Thursday, July 2nd, 2009
House sellers who get a Home Information Pack from an estate agent are being urged to ensure that the price isn’t being inflated by hidden charges or commission fees.
The warning from the Law Society comes after a Channel 4 News investigation found that some estate agents were adding more than £100 to the cost of a HIP. This is because many agents hire outside providers to supply the HIP and then add on a commission fee for themselves when billing the client.
Law Society President Paul Marsh said: “The cost of the HIP charged to the home seller by the estate agent could be much higher than necessary and more than the agent actually pays the HIP provider. Because of these hidden referral fees the estate agent is overcharging the seller and making a secret profit.
“Sellers should ask for details of the exact costs to discover if the agent is charging them more than they should be, and more than the HIP actually cost the estate agent. They should also ask if the estate agent is receiving a hidden commission from the HIP provider, which would mean the estate agents are keeping part of the cost themselves.
“If the agent is paying £300 to the HIP provider and then charging their client £400 the client is paying an extra £100 unnecessarily. With the other costs involved in selling, these added costs are unwanted extras.
“If sellers do find their agent is charging extra for their HIP they should ask their solicitor if they can provide a HIP instead, as solicitors are required to be fully open with their clients about fees. The added benefit of using a solicitor is that they are all strictly regulated and required to follow stringent rules, unlike estate agents.”
Please contact Sophie Warren if you would like more information about Home Information Packs.
Tuesday, May 19th, 2009
For the first time in two years landlords are now buying more properties than they are selling, according to research by the Association of Residential Letting Agents (ARLA).
Meanwhile, rental returns are holding up at just under 5%.
The ARLA Members’ Survey of the Private Rented Sector found that more than double the number of agents reported landlords buying properties in the first quarter of this year compared with the last quarter of 2008. ARLA believes the figures show that sentiment in the buy to let market is changing for the better.
This is in spite of the fact that ARLA members also reported an oversupply of properties caused by non-professional landlords entering the market simply because they have been unable to sell their homes.
Ian Potter, ARLA Operations Manager, said: “The data shows that there are bargains to be had in the property market at the moment for those with a keen eye. This substantiates our belief that buy to let remains a viable long-term investment vehicle.
“And whilst in general it appears that there is an oversupply of rental properties to let, this does not mean that in certain areas of the country there isn’t a shortage of property. It very much depends on the type of property, the experience of the landlord and the quality of advice they receive that makes the difference in identifying a good opportunity to invest.”
The ARLA quarterly survey showed that rental returns have remained consistent during the first quarter of the year. The return on flats remains the same as the final quarter of 2008 at 4.9%, while the return on houses has fallen slightly from 4.9% to 4.8%.
Mr Potter said: “With interest rates at an all time low the figures speak for themselves. Flats clearly offer a sound return on investment against saving rates, particularly if you’re not looking for quick capital uplift.”
It’s good to see that some confidence seems to be returning to the market after the turmoil of the last few years, although it is still too early to say whether or not the worst is over.
Investors should still tread carefully when choosing properties and, of course, they should ensure that they are aware of the legal requirements involved in buy to let.
For example, landlords need a licence from the local authority if they want to rent out homes of multiple occupation such as student flats. The Housing Act also places obligations on landlords to ensure their properties are safe, secure and free from hazards.
New investors may need to familiarise themselves with the tenancy deposit scheme which is designed to protect a tenant’s money from unscrupulous landlords. All landlords should ensure that tenancy agreements are properly drawn up to provide them with as much protection as possible should disputes arise.
Please contact Paul Slot for more information about any aspect of commercial property law.
Wednesday, May 13th, 2009
The Office of Fair Trading has begun a market study into the process of buying and selling homes to ensure that consumers are getting a good service.
The provision of Home Information Packs (HIPs) will be one of the areas coming under scrutiny. The study will examine competition on price and quality between service providers, particularly estate agents.
It will also look at the relationships between estate agents and mortgage brokers, surveyors, solicitors and other professional advisers.
The move has been welcomed by the Law Society which says a review that considers “the lack of transparency around the role, responsibilities and payment of estate agents, is desperately needed”.
The study will try to establish whether the existing regulatory framework strikes the right balance between protecting consumers and ensuring that the market remains competitive and innovative.
The Law Society president, Paul Marsh, said: “The Law Society has been asking for a review of this kind for over five years and it is clear that the lack of clarity regarding the legal obligations of estate agents in the market is a problem for all involved.
“There is a clear distinction between advertising properties for sale and the much more complex handling of detailed negotiations between a buyer and a seller.
“An independent review of HIPs has been needed since it was first introduced, we are extremely pleased that at last it is going ahead.
“Solicitors are highly regulated and the system has been reformed recently by the Legal Services Act. It is about time that everyone involved in the property market stepped up to an appropriate level of regulation for the benefit of the consumers and for fair competition.”
The OFT intends to complete its study before the end of this year. We shall keep clients up to date with developments.
In the meantime, anyone wishing to buy or sell a property should get legal advice from a solicitor to protect their interests and ensure everything goes smoothly.
