Landlord’s obligations contained in the lease

These may cover any of the following:

• The main structure of the property.
• The external parts.
• The internal parts.
• The common parts.

b) Statutory obligations

Breach of a statutory obligation may not give the tenant any contractual claim against the landlord but may be a ground for claiming damages against the landlord or for applying for a mandatory injunction to require the landlord to carry out remedial works.

In the case of a lease of a dwelling granted for a term of less than seven years, section 11of the Landlord and Tenant Act 1985applies. This imposes a statutory obligation on the landlord to keep in repair the structure, exterior and installations for the supply of essential services.

• Evidence of the disrepair

The tenant should gather evidence of the disrepair.  This may include:

• • Details of the disrepair.
  • Details of the type and scope of repair required.
  • Likely costs of the repair.
  • Photographs of the disrepair or damage.

If the disrepair is serious or specialist expertise is required, the tenant should consider if it would be worthwhile obtaining a specialist report from, for example, a builder or heating engineer. 

In the first instance at least, the tenant would need to bear the cost of this.  While the report may form the basis of an expert report in any court proceedings, a simple report or a costed estimate will suffice at this stage.

The report may cover matters such as the following:

• The cause of the disrepair.
• The works to be carried out to remedy the disrepair.
• The manner in which the works should be carried out and if specialist expertise is required.
• The likely timescale for the works.
• The likely costs of the repairs.

If the tenant has suffered any loss or damage, the tenant should set out the details of the loss or damage and the likely costs of repair or replacement.

• Giving the landlord notice of the disrepair

The tenant should ensure that the landlord is on written notice of the breach of covenant and the need for repair.

Until the landlord has had notice of the disrepair and has had a reasonable opportunity to carry out any remedial works, it will notbe in breach of its obligation to repair. What is a reasonable length of time will depend on the circumstances and may include factors such as the type and scale of the repair.

The tenant should be prepared to allow the landlord or its agents access to view the premises.

Giving notice

The tenant should give the landlord formal notice in writing (letter or email) so that there is proper evidence that notice has been given. The notice should be dated and properly addressed to the landlord at the correct address. Where appropriate, notice should be given to the landlord's agents.

If it is only possible to give notice by telephone, a note of the telephone call should be kept, including the date and the details of the conversation. If possible, this should be followed up by a written notice to confirm the telephone call.

If the lease makes provision for the manner in which notice should be given, the tenant should comply with this.  The tenant should consider giving the landlord an appropriate, but reasonable, deadline for a response.

Action following the notice of disrepair

The tenant should do all the following:

• Keep a diary of events.
• Keep a copy of the notice given.
• Record the date on which the notice was given.
• Diarise when a follow up should be sent to the landlord.
• Make a note of any telephone conversation to report or discuss the repair.
• Be prepared to grant access to the property (if necessary and if requested).
• Note when any response comes in from the landlord.

Landlord's response

The timing and nature of the landlord's response will determine how matters progress. If the landlord seeks further details or information, the tenant should address this request by responding promptly.

If the landlord puts forward any proposals for any type of "without prejudice" meeting or discussions or for some type of alternative dispute resolution procedure, the tenant should consider this and respond accordingly.

A failure by the landlord to respond in a constructive way or at all will result in the tenant needing to chase up a response or deciding to take further alternative action.

• Tenant's remedies against the landlord

The tenant could carry out the repairs and then seek to recover the costs from the landlord by way of a deduction or set-off against rent due to the landlord.  Receipts should be provided to the landlord for all deductions made.

The tenant may consider this as a viable possibility in a number of situations:

• An emergency situation when urgent action is required to prevent further damage or injury to the building or to the property of the tenant, or to the tenant or some other person.
• Where the repair is small, easy and inexpensive to carry out, and the tenant has access to the funds to carry out the work.
• If the tenant has been waiting a long time and the landlord has failed to act.

This remedy is less likely to be appropriate if:

• The repair is required to the common parts 
• The landlord needs to carry out the repair to the building as a whole and this repair should be carried out as part of that overall repair.
• The repairs are expensive or particularly complicated and the tenant does not have access to funds to carry them out.

The advantage to the tenant is that this may result in a speedy solution to the issue and one that is also within the control of the tenant. The disadvantages with this process are if the tenant's repair is found to be faulty in some way or if the landlord challenges the amount withheld and takes forfeiture action for non-payment which the tenant has to defend.

The other options for the tenant to consider are:

• Raise court action against the Landlord for failure to comply with their legal obligations
• Withhold rent until landlord carries out repairs (this action carries legal risks and should not be done without legal advice)
• Terminate the lease (again, this action carries legal risks and should not be done without legal advice)
• Make a complaint to the local authority (e.g. to the environmental health department).

If the need for repairs is so substantial that the property is effectively uninhabitable, then the issues arising are rather different.  If there has been no fault on the landlord’s part (e.g. major flooding in the area), then the lease will probably come to an end under the legal concept of “frustration”.  On the other hand, if the property has become uninhabitable due to failures by the landlord, then the landlord will be responsible for the tenant’s reasonable costs, such as alternative accommodation.

Ultimately, there is no fast or simple way to deal with a landlord who is ignoring their repairing obligations.  But awareness of the various ways in which the law can support the tenant is key to arriving at a successful outcome.