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Which Flats Count Towards a Licensable HMO?

Licensable HMOs – rather an esoteric subject which turns out to be rather complex. As complicated as it is, a Landlord also has to get it right because failing to license an HMO carries draconian penalties:

  • A fine and costs – the legislation says up to £20,000 but prosecutions are generally brought for multiple offenses, so the biggest fine I have heard about personally was a Blexley Landlord who had to pay £110,000 + £5000 costs.
  • Rent Repayment Order – Tenants and Local Authorities are entitled to have their rent & Housing Benefit returned to them.
  • No Eviction Rights – If a property is unlicensed a Landlord cannot serve legal papers such as S21 Notice, or proceed with evictions.

I think that this illustrates that the issue is more than theoretical and Cotswold District Council established in Court :

This case brought by Cotswold District Council is of particular importance because it clarifies the ambiguous legislation that defines which storeys within a building should be counted when determining if a house in multiple occupation, or part of it, comprises three storeys or more.

A legal judgment on the case given on December 21st 2007 at Gloucester confirmed that a self-contained ground-floor flat at a property does in fact count towards the total number of storeys. This clarified a grey area within the legislation.

However 5 years later another court made what I consider an inconsistent ruling:

when counting storeys in a building for HMO purposes it is not necessary to consider other residential storeys unless they are actually part of the HMO being considered. It is necessary to consider business premises.

And now we have yet another oddity as the above cases relied upon 2004 Housing Act defines a Mandatorily Licensable HMO as:

a)the HMO or any part of it comprises three storeys or more;

(b)it is occupied by five or more persons; and

(c)it is occupied by persons living in two or more single households.

It additionally defines which parts of a building should be defined as a storey where there might be some doubt or argument as to whether they are included in the living accommodation:

3) The following storeys shall be taken into account when calculating whether the HMO or any part of it comprises three storeys or more—

(a)any basement if—

(i)it is used wholly or partly as living accommodation;

(ii)it has been constructed, converted or adapted for use wholly or partly as living accommodation;

(iii)it is being used in connection with, and as an integral part of, the HMO; or

(iv)it is the only or principal entry into the HMO from the street.

(b)any attic if—

(i)it is used wholly or partly as living accommodation;

(ii)it has been constructed, converted or adapted for use wholly or partly as living accommodation, or

(iii)it is being used in connection with, and as an integral part of, the HMO;

(c)where the living accommodation is situated in a part of a building above business premises, each storey comprising the business premises;

(d)where the living accommodation is situated in a part of a building below business premises, each storey comprising the business premises;

(e)any mezzanine floor not used solely as a means of access between two adjoining floors if—

(i)it is used wholly or mainly as living accommodation; or

(ii)it is being used in connection with, and as an integral part of, the HMO; and

(f)any other storey that is used wholly or partly as living accommodation or in connection with, and as an integral part of, the HMO.

These are the clauses which caused so much heartache in the previous 2 cases.

If you have an HMO with 2 principle storeys of living accommodation on the 1st and 2nd floor, but a private access stair from the ground floor, Local Authorities have been reading this as a 3 storey mandatorily licensable HMO. The situation translates directly to the specific example given in the Housing Act where it talks about counting a basement if it is the main entrance to the HMO, so I agree with that.

Link to Original Story

Original Story

However in an odd and contradictory development a recent judgement at Bristol Magistrate’s Court District Judge Zara ruled that a property on the upper two floors of a two story building, accessed by a private staircase leading from the ground floor is not a Licensable HMO. Bristol City Council believed that the layout at the premises was such that the ground floor hallway and first floor landing associated with the maisonette constituted a storey, thus making the premises liable to licensing. The judge however ruled that the areas concerned only formed part of a storey. The ruling means that Local Authorities that have two storey maisonettes with private means of access within their areas may now face claims for the return of licensing fees.

 

Renting Law Changes (April 2012)

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.
  • DHSS allowances for Housing Benefit (LHA) change dramatically.
    • The age limit of the Single Room Rate (SRR) rose from 25 to 35 years old. Anyone under 35 yrs will only get Bedsit LHA
    • The five bedroom Local Housing Allowance rate has gone so that the maximum level is for a four bedroom flat.
    • 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.

Guild normal logo

Pimlico’s Dolphin Square to Set Freehold Leasehold Law Precedent

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

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.

Further Reading:

Who are the winners at dolphin square?