Please contact Sophie Warren if you would like to know more about Home Information Packs or any aspect of buying and selling a property.
Saturday, April 25th, 2009
A landlord has won its appeal in a case which centred on whether or not a tenant’s notice to end a lease under a break clause was valid, even though it wasn’t acknowledged until ten months after the break date was reached.
The case involved a company which rented some commercial premises on a 15-year lease. The lease contained a break clause that allowed the tenant to terminate after five or ten years by giving six months’ notice.
The lease required that notices had to be in writing and unless they were acknowledged by the landlord, they had to be sent by registered post or recorded delivery.
The tenant decided to take advantage of the break clause in July 2005 and sent notices by both letter and fax. The letters were posted by a process server and placed in the wrong box and so were ineffective. The faxes were sent and received by the landlord but at a time when its offices were closed.
The landlord did not acknowledge receipt of these faxes until December 2006 – more than 16 months after the last possible day for serving a six months notice period and more than ten months after the fifth anniversary of the break date itself.
By this time, the tenant had vacated the premises despite protests from the landlord who said the notice was ineffective and began proceedings to recover rent.
The judge ruled in favour of the tenant saying that the acknowledgement of the faxes by the landlord, albeit several months after the event, had retrospectively validated the tenant’s notice. However, that ruling has now been overturned by the Court of Appeal.
It held that the informal notice sent by fax could only become valid once it was acknowledged, but that acknowledgment would have to be before the five-year break point had been reached. The notice could not be retrospectively validated by a later acknowledgment.
Lord Justice Rix said: “…it was too late for an acknowledgment once the break point had passed. However, I also think, but it is unnecessary to decide, that the requirement of a six months’ notice means that certainty must be achieved before the six months deadline and that a notice which is invalid or not yet valid at that time cannot become effective merely because its receipt is acknowledged thereafter.”
It followed, therefore, that the lease had not come to an end and could not do so under the break clause for another five years. In the meantime, the landlord retained the right to charge rent.
For advice on all commercial property matters contact Paul Slot.
Sunday, April 19th, 2009
Stricter regulations mean that Home Information Packs (HIPs) now have to be available as soon as a property is put on the market.
Sellers must also include a Property Information Questionnaire (PIQ) covering areas such as the property’s service charges, flood risk information, structural damage, gas and electricity safety and parking arrangements.
The PIQ is in addition to the other required documents such as the Energy Performance Certificate rating the property’s energy efficiency, evidence of title, the results of standard searches and the terms of sale.
Until now, sellers were allowed to request and pay for a HIP and then start marketing their property for up to 28 days before the HIP became available. The new regulations, effective from 6th April, mean that HIPs now have to be available from the outset and they must contain a PIQ.
The PIQ is also required for leasehold properties.
Please contact Sophie Warren if you would like more information about HIPs or any aspect of buying and selling property.
Friday, April 10th, 2009
A recent case in the Court of Appeal highlights the need for landlords to make sure they follow the provisions of the lease when making service charges.
Failure to do so has cost Leonora Investments Co Ltd £263,117. Leonora was the landlord of an office block in Croydon. In 2000 it let four floors to engineering consultancy Mott MacDonald.
The leases contained specific provisions for the payment of service charges. The Schedule of Services stated: “The Landlord will (unless prevented by causes beyond its control) prepare and send to the Tenant a statement of actual Service Costs and Service Charge for each Service Charge Year as soon as practicable after the end of such year and in the event of the Service Charge for the Premises exceeding the aggregate amount paid by the Tenant for such year the Tenant will pay the balance due to the Landlord within 14 days of demand and in the event of the aggregate amount being greater the excess will be credited by the Landlord by way of a set-off against the next instalment of Service Charge due from the Tenant.”
This set out a clear method of payment. However, the landlord then set about some substantial renovations to all four floors which it regarded as outside the normal service costs so it decided to send separate invoices outside the provisions laid down in the schedule.
The tenant refused to pay so the landlord sued.
The Court of Appeal has now ruled in favour of the tenant. In giving his judgment Lord Justice Tuckey said the issue boiled down to a simple question: what does the Lease say has to happen before the Tenant is obliged to pay Service Charge?” He said the answer was in paragraphs 1 to 3 of the Schedule dealing with Service Charges. “They prescribe the contractual route down which the Landlord must travel to be entitled to payment”.
This meant the landlord should have followed the provisions of the lease. In failing to do so it had lost the right to charge for the work.
The ruling may seem harsh but with so much at stake it is essential that landlords take legal advice before deviating from the exact terms of the lease.
For proactive advice on all lease matters contact Paul Slot now.
Wednesday, April 1st, 2009
Northern Rock is to increase its mortgage lending by up to £14bn over the next two years.
The nationalised bank plans to make £5bn available this year and a further £9bn in 2010. The Chancellor Alistair Darling says this is one of a series of moves designed to rebuild the banking sector and revitalise the housing market by making more mortgages available.
