The month in Brief
Welcome to the August issue of the Technical Update. This month we take a look at the pros and cons of mediation and consider the legal aspects of solar panel installation for blocks of flats.
Meanwhile, the row over who should pay for combustible cladding to be removed rumbles on. A tribunal judge ruled in July that residents in Manchester must pay for removal while the government urges developers and freeholders to foot the bill but doesn’t offer to help with the costs.
In other news, the government missed the deadline for its promised Social Housing Green Paper; the Law Commission published proposals to provide a fairer deal for owners of leasehold houses; a consultation was launched on right to manage; and the B2R sector goes from strength to strength as the BPF announces a “big surge” in the number of homes in the pipeline and under construction.
As always we are keen to hear from our members, so if you want to share something join the [email protected] with title "IRPM Update Idea - FAO Marketing"
IRPM News
Risky business: the professional approach to resident safety | More than half of 2018 MIRPM cohort are women | Changes to Resource Hub
In the press
Will developers ‘do the right thing’ and foot cladding bills? | Law Commission proposes fairer deal for leaseholders | Brexit uncertainty could delay projects, says report | ‘Healthy homes zones’ proposed by Labour | What property reforms do UK renters and homeowners most want to see? | Knotweed is no big deal says new research
What’s new in HR
How stressed are your staff | CIPD Law on tour
Social Housing
Social Housing Green Paper misses deadline | Social landlords must understand health & safety obligations, says regulator
Health & safety
False gas safety certificates issued for rented flats
Fire safety
New alliance to improve UK fire safety testing | Global standards for fire safety in buildings launched
News from Scotland
Support for first time buyers in Scotland | Making Scotland’s buildings safer for people | Review of energy standards: call for evidence | Proposed register of controlled interests
PRS and B2R
Rental market set for further expansion says new report | New guidance on Client Money Protection Schemes | New B2R village in Brighton & Hove | A quarter of private rented homes are below standard says government report | How to rent guide updated – again | ARLA Propertymark launches licensing scheme database |Build to rent investors target Birmingham | L&G acquires biggest London B2R site yet
Legislation
Does RTM need reform asks Commission? | Inquiry launched into leasehold reform
Legal update
Avon Ground Rents Ltd v Child | Other recent must-read cases
Talking points
The future’s bright but is it solar? | RTM: change in the air?
Topic of the month - Mediation
Events
What’s happening when and where
IRPM News
Risky business: the professional approach to resident safety
Dame Judith Hackitt is calling for a new role of Building Safety Manager to be created. This role is already carried out by the professional property manager says Andrew Bulmer
Last month I wrote about the Four Elements of professionalism; technical competence, safety, customer focus and ethics/behaviours. And how professionalism breeds trust, which wins business. This month I'm looking at the safety element. And I'm guessing some readers are already turning off, but stick with me dear reader - I have written a happy ending.
A lifetime ago, the local H&S inspector visited my PRS/block management firm armed with a cunning plan. He'd twigged that, instead of visiting 100+ contractors to check their H&S, he only needed to come to me as the head contractor. No fool he! His message was simple; sooner or later something would go wrong and when it did, he would be asking difficult questions and if I wasn't actively managing risk I would be in very hot water, possibly at Her Madge's pleasure. More importantly, some innocent soul could be spending the rest of their days with a life-changing condition, or worse.
If you manage a site or instruct/control contractors, you are likely carrying H&S liability. Often our customers do not understand this. Nor do some developers, who hand over sites with minimal information. I also question if professional fees properly reflect this risk.
Dame Judith Hackitt focussed her review on fire safety, but the ramifications go wider. As this issue of the Technical Update goes to press, industry and government are debating the responsibilities of a potential new role, the Building Safety Manager. Maybe just for fire safety, maybe across the H&S piece. Dame Judith wants a named individual to be responsible for the safety of a building and its residents. And it could be you, if you are a property/building manager. Or maybe a separate specialist. Discussions are at the earliest stages and IRPM are at the table, so let's not set hares running just yet.
But here's my point. If the words "...and it could be you" make you think "I don't want that responsibility" then I have to say to you that under existing laws, you might already have it.
And that's okay. Because someone needs to be responsible for keeping people safe in their beds at night and who better than an IRPM professional? However, it needs to be done right. Professional risk assessments and solid H&S policies cost money. Then, your internal processes and training to implement those policies need to be robust and demonstrable. That costs too and the customer will end up paying for their safety through service charges/rents/fees. Be comfortable with that - it is the right thing. If there is one crumb of comfort from the horrors of Grenfell, it must surely be that we can have a sensible discussion about safety with our customers.
Safety is at the very heart of everything we do and that includes managing your own risk too. Customers should pay a fair and reasonable price for their safety. Within that fair price, you can manage their safety and your risk properly and then everyone gets to sleep at night. Being a professional means giving the right advice, educating your customer when necessary and being prepared to walk away from those that expect you to carry the risk while cutting corners.
