Property litigation weekly update – 15 October
This week we report on a recent Tribunal decision about Rent Repayment Orders, the BPF's call for investment in UK courts and eviction processes and anticipated guidance to help reduce the impact of Japanese Knotweed on property sales. Read on for Insight from our colleagues around the firm, positive news and the usual quiz.
Williams v Parmar & Ors  UKUT 244 (LC)
This case concerned an appeal by the Landlord against a decision by the First-tier Tribunal (Property Chamber) (FTT). At first instance, the FTT made six Rent Repayment Orders ("RRO") under Chapter 4 of Part 2 of the Housing and Planning Act 2016 against the Landlord in favour of the Tenants. The original rent repayment order was made against the Landlord as he had let six bedrooms of a property to the Tenants individually, on assured shorthold tenancies running for 6 months without having licence to do so.
The Landlord challenged the FTT's decision on the basis that they had awarded the Tenants 100% of the rent, crucially they were not challenging that the FTT had jurisdiction to make the Rent Repayment Order. The appeal was brought on the following grounds:
- That the correct rental period was not applied by the FTT in calculating the amount of the RROs and so the amount should be reduced (Ground A)
- The amounts of interest-only mortgage monthly payments paid by the Landlord should have been deducted from the amount of the RROs, since an RRO should only reflect the profit made by the Landlord from the commission of the relevant offence (Ground B)
- The FTT had insufficient regard to the Landlord's financial circumstances and state of health in determining the amount of the RRO (Ground C)
One each of the grounds, the Upper Tribunal (UT) found:
- Ground A failed as the Landlord had not raised the point before the FTT and therefore, the Tenants had no opportunity to address it in their evidence. Furthermore, had the point been raised before the FTT then the Tenants would have reasonably been able to adduce evidence to meet the point.
- On Ground B the argument by the Landlord changed during the course of the proceedings and instead became an argument that the FTT had failed in its approach by rejecting as irrelevant all factors other than those specified in section 44(4) of the 2016 Act. The UT found that the FTT had erred in its decision by construing its powers to narrowly to fix the amount of RROs. They found there is no presumption in favour of the maximum amount of rent paid during the period and the factors are not limited to those in section 44. In those circumstances, the UT should re-conduct the exercise of determining the amount in which the orders should be made.
- The Landlord admitted that it was not possible to say the FTT did not have regard to the right matters in taking into account the landlord's' financial circumstances, as the statutory provisions require and therefore, this ground was abandoned.
The RROs were reduced to 80% of the rent for five of the Tenants and 90% for the sixth Tenant who had an undersized room, following an evaluation of the Landlord's conduct. Where does this leave RROs? Applications will continue to turn on their facts with an assessment being made as to the seriousness of the Landlord and Tenant's conduct in comparison to other cases. The outcome may be harder to anticipate but close scrutiny of the facts remains the place to start.
The British Property Federation has called for proper investment in the UK courts and eviction processes to support upcoming tenancy reform
The long-awaited reform of tenancy law will see section 21 “no fault” evictions abolished and the strengthening of section 8 repossessions.
Reform will have a large impact on the emerging build-to-rent sector when it comes to managing disruptive tenants, but also in setting lease lengths in ASTs. The BPF said it is supportive of reform but added that it will require “significant modernisation and digitalisation of our courts” with funding in the upcoming comprehensive spending review.
It said: “If investment is to be protected it must be delivered hand-in-hand with government investment into the courts to ensure property owners and managers can deal quickly with a tenant who is proving to be disruptive, displaying anti-social behaviour and upsetting neighbours.”
The BPF has also recommended the reform retains fixed-term tenancies, while also streamlining and improving the grounds for repossession.
Government must ensure that investors have access to properties for refurbishment to help them achieve targets such as improving minimum energy efficiency standards, the BPF said.
Ian Fletcher, director of real estate policy at the BPF said: “The key aspect of reform for property owners will be the courts, which are not fit to support the government’s ambitions at present.” Fletcher said it is “unacceptable that court users rely on a system that in large part still operates with paper and can often involve happenchance as to whether a court official will be on the other end of a telephone”.
He added: “It will be hugely disappointing if the government seeks to deliver reform without the requisite investment to make it work properly.” Failure to create a new system that works for residents and owners “could jeopardise much-needed investment in new high-quality homes for renters across the UK,” he said.
Watch this space: Guidance on Japanese Knotweed to be published soon
RICS, with assistance from the Housing, Communities and Local Government Select Committee and DEFRA, is putting together new draft guidance intended to reduce the impact the presence of Japanese Knotweed has on a residential property sales and developments. The purpose of the guidance is to set out a framework to be followed by surveyors carrying out preliminary assessments of properties with Japanese Knotweed, to ensure sales proceed in a timely manner. The framework will also set out the appropriate initial mortgage lending or pre-purchase advice as well as establishing a system to flag the most serious cases.
Japanese Knotweed is an invasive plant species which, if untreated, can derail sales and even devalue properties. Homeowners are obliged to declare the presence of Japanese Knotweed upon sale and failure to do so can result in claim for misrepresentation. Nuisance and trespass claims may also arise if the knotweed affects neighbouring properties. It is known that the presence of Japanese Knotweed at a property can cause significant problems for sellers and the purpose of the guidance is to support the use of management plans for the treatment of knotweed to ensure that sales proceed smoothly.
The consultation ended in August this year and the final version of the guidance is intended to be published before the year end.
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