Some mortgages will be provided at up to 90% of the value of the property being purchased. The average value of new mortgages is currently £112,000. At that rate, the extra £5bn being made available this year could fund the purchase of 44,600 homes of average size.
Announcing the increased funding, a Government statement said ministers wanted to see a well functioning mortgage market where “lenders lend responsibly and borrowers have access to a wide range of mortgages that they can afford to repay”.
The extra funding from Northern Rock may not have a dramatic effect on the depressed property market but it is nevertheless a step in the right direction and gives some ground for optimism for those looking to buy or sell a house.
Both buyers and sellers who are thinking of re-entering the market may find that the system has changed considerably since the last time they moved home – mainly because of the introduction of Home Information Packs (HIPs).
HIPs are intended to simplify and speed up the process by obliging the vendor to provide potential buyers with important information such as the results of local searches and evidence of title as soon as the property is put on the market. This was the kind of information that each buyer used to have to find out for themselves.
Anyone selling a home regardless of its size must now provide a HIP for potential buyers.
Please contact Sophie Warren if you would like more details about HIPs or any aspect of buying and selling a house.
Friday, March 27th, 2009
A recent dispute between a homeowner and a builder has highlighted the fact that consumers are not necessarily bound by a contract if the terms are considered by the courts to be unfair.
This can apply even if the consumer has signed the contract confirming that they have read and understood it.
The case involved a homeowner who engaged a builder to add an extension to her bungalow. She signed a contract saying that if a dispute were to arise between them then it should be resolved in accordance with the Arbitration Act 1950. This effectively meant that rather than going to court, they would appoint an arbitrator to settle the matter.
A disagreement then arose over the cost of the work. When negotiations broke down, the builder sent a Notice of Arbitration. The homeowner refused to take part in appointing an arbitrator because she wanted the dispute to be settled through the courts. The builder appointed an arbitrator without her. The arbitrator later found in favour of the builder.
The homeowner refused to accept this and took the matter to court.
The case centred on provisions in the Unfair Terms in Consumer Contracts Regulations 1999. It states that: “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.”
The judge held that the arbitration clause was unfair because it was intended to remove the homeowner’s right to take legal action through the courts. It also created an imbalance between her as just a layperson and the builder as an experienced professional – particularly as she would have had to pay the arbitrator a fee of £2,000 to settle a dispute about a sum of only £5,000.
Of course, consumers should always read the small print and understand what they are signing because on most occasions they will be bound by the terms of the contract. However, when those terms are considered to be unfair as in this case, it is possible to take legal action and win.
Please contact Steven Kinch if you would like more information.
Wednesday, March 25th, 2009
A tenant has failed in her attempt to bring court proceedings for a second time in relation to a problem with dampness in her flat.
The court ruled that as the case had already been dealt with once it should be not be heard again and so was struck out.
The case involved Ealing Borough Council and one of its tenants. The tenant had experienced problems with dampness in her flat and so had started proceedings alleging that Ealing had breached its duty under the Landlord and Tenant Act 1985.
She did not produce any expert evidence as to the cause of the problem. The judge then found that there was no evidence of structural damage and the most likely cause of the dampness was condensation. The tenant’s claim therefore failed.
The tenant then tried to make a second claim, calling on expert evidence suggesting that the most likely cause of the dampness was the fact that there was no membrane under the floor. However, the county court struck out her claim on the grounds of res judicata – a legal principle that prevents courts from hearing the same case twice. It’s designed to ensure a finality to legal proceedings.
The tenant appealed to the High Court saying the principle should be set aside because the Landlord and Tenant Act 1985 placed a continuing duty on landlords to keep properties in good repair. Therefore, to continue with the principle would frustrate the will of Parliament.
The High Court dismissed her appeal, however, saying it was in the public interest that there should be a finality to litigation and there was no reason why res judicata should not apply to the Landlord and Tenant Act.
For advice on all property matters contact Paul Slot.
Sunday, March 22nd, 2009
The Government and property developers are making £400m available to help first time home buyers.
The figure is £100m more than originally planned and has been increased to meet the worsening economic climate.
The money will be distributed through the HomeBuy Direct scheme and should enable 18,000 people buy a home for the first time.
The scheme works by offering buyers an equity loan which can be used as a deposit and cover up to 30% of the purchase price. The loan is interest free for five years. The buyer provides the rest of the money by traditional methods such as a mortgage. The equity loan can be repaid at market value when the property is eventually sold.
The scheme is funded by the Government and 130 developers across the country. The equity loans would enable a person to buy a £180,000 house for as little as £126,000.
The loans are available to first time buyers with a joint household income of less than £60,000.
The scheme will hopefully help many people who might not otherwise be able to buy their first home. However, buyers should also ensure that they consult a solicitor to deal with the legal aspects of the purchase to ensure that all the necessary procedures are followed correctly.
Please contact Sophie Warren if you would like more advice on any aspect of buying or selling a home.
The list of sites containing homes available under the HomeBuy Direct scheme can be found at: http://www.homesandcommunities.co.uk/
© Copyright 2009 Burt Brill & Cardens Solicitors