Andrew Bulmer is CEO of IRPM
NEWSFLASH - Hold the date! The legendary IRPM Annual Seminar has outgrown another venue! So, on 13 June 2019, the industry will be gathering at the QEII Centre off Parliament Square, London for an extended programme of thought-provoking sessions from leading speakers. With a capacity for 700 and decent aircon, everyone should be comfortable this year! Tickets on sale this autumn - don't miss out!
More than half of 2018 MIRPM cohort are women
The IRPM is delighted that 52% of the latest cohort of property managers to achieve their MIRPM qualification are women. This compares favourably with other property professions. For example, less than 20% of RICS-qualified surveyors and less than a quarter of registered architects are women.
Passing the IRPM’s level 4 exams to gain the status of an MIRPM-qualified professional is proven to open doors for property managers and will become increasingly important in future as the government moves towards mandatory qualifications for those working in the leasehold sector. However, professionalism is about more than simply gaining a qualification and means keeping up-to-date with technical, legislative and legal issues as well as carrying out day-to-day activities in an ethical manner and keeping the needs of clients and end-users constantly in mind.
The IRPM works hard to support members in gaining their qualifications and logging their CPD by providing a wide range of training and CPD opportunities. Did you know that the Technical Update counts towards your CPD hours? Another good reason to keep reading and ensure your knowledge of what’s happening in leasehold is kept up-to-date.
Changes to the Resource Hub
The Resource Hub is now easier to navigate thanks to changes made in the last month to the online layout. The Hub exists to provide members with a single source of information about all aspects of property management and the leasehold sector. In the last two years it has expanded exponentially and in recent months had become increasingly difficult to navigate. In order to make browsing easier for members, in July the pages were overhauled and new sections added.
The Resource Hub is split into nine sections:
• Exam guidance
• Case Law
• Legislation
• Property management
• Finance
• B2R and PRS
• Maintenance
• Professional skills
• Professional bodies and blogs
Each section is packed full of links to must-read articles, research and technical information, so if you’ve never visited the Resource Hub, take a look.
In the press
Will developers ‘do the right thing’ and foot cladding bills?
In July, a tribunal determined that leaseholders living in 345 flats at Vallea Court and Cypress Place in Manchester will be expected to foot the £3M bill for the removal of potentially dangerous cladding on their blocks. They will also be expected to pay the freeholder’s legal fees and the cost of a waking watch.
The flats were developed by Lendlease on a design and build contract carried out by Shepherds Construction before being sold to property investor Pemberstone. According to Inside Housing, following a commitment from Barrett Developments, Legal and General, Taylor Wimpey and Mace to pay for work to remove cladding on blocks they have developed and built, one of the residents’ group at the Manchester blocks said: “It’s time now for Lendlease to step up and follow … other considerate contractors such as Mace and Barratt and put this right at no cost to leaseholders".
When asked whether the government would step in to help leaseholders who are facing huge bills for the removal of cladding, the Ministry of Housing, Communities and Local Government (MHCLG) said: “There is a moral imperative for private sector landlords to do the right thing and foot the bill for removing unsafe cladding, and not leave leaseholders to cover the cost.
The government has committed £400m to fund the removal of cladding in the social housing sector, but is not putting any money into the removal of the material from private blocks.
Law Commission proposes fairer deal for leaseholders
Radical new proposals to provide a fairer deal for leasehold homeowners have been announced by the Law Commission.
Following hot on the heels of plans by the Government to ban the sale of houses on a leasehold basis, the Commission has outlined a range of measures to help existing leasehold homeowners buy the freehold of their houses.
These include:
- options for changing the valuation formula, including setting the premium at 10% of the property value or ten times ground rent. Another proposed option is using the “market value” as per the current system, but removing the “marriage value” from the equation.
- making it easier for homeowners to buy the freehold.
- removing the requirement that leaseholders must have owned their house for two years before making a claim.
However, a prominent leasehold campaigner, Louie Burns, who is MD of lease extension specialist Leasehold Solutions, has slated the proposals, describing them as vague, unworkable and little more than “window dressing”.
Quoted by Property Industry Eye in July, Burns said:“Our main concern is that the document gives far too much weight to freeholders’ legal rights by promising to ‘keep in mind the interests of landlords who would be affected by reforms which lower the premium’ paid by leaseholders. The proposals are contradictory as any reform will create winners and losers but the Law Commission proposal suggests that compensation will still be in the landlords’ favour."
In September 2018, the Law Commission is to publish a consultation paper on enfranchisement. This will propose a new, single regime for leasehold enfranchisement designed to benefit leaseholders of houses and flats. The proposal will then be subject to full public consultation.
Brexit uncertainty could delay projects, says report
A new report from the Royal Town Planning Institute (RTPI), published in July and titled The impacts of Brexit on key EU legislation affecting land use, looks at the implications of Brexit for future implementation of EU legislation that impacts land use (source: Planning Resource).
The briefing paper, which has been produced in conjunction with the Institute for European Environmental Policy, says there could be "significant scope" for UK governments to adopt new approaches to Environmental Impact Assessments if no agreement is reached on European legislation in the current Brexit negotiations.
In that event, says the report, developers looking at the feasibility of future projects would face "significant regulatory uncertainty", raising the risk that "some potential project developers might choose to wait for a theoretically simpler and/or more favourable regime to emerge".