Westbrook given leave to appeal for Pimlico’s Dolphin Square freehold

London Mayor Candidate Calls for Tenancy Law Change to Give 4 Years Tenant Security

Jenny Jones

Jenny Jones, Wikipedia

 

 

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.”

Pimlico Riots – London Tenants Arrested & Evicted

Rioter

Rioter

An example rioter – click on the picture to see more and if anyone recognises individuals in the photographs or has any information about the violence and disorder that has occurred they should contact the Major Investigation Team on 020 8345 4142. Alternatively anyone can report crime and provide information anonymously to Crimestoppers on 0800 555 111.

Police carried out raids on four flats in Pimlico and two 18-year-old men and a 29-year-old man were arrested on suspicion of burglary and violent disorder on the Churchill Gardens Estate. Searches of their properties recovered £1,600 in cash and thousands of pounds worth of Hugo Boss clothing taken from the Hugo Boss store in Sloane Square which was looted on Monday night.

A number of Councils and Housing Associations in London, Manchester, Salford and Birmingham say that they intend to evict tenants involved in rioting (and Grant Shapps has jumped in to back them, as has David Cameron)

A prayer vigil will be held from 2pm to 4pm today at Methodist Central Hall, in Storey’s Gate, in response to the current civil unrest. Given the national mood about the rioters they are going to need every prayer they can get.

Legal Ombudsman – How to Get Justice from a Dodgy Solicitor

I pursued an errant tenant for a year’s rent, finally 2 years later after using private detectives, and several contested court hearings, I finally won the case and all costs in the High Court, only to have the solicitor never release the funds from their client account & the funds were lost when the partnership dissolved. Apparently from various phone calls to the Law Society etc etc back then there wasn’t an awful lot I could do about it in practice, except be less trusting and more cautious next time.

Legal Wig

Guardian Story on Ombudsman Service

Last week there was a new Sheriff in town, a £20m body set up by Government to ensure that my sort of story cannot happen in a modern fair society. The Ombudsman service puts lawyers on the receiving end of justice aiming to deliver swift but fair decisions through a simplified complaints process.

Note: Legal Ombudsman is NOT the same as the The Legal Services Ombudsman – a service whose function it replaces, and a Quango which the Government announced that it was closing yesterday.

The Ombudsman service itself says:

Our job is to resolve legal complaints in a fair and independent way – we will not take sides.

• We are the Legal Ombudsman for England and Wales. We have been set up by the Office for Legal Complaints (our Board) under the Legal Services Act 2007. Parliament wanted to simplify the system and make sure consumers had access to an independent expert to resolve complaints.

• We opened on 6 October 2010.

• Our service is open to all members of the public, very small businesses, charities, clubs and trusts. Our service is free to these consumers.

• We can get involved in different types of complaints about legal services. Some examples are wills, family issues such as divorce, personal injury and buying or selling a house. There are many others.

• We are independent and impartial. This means that when we start to receive complaints, we will look at the facts in each case and weigh both sides of the story.

• We are not consumer champions or part of the legal profession, and we are also independent of Government.

• If we decide the service you received was unsatisfactory, we can ask the lawyer and the firm to put it right. We may also say that we think that your lawyer provided a reasonable service – if we think this, we will explain why.

Well that sounds good to me!

7 October 2010
Legal Ombudsman takes 497 calls and emails on its first day.

11 October 2010
Welcome Day, LeO welcomes its second wave of new team members as they arrive to start their training.

The ombudsman will be funded by a levy on lawyers and by additional fees paid when complaints are upheld, following a series of controversies about lawyers being regulated by bodies which were perceived as too close to the profession, and which followed a legalistic and in some cases lengthy process. The old system was tainted by the idea that they were the representatives of the profession not the consumer.

The scheme’s chief ombudsman is Adam Sampson, the former director of the homelessness charity Shelter, who says they expected to receive around 100,000 complaints each year. “We are hoping to resolve the majority in an informal manner and to do things quickly.”

The expectation of dealing with 100,000 cases a year is interesting when compared to the work of the first Ombudsman service which started on 2 January 1991. During the first decade of operation, that Ombudsman undertook 10,531 investigations:

Around 60% of the firms of solicitors in England and Wales and around 8% of practising barristers were subject of a complaint to the Ombudsman in that time.

Congratulations to the new team on preparing to deal with a caseload 100 times greater than the old system.

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