Apart from the passing of the 1988 & 2004 Housing Acts by Parliament I have never experienced such a collection of changes to renting a flat all in one go. The following Legislation has just become effective (April 2012).
Tenancy Deposit Protection information must now be provided within 30 days or you may be fined and invalidate your right to evict a Tenant by issuing a S21 notice.
An EPC must be commissioned before a property can be marketed and the EPC must actually be issued within 7 days of marketing.
In 2018, rental properties with the two lowest EPC scores are due to be banned from the market, meaning that landlords must have improved them by then.
Local Housing Allowance rates are reduced so that about 3 in 10 properties for rent in the area should be affordable to people on Housing Benefit, rather than every 5 in 10 properties as before.
Local Housing Allowance weekly rates in any area cannot exceed:
£250 for a one bedroom property
£290 for a two bedroom property
£340 for a three bedroom property
£400 for a four bedroom property
Local Housing Allowance (Housing Benefits) will be set in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI)
Small-shared houses or flats occupied by between 3 and 6 unrelated individuals who share basic amenities were reclassified under planning laws from “C3 Dwelling Houses” to “C4 Houses in Multiple Occupation“. Depending in which part of the country you are you may need Planning Permission to rent these.
So from today the tenancy agreements that you use should be different to the ones that you used to use. The way that I keep up to date with legislation is through my membership of the Guild of Landlords which costs me £80 p.a. and provides me with current documents and a legal advice line to advise me on their use. I chose the Guild because it was strongly recommended to me, and I appreciate the personal nature of the organisation. However the other landlord organisations have their own supporters, and I don’t think that it is important which one you join, just that you do join one of them.
It’s not normally my place to blog about legal precedents, but this case is so relevant to Pimlico, Property, and Flats (the themes of this blog) that I couldn’t resist reporting an unusual legal judgement about one of the most contentious property estates in the country – Pimlico’s Dolphin Square.
Dolphin Square, Pimlico (Westminster London SW1)
Dolphin Square is a massive central London complex of 1250 luxury flats that is home to dozens of MPs, peers, judges, lawyers, QCs and senior military officers, and where Oswald Mosley, Harold Wilson, Christine Keeler, Charles de Gaulle, CP Snow, Donald Campbell, and Princess Anne once lived.
For decades it was one of the biggest scandals in the UK’s housing history – the block, paid for with public money, was run for the benefit of a few wealthy individuals. Social Housing for Millionaires in a borough with thousands of homeless and overcrowded families.
In order to rid itself of it’s political embarrassment in 2004 Westminster City Council sold its 27-year head lease of Dolphin Square to US private equity investor Westbrook Associates for a BMV of £176.5 million. I wonder whether even then Westbrook had it’s Machiavellian plan to acquire the freehold in mind?
Leasehold Flats Can Buy their Freehold
Westbrook has been publically aiming to buy the freehold since 2007. The Leasehold Reform Housing and Urban Development Act 1993 (as amended by the Commonhold and Leasehold Reform Act 2002) gives tenants the right upon qualification to compel the sale of the freehold of the building or part of the building. Description of the process of buying the freehold of leasehold flats. The intention of this legislation was to enable individual flat owners to club together and break free from aggressive landlords.
The law was never intended to allow predatory head lessees to acquire freeholds for less than their market value, however Westbrook has taken advantage of the oddity that Dolphin Square has always been entirely let, either on decades-old regulated tenancies or assured shorthold tenancies but not on long leases so there are no leaseholders. The company was able to create 612 Jersey-listed companies, and sell each of them one or two Dolphin Square flats on 26-year leases, and then serve the Freeholder with a notice to enfranchise those leases. The owners of leases of more than 21 years have the right to buy the freehold, subject to no one leaseholder owning more than two flats. Changes in the 2002 act that were intended to help big London blocks enfranchise, even if many owners were subletting, abolished the ‘residency test’, which required occupation of a flat to qualify for enfranchisement.
The Freeholder is the life assurance company Friends Provident, who are not happy at this ruse.
‘We do not believe that the law was intended to allow foreign private equity investors to compulsorily acquire on the cheap a major asset of a British life assurance company that has held the property as one of its core investments for more than 70 years, the price offered to us in the legal notice compares unfavourably with the average £250,000 for which Westbrook sold the 1,200 flats held on 27-year leases to its 612 Jersey-based associated companies.’
Leaseholder Freeholder Legal Battle
Westbrook and Friends Provident are fighting it out at the Leasehold Valuation Tribunal, the Lands Tribunal, the Court of Appeal, and most likely the House of Lords as well. In 2009 the company brought a claim, but a week before the trial it pulled out, claiming it was because of “unfavourable market conditions”. In a second attempt, the company served a new notice in 2010, valuing the freehold at £111.6m – a £13.8m increase on the 2007 valuation. Friends Provident, which currently owns the freehold, has argued that the claim should be struck out given that Westbrook already abandoned its earlier claim. Giving his judgment last month, Mr Justice Arnold said that although enfranchisement laws allow the bringing of successive claims for enfranchisement, they do not allow the bringing of successive claims to be entitled to exercise the right to collective enfranchisement.
“I recognise that it is a strong thing to prevent a party from obtaining the court’s determination of what is accepted to be a reasonably arguable claim. However, Westbrook had a full opportunity to obtain the court’s determination in the previous proceedings, by bringing the previous claim, Westbrook caused Friends Provident and the courts to expend time and resources to deal with the claim. It chose to discontinue that claim shortly before trial. In my view, it both could and should have pursued that claim to trial to establish the entitlement of special purpose vehicles to exercise the right of collective enfranchisement if it wanted to maintain that entitlement.”
The High Court ruling is that the claim to use enfranchisement laws in relation to the 1,250-flat block “amounts to an abuse of process” and must be “struck out”, however on Monday afternoon, Mr Justice Arnold granted Westbrook permission to appeal the decision because the case raised an “issue of principle” that should be determined by the Court of Appeal.
Following the National Housing Federation report into the national housing crisis, Jenny Jones – the Green Party Mayoral Candidate for London – has called for a change to tenancy law to give tenants the right to stay in their home for 4 years.
With more and more Londoners reliant on the private rented sector Jenny Jones is calling for them to have greater security.
The report predicts that:
In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.
In London, the majority of people living in the capital will rent by 2021 with the number of owner occupiers falling from 51.6% in 2010 to 44% by 2021.
The average house price in England will meanwhile rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016.
Average rents in the private sector will increase sharply by 19.8% over the next five years fuelled by high demand and a shortage of properties.
Jenny Jones said:
“Home ownership in London has been in decline for a decade, dropping from 60% to 52% of households. This means that more and more Londoners rely on one of the most insecure rental sectors in Europe, where tenants are unable to resist rent hikes and are scared to challenge slum landlords.”
“Ireland is more enlightened - after six months you get an automatic right to stay for another three and a half years and landlords need a good reason to evict you. In the UK you can be kicked out with two months’ notice and the landlord doesn’t need to give you a reason. We urgently need to protect London’s private tenants, whether they live there by choice or because they’re priced out of home ownership.”