The document assesses the implications for nine EU directives affecting land use and planning against three possible outcomes following the UK’s departure from the European Union, scheduled for 29 March next year.
‘Healthy homes zones’ proposed by Labour
Plans to create ‘healthy homes zones’, as part of an effort to reduce housing-related health inequalities, have been proposed by the Labour Party, reported Landlord Today in July.
Shadow health secretary Jonathan Ashworth and shadow housing secretary John Healey have launched a consultation on the opposition party’s plans to link up health and housing. Under the initial plans put forward, the new ‘healthy homes zones’ will target areas with the worst quality housing, with new landlord licensing powers and penalties made available, along with the appointment of a "tsar" to report on progress and plans for a £50m housing and health inequalities fund.
Ashworth commented: “As part of our determination to narrow health inequalities and tackle the wider social determinants of poor health, we must again more closely align health and housing policy.” The MP said that housing related health problems are costing the NHS an estimated £1.4bn a year and poor housing “can ruin people’s lives”. The Chartered Institute of Environmental Health (CIEH) has welcomed the proposals to create “healthy homes zones” but called for more details.
What property reforms do UK renters and homeowners most want to see?
New research among more than 2,000 UK adults commissioned by London-based bridging lender Market Financial Solutions has uncovered the top policy reforms UK renters and homeowners would like to see introduced. The independent, nationally representative survey asked which property policies and initiatives the UK public would most like to see introduced. Presented with 11 policy proposals, respondents were asked to what extent they agreed or disagreed with the proposed reforms.
Respondents were questioned on the extent to which they supported 11 proposed property sector reforms, ranging from laws on gazumping to changes to Stamp Duty.
The research found:
- 55% of all Brits strongly support the introduction of new laws to prevent gazumping, with this number rising to 64% amongst those who own one residential property
- More than half (52%) of all people believe caps should be introduced to restrict the number, value or location of properties that can be bought by non-UK residents
- 49% of UK adults would welcome the introduction of a house tribunal system with the powers to review rent rises on individual properties - this jumps to 58% for those renting with no intention of buying a home over the coming 18 months
- 47% of those who currently own more than one property are against a cap being put on the number of residential properties owned by one person
- More than 62% of people with more than one property support the abolition of inheritance tax on property assets – this ranks as their top policy reform
- 52% of renters with no intention of buying a residential property support having council tax for rental properties paid by the landlord.
Uncovering the number of renters and home owners that currently make up the property market, the research also found that:
- More than half of UK adults (52%) own one residential property in the UK – equivalent to 26.92 million people
- Only 4% of the UK population own two or more residential properties
- 25% of Brits live in rented accommodation and have no intention of buying a property in the coming 18 months. This compares to 7% of Brits who live in a rental property and are planning to buy a home by 2020.
Download the full report.
Knotweed is no big deal, says new research
Japanese Knotweed, the bane of UK homeowners and mortgage lenders alike, has been given a clean bill of health by a new study reported in Telegraph Money this month, which suggests the plant is relatively harmless to buildings.
In July an Appeal Court Judge ruled that neighbours could sue if the “pernicious weed” invades their property (see this month’s Legal Update or go to the Resource Hub for more on this case).
However, new research carried out by the University of Leeds and engineers Aecom examined 68 homes with knotweed growing in the vicinity, quizzed surveyors and environmental experts as well as looking at 81 other sites and could find “nothing to suggest that Japanese Knotweed causes significant damage to buildings – even when it is growing in close proximity – and certainly no more damage than other species that are not subject to such strict lending policies”.
Read the full report here.
What’s new in HR?
Managing work-related stress as part of a prevention culture is a new white paper from the HSE that argues organisations need to take a proactive approach to tackling stress in the workplace.
The white paper promotes the HSE’s ‘management standards’ approach – a systematic approach to implementing an organisational procedure for managing work-related stress. It also promotes HSE's new Stress Indicator Tool survey software, designed to give you a scientifically robust insight into the six key areas of work design that, if not properly managed, are associated with poor health, lower productivity and increased accident and sickness absence rates.
To download the white paper and the stress indicator tool here.
This autumn, the Chartered Institute of Personnel and Development (CIPD) is running a series of employment law workshops, which may be of interest to property managers running their own businesses. This October, key topics up for discussion will include case law, avoiding unfair dismissal, dress code issues, GDPR lessons learnt so far and more.
Social Housing
Social Housing Green Paper misses deadline
The government has said it will publish its delayed Social Housing Green Paper “shortly” after missing its pre-Parliamentary recess deadline. No reason was given for the latest delay in publication of the paper, which was first promised by Sajid Javid in September last year. The former Housing Minister promised the Green Paper would be the most substantial report of its kind for a generation and would represent a “top-to-bottom review of the issues facing the sector” in the aftermath of the Grenfell Tower fire last year.
Social landlords must understand health & safety obligations, says regulator
In its sixth consumer regulation review, published in July, the Regulator of Social Housing (RSH) has urged social landlords to ensure they fully understand their statutory health and safety obligations. This message applies regardless of “whether stock is owned, managed or leased, said the RSH and where there are gaps in their knowledge, landlords must be prepared to take professional advice to ensure compliance. The RSH calls on landlords to maintain “robust systems to ensure compliance in the wake of last year’s Grenfell Tower fire, which has led to higher levels of health and safety work being carried out by social housing providers.
Health and safety
False gas safety certificates issued for rented flats
A gas safety engineer and a landlord were found guilty in July of falsifying gas safety certificates for a number of private rental properties in Essex.
Thames Magistrates Court and Snaresbrook Crown Court heard that landlord Tariq Hussain, of Walthamstow, induced engineer Muhammad Waseem, of Manor Park, to falsify four gas safety certificates for four flats in in Chingford.
The certificates would have been used to pass the boilers as safe for residents to use and given to Waltham Forest council when obtaining a licence to rent out property in the area.
Waseem was charged under the Fraud Act at Thames Magistrates Court. He was fined £1030 and will be removed from the register of certified Gas Safe engineers.
Tariq Hussain was fined £1600. According to a report in Letting Agent Today, Hussain’s wife has previously been found guilty of supplying false or misleading information after she stated that the four flats did not contain any gas appliances. She was fined £40,000, plus costs of £1,839.64.
Fire safety
New alliance to improve UK fire safety testing
UL LLC, a global safety science organisation based in the US, and the UK’s Fire Protection Association (FPA) , have signed a long-term partnership which aims to transform the testing and certification of facades and building envelope products within the UK. This will enhance the capability and broaden the scope of testing available to developers, social landlords, specifiers and manufacturers.
Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety called for major changes in the UK fire testing market. Significant revisions are expected to the current British Standard (BS 8414) cladding test following a detailed critique conducted by the FPA’s testing and research team earlier this year, commissioned by the Association of British Insurers (ABI).
Due to the increased capacity needed in the UK for cladding testing, this new partnership will be developing multiple new test rigs complying to the new updated standard, and these will be avail-able from early 2019. Currently the only large-scale testing facility in the UK is operated by the Building Research Establishment (BRE) and is booked up for the next six months. Other rigs are available in Dubai and Australia.
Global standards for fire safety in buildings launched
More than 30 organisations from around the world have united in a single group – The International Fire Safety Standards (IFSS) Coalition – to develop landmark industry standards to globally address fire safety in buildings.
Launched at the United Nations in July, the coalition consists of local and international professional bodies and standard-setting organisations, committed to developing and supporting a shared set of standards for fire safety in buildings.
The standards aim to set and reinforce the minimum requirements professionals should adhere to, to ensure building safety in the event of a fire. Once the high-level standards are developed, the IFSS Coalition will work with professionals around the world to deliver the standards locally. The standards will be owned by the IFSS Coalition and not by any one organisation.
Initially, the IFSS Coalition will set up a Standards Setting Committee that will draw on a group of international technical fire experts to develop and write the high-level standards to ensure they are fit for purpose across global markets.
News from Scotland
Support for first-time buyers in Scotland
Following consultation, a new tax relief came into force on 30 June to help first-time buyers in Scotland purchase their first home. Around 80% of first-time buyers will pay no tax after the Land and Buildings Transaction Tax (LBTT) First Time Buyer relief comes into effect. The change sees the zero-rated LBTT threshold raised to £175,000 for first-time buyers. Those purchasing property at a higher value will have their tax reduced by £600, meaning that around 12,000 first-time buyers will benefit each year.
Making Scotland’s buildings safer for people
A new consultation looking at Building Standards Compliance and Fire Safety in Scotland is seeking the views and opinions of stakeholders on a review of building and fire safety regulatory frameworks to help ensure the safety of people in and around Scotland’s buildings.
The consultation covers two main areas:
- the roles and responsibilities of people verifying, inspecting and certifying building work and strengthening enforcement of and compliance with building regulations.
- specific fire safety standards relating to external cladding and cavities, escape, the provision of sprinklers and the proposal for a "central hub" for verifying complex fire engineered solutions.
The proposed changes outlined in the consultation aim to:
- improve compliance with building standards during the design and construction of all buildings, with a particular focus on complex and high value public buildings, making them safer for occupants; and
- address fire safety related issues in relation to high rise domestic buildings and certain other residential buildings.
The consultation paper can be and the consultation ends on 26 September 2018.
Review of Energy Standards: call for evidence
A review of the energy standards of the Scottish Building Regulations is now underway and is considering the next steps to further enhance the energy performance of buildings and contribute to greenhouse gas abatement targets set under the Climate Change (Scotland) Act 2009.
The first stage of this review is to consider the effectiveness and impact that the 2015 energy standards, and the supporting guidance, had, or continues to have, on industry in delivering energy efficient buildings. Feedback received through this call for evidence will be considered in the next stage of the review.
The consultation can be accessed here with responses to be received by 14 September 2014.
Proposed Register of controlled interest
As part of the Scottish Government’s commitment to improving transparency of land ownership in Scotland, they have opened a public consultation on the proposed draft regulations (the Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) (Scotland) Regulations 2021) to establish a register of persons holding a controlled interest in land in Scotland.
The aim is to increase public transparency in relation to the individuals who control the decision making of landowners and tenants (of registrable leases i.e. over 20 years) in Scotland. It is proposed that such a register will ensure that there can no longer be categories of owners where, intentionally or not, control of decision making is obscured. This could include where the true owner is hidden behind corporate structures, which can sometimes be based overseas.
There is an intention for the Scottish Register to include trusts, partnerships and “associates” who are “responsible for the general control and management” of a property. Whether or not this would apply to managing agents who have a similar level of control is still to be determined, and is a point that is expected to generate some debate.
The deadline for the consultation is 8 November 2018.
PRS and B2R
Rental market set for further expansion
The Build-To-Rent (B2R) sector has grown significantly in the last few years, in particular up to 2016, and the largest volume of B2R is coming through in urban city centres with London leading the way, but there is also significant activity in Birmingham, Manchester and Leeds.
New research titled The Private Residential Rental Market Report - UK 2018-2022, carried out by AMA Research Analysis and Estimates, reveals that a recovering UK economy and increasing interest by both UK and overseas large institutional investors are key elements in the recent expansion of the PRS. Rising demand for professionally managed PRS accommodation has led to the emergence of large scale owners aiming to offer a bespoke, professionally run service to a large and growing market. Large institutional investors are now taking a larger share of the landlord market creating bigger schemes and driving supply.
Growth in the B2R sector has remained strong and there are positive forecasts over the next few years through to 2022 in volume and value terms of around 4-6% each year, reflecting a combination of rising house prices, stagnant wages and tighter mortgage lending, a shifting demographic balance – the growth of the so-called 'Generation Rent', shifting behaviour amongst the younger age groups, population growth, net migration of mainly younger adults and workforce mobility.
“The PRS industry and the BTR sector have grown significantly in the last couple of years, and this growth looks set to continue in the medium term, with the rental market expected to expand by over 1m households over the next 3-4 years” said Keith Taylor, Director at AMA Research.
“The trend towards increased private renting is expected to continue driven primarily by the younger ‘generation rent’ demographic, which is being targeted with appealing lifestyle-branded homes.” While the PRS is dominated by smaller private landlords – around 75% of private rented dwellings by value are owned by private individuals - many institutional and large corporate investors are showing increasing interest and institutional investors are expected to substantially increase their investment in the BTR sector over the next few years.
However, the research also finds that the planning system continues to present challenges to the viability and delivery of many PRS schemes. Housing associations and local authorities have also increasingly been looking to the PRS as a means of alleviating local housing shortages and subsidising reductions in central Government grant funding.
The British Property Federation says there are now 124,037 B2R homes complete, under construction and in planning across the UK.
New guidance on Client Money Protection schemes
The government has produced new guidelines on setting up client money protection schemes for the private rented sector.
The document outlines the government’s commitment to making it mandatory that property agents in the private rented sector holding client money obtain membership of a client money protection scheme. A consultation on the implementation of mandatory client money protection was issued in November 2017 and the consultation response was published in April 2018. The government intends that these agents be required to obtain protection by April 1 2019.
Click here to download the guidance.
New B2R village in Brighton & Hove
PRS owner-operator Moda and its joint venture partner Apache Capital have announced their first major project in the South of England and one of the largest build-to-rent (BTR) schemes on the South coast in Brighton. The nine acre site on Sackville Road shares a boundary with Hove station and is a short walk from the Brighton seafront. The proposed ‘urban village’ has capacity for up to 860 homes of mixed tenure as well as a substantial amount of employment space. Phase one is likely to consist 600 BTR homes and 20,000 sq. ft. of co-working space.
A quarter of private rented homes below standard, says survey
More than a quarter of homes in the private rented sector (PRS) are falling below the decent homes standard, according to the latest English Housing Survey published in July.
Under the standard, council or housing association homes must:
- be free from any hazard that poses a serious threat to your health or safety.
- be in a reasonable state of repair.
- have reasonably modern facilities.
- have efficient heating and insulation.
Houses and flats that don’t meet all of these criteria fail the decent homes standard
The report says that 47% of PRS properties did not conform to the decent homes standard in 2006 and 27% are still not up to scratch.
How to Rent guide updated - again
Landlords agreeing new tenancies or renewing an existing agreement must provide tenants with the latest version of the government’s How to Rent guide or risk leaving themselves exposed, as a section 21 notice is not valid unless the relevant guide has been given to the tenant. In light of this requirement, property managers should be aware that the MHCLG has updated the guide again, since a new version was published on 26 June, and ensure their clients are using the correct version. The guide is normally updated once every six – 12 months.
ARLA Propertymark launches licensing scheme database
A new database launched in partnership between ARLA Propertymark and proptech platform GetRentr, will make it easier for ARLA Propertymark members to keep up with changes to licensing schemes in their local area and ensure they are compliant with local requirements.
GetRentr automatically monitors property portfolios for compliance with all UK property licensing schemes. The new service holds information on schemes coming into force in the next month; those which are ending this month; and those which local authorities are consulting on and will come into effect in the near future.
Build-to-rent investors target Birmingham
Birmingham’s tallest residential tower is not being built by a housebuilder, but by a B2R developer as internal migration drives more young professionals out of London, according to new data from the Office of National Statistics. The ONS figures show that people are moving out of London at the highest rate since records began in 2011, with Birmingham being a top destination for many.
Johnny Caddick, managing director at Moda, which is creating a £2bn portfolio of city centre rental apartments across England and Scotland, said in July: “It’s not surprising that record numbers of people are moving to Birmingham. It’s now a global city with the amenities and international connections consumers and businesses demand. Investment around HS2 and commitment from firms like HSBC has underscored investor confidence in Birmingham and this is why investors are piling in.
“Birmingham’s economy can only grow if it attracts – and retains – the brightest talent and the city council knows that doing this requires high-quality, city centre housing. Build to rent is well suited to the city as it supports high density development and recognises that many workers value the time saving and hassle-free way of life companies like Moda plan to offer.”
L&G acquires biggest B2R site yet
Legal & General has announced that it has exchanged contracts on its largest Build To Rent (BTR) site to date located in Woolwich. The scheme has been acquired by co-investors Legal & General Capital and PGGM, as well as pension fund capital raised by LGIM Real Assets through its open-ended BTR fund.
The brownfield site, located near Woolwich Arsenal overground station is known as Macbean and is Legal & General’s third BTR scheme in London, with existing developments progressing in Walthamstow and Croydon.
Subject to planning approval, the scheme is projected to deliver over 650 new homes, together with 21,000sqft of commercial space and a new public square. The development will comprise both private and affordable rental homes, split between London Living Rent and Discount Market rent.
With a total B2R pipeline of around 3,000 homes across nine schemes countrywide, Legal & General aims to have 6,000 homes in planning, development or operation by the end of 2019.
Legislation
Does RTM need reform asks MHCLG?
The Ministry for Housing, Communities and Local Government (MHCLG) has tasked the Law Commission with looking in detail at the existing legislation around right to manage under the Commonhold and Leasehold Reform Act 2002.
To use the right, leaseholders must set up a company and follow certain procedures. However, issues with the law have meant that uptake of the right to manage scheme has been low. In 2014, the CMA estimated that there were just 4,500 RTM companies. And those that have set them up have found have found themselves facing further administrative burdens and court procedures in order to acquire the right to manage.
As a result, the Law Commission will look again at the law and come up with reform recommendations to improve how it works in practice. The 12-month project started in July and a public consultation on provisional proposals will be launched later in the year.
Inquiry launched into leasehold reform
In December 2017 the Law Commission announced that it was to start a project on residential leasehold and commonhold as part of its 13th Programme of Law Reform.
The residential leasehold and commonhold project aims to improve consumer choice, provide greater fairness, and make the process of enfranchisement easier, quicker and more cost effective.
On 24 July, the Housing, Communities and Local Government Committee launched an inquiry into the Government’s leasehold reform programme.
The inquiry will focus on how existing leaseholders of both houses and flats who face difficult or unfair leasehold terms (such as rising ground rents) can be supported.
The inquiry will also examine progress made on leasehold reform which follows the conclusion of the Government’s consultation on tackling unfair practices in the leasehold market in 2017.
The Committee is particularly concerned with what can be done for existing leaseholders of both houses and flats.
The Committee is inviting submissions on:
- the effectiveness of the Government’s programme of work on residential leasehold re-form, in relation to existing leaseholders and also whether any further reforms should be introduced.
- the support and Government intervention which could be provided to existing leasehold-ers who are affected by onerous leasehold terms.
- the implications of providing support and Government intervention to those existing leaseholders.
Submissions can be made to the Committee by Friday 7 September.
A detailed consultation is due in September to develop a new enfranchisement regime in respect of leasehold houses and flats.
Legal Update
Mark Loveday looks in detail at a service charges case which involved both the FTT and the County Court
In the recent case of Avon Ground Rents Ltd v Child [2018] UKUT 204 (LC), Holgate J (Chamber President), heard on 20 June 2018, the landlord issued a county court claim to recover unpaid service charges.
The county court transferred the claim to the First-tier Tribunal (Property Chamber) under the Commonhold and Leasehold Reform Act 2002 s.176A. The tribunal judge dealt with the application but at the end of the hearing indicated he would use his county court jurisdiction (purportedly conferred under the Residential Property Dispute Deployment Pilot scheme) to deal with costs.
The judge awarded the landlord half of its costs. The landlord appealed, arguing (1) the F-tT had no jurisdiction to deal with costs, and (2) a judge sitting as both an F-tT judge and a County Court judge had no power to make a court order giving effect to the tribunal’s decision.
At appeal the question was asked whether or not the tribunal did indeed have jurisdiction to decide the legal costs? The decision was made that, no, the pilot scheme did not affect the underlying statutory provisions governing the respective jurisdictions of the tribunal and the county court. The tribunal had no statutory or inherent power to determine costs and jurisdiction could not be conferred on it by agreement. In a case transferred from the county court, its jurisdiction was confined to the question transferred (see Cain v Islington LBC [2015] UKUT 117 (LC)).
The scope of the questions transferred depended on the terms of the transfer and whether the matter was one the court was permitted to transfer under s.176A(2). The pilot scheme contemplated that once the tribunal determined the substantive issues transferred to it, the tribunal judge could then sit alone as a County Court judge to determine costs, but that was not what had happened in the this case. The costs decision had wrongly been made by the tribunal - not the court.
It was also decided that a tribunal judge sitting as a county court judge could give effect to the tribunal’s determination in an order under s.176A(3) of the 2002 Act. It was unnecessary to use the s.176C enforcement route in relation to a case transferred to the tribunal under s.176A (paras 61-62).
For future guidance, where cases are transferred from the county court to the F-tT, care must be taken to ensure the transfer order identifies all the matters being transferred, and that those matters are within the tribunal’s jurisdiction and within the scope of the county court's power to transfer. The judge must also be very clear about which role is being performed.
Practical Points for property managers
Managing agents and their advisers often find it frustrating to pursue leaseholders for money, given that some claims are within the exclusive jurisdiction of the courts (such as ground rent arrears) while other claims, such as service charges, are dealt with by residential property tribunals.
One response of the English court system to this has been the Property Dispute Deployment Pilot scheme (often known as ‘double hatting’) where a tribunal judge sits concurrently as a judge of the county court under powers given by the Tribunals, Courts and Enforcement Act 2007.
The pilot project has been running in several parts of the country since 2016, but there are no published rules or any Practice Direction governing it. This case highlights that the parties (and their advisers) should take care to ensure the relevant tribunal judge has been given complete jurisdiction by the county court to decide all matters in dispute before agreeing that a dispute should proceed under the ‘pilot’ scheme.
Mark Loveday is a leading Barrister with Tanfield Chambers specialising in leasehold management and enfranchisement work
Other recent must-read cases
Network Rail Infrastructure Ltd v Williams [2018] EWCA Civ 1514, Court of Appeal (Civil Division)
On 3 July 2018, a landowner was found liable in nuisance for permitting the spread of Japanese Knotweed onto neighbouring land. A full case analysis will appear in the next bulletin.
Talking points
The future's bright, but is it solar?
Yashmin Mistry urges property managers to carefully consider the legal aspects of solar panels on residential blocks
At first glance, there are clear benefits for residential blocks in having solar panels installed on the roof: cheap electricity; the opportunity to sell excess electricity back to the grid; doing your bit for the planet. Government subsidies are even available for installation.
However, if this is something that one of your clients may be considering it is important to take a step back. Initially there will be technical issues around planning permissions and the suitability of the roof for the installation but there are also legal implications to take into account.
First, consider the lease. Most solar panel installations will be installed on the roof. The lease should identify which parts of the block belong to the leaseholder and which have been reserved to the landlord. The lease will usually contain a plan providing further illustration(s) which may be helpful in identifying who is responsible for the installation location.
While most leases permit a landlord to recover a service charge cost for repairs, it is more unusual for leases to allow recovery for works classed as “improvements”. There is no single test to determine whether particular works are improvements or repairs. The most useful guideline is: “is the repair so radical and extravagant as to amount to creating a new thing in place of what was there and not a mere replacement?” It seems likely the courts/tribunals would decide solar panel installations are “improvements”, subject to the lease provisions. Generally, service charge clauses are read restrictively and only permit the recovery of expenditure if the lease permits it. So, improvements will not be recoverable without clear words to that effect.
Next, it is important to consider who will be responsible for maintenance? It is unlikely the lease will incorporate provisions and variations may need consideration. Also, the installation is likely to be connected to the mains. Does the lease contain provisions for the running of cables around the development?
Invariably leaseholders will proceed on the basis that any “returns” will help baluster the reserve fund. The lease should be checked to see if, first, it contains provision for a reserve fund and second, whether the reserve fund permits such “returns” to be accumulated (unlikely).
So whilst the idea of solar panel installations may sound attractive due to the potential returns, given the above legal consideration, the process may not be so simple. As ever, taking independent professional advice is absolutely essential. In summary, solar panels may bring sunshine to your block. But without an experienced surveyor and solicitor on your side, a number of dark clouds may follow.
Yashmin Mistry is Partner and Property Practice Group Leader at JPC Law.
t: 020 7644 6098
www.jpclaw.co.uk
Cassandra Zanelli looks at a recent case that could signal a new approach to RTM in advance of the Law Commission review
In July, the Law Commission announced that it is to review the provisions of the Commonhold and Leasehold Reform Act 2002 that give leaseholders the statutory right to assume the management functions in relation to their building. Consultation papers will be published in the autumn.
At present, residents will only qualify for the right to manage subject to meeting certain criteria and by following the correct process. The procedure that must be followed is prescriptive and property lawyers always advise that any deviation from the process is likely to kill their claim stone dead.
At least that was always the case until last year’s decision of the Court of Appeal in Elim Court RTM Company Limited v Avon Freeholds Limited. In this case, the Court of Appeal considered the consequences of a failure by the right to manage company to comply with the statutory requirements and the decision was a little surprising.
The appeal in Elim Court turned on three points. The notice inviting participation failed to meet the requirements of the legislation because it said that the Articles of Association would be available for inspection on Monday, Tuesday and Wednesday with no mention of Saturday or Sunday as specified. This failure was referred to as the “Saturday/Sunday issue”.
The second failure gave rise to the so called “intermediate landlord” issue, because the RTM company had failed to serve a claim notice on an intermediate landlord of one of the flats.
The third “signature of the claim notice” issue relates to the signing off of the notice. So far as the signature of the claim notice was concerned, the document had been signed by an individual, who signed the document as “RTMF secretarial, company secretary”. The company secretary was itself a company, and this gave rise to the landlord’s argument that in order for the company secretary to sign those claim notice, it should not have been signed by the individual, rather than having been signed as the corporate entity.
Given how pernickety the Courts and Tribunals have been in adhering to the mandatory requirements laid down by the Commonhold and Leasehold Reform Act 2002, the Court of Appeal was expected to hold that these failures to adhere to the rules invalidated the right to manage claim. However, that was not the decision reached by the Court.
- On the Saturday/Sunday Issue, the Court agreed that the RTM company had departed from the requirements under the Act and agreed that there was no justification for this, but nonetheless found that the failure to comply precisely with the requirements did not invalidate the notice as a whole.
- On the Intermediate Landlord issue, the Court found that the RTM Company’s failure to serve a claim notice on an intermediate landlord of a single flat did not invalidate the claim.
- On the Signature of the Claim Notice issue, the Court of Appeal was in complete agreement with both the LVT and Upper Tribunal that the signature has not invalidated the claim notices.
Comment was made that where a provision could be interpreted two different ways, the preferred interpretation is the one which concludes that the notice is valid. Interesting comment….
So does this decision signal a more generous approach to the statutory requirements of RTM Companies than has previously been the case?
What is clear, and what was commented on at the end of the judgment by Lewison LJ is that the procedure for the acquisition of the right to manage is in dire need of simplification. The forthcoming review may have the effect of simplifying the processes and procedures and giving greater clarity for the benefit of both landlords and RTM companies, and in doing so reduce the ever present threat of technical challenges. Only time will tell and the consultation will no doubt be of interest to everyone involved in the RTM process.
Cassandra Zanelli is a property lawyer and partner of Property Management Legal Services
Topic of the month - Mediation
Is the First Tier Tribunal the answer to property disputes?
Not always, says Gordon Monaghan, who makes the case for considering mediation before resorting to litigation
Issues around service and administration charges are ripe for dispute between landlord and tenant, particularly in relation to long leases. The topic of service charges has attracted much attention over recent years in light of the Supreme Court decision in Arnold v Britton & Others [2015] UKSC 36. In this case the court held that the proper construction of a service charge clause meant that by 2072 each tenant could be paying a service charge of £550,000 per annum.
Property managers are often the first point of contact in terms of any dispute between tenants and landlords, and can hold great sway in terms of how the dispute should be resolved both in terms of the manner and tone of the proposed resolution.
When disputes relating to service and administration charges arise, the parties involved often turn to the First Tier Tribunal as a means of resolution. However, this is not always the best solution. Pursuing a determination from the First Tier Tribunal often entails instructing solicitors, incurring associated costs as well as the time that it takes in terms of pursuing/defending litigation. It also means that the landlord and tenant are surrendering their ability to decide the level of relevant charges by handing over the decision-making process to the Tribunal, which will only have a snapshot view of the position. In addition, it is highly likely that litigation will significantly harm the relationship between the landlord and the long-term leaseholder.
The mediation solution
For all of these reasons, it is becoming increasingly common for landlords and tenants to resolve their disputes by mediation rather than through litigation. Where a property manager is involved in a situation where a landlord and a leaseholder are in dispute there are sound reasons for advising them to go down this route rather than automatically taking the case to the FTT. And if mediation fails, the FTT will still be there as a last resort.
In commercial mediation both parties agree to appoint an independent third-party mediator to facilitate the settlement. This process is confidential and without prejudice, which means that nothing mentioned in the mediation can later be referred to should litigation eventually become necessary. Attendance is voluntary, but once agreement is reached at mediation, that agreement is recorded in writing and is binding between both parties.
There are number of advantages that are worth pointing out to clients and residents that find themselves in dispute:
- Cost - mediation is almost always significantly cheaper.
- Flexibility – any agreement reached via mediation can be flexible and accommodate all ar-eas of difference between landlord and tenant; something that the FTT cannot necessarily do.
- Ownership - both parties have ownership of the agreement reached, unlike a Tribunal de-cision, so at least one of the parties is less likely to feel aggrieved or dissatisfied.
- Building bridges - mediation can also assist in repairing any harm done to the relationship between the tenant and the landlord.
Choosing a mediator
Once you have decided to go down the mediation route, it’s advisable to ensure that your mediator is properly trained by a training provider accredited by the Civil Mediation Council such as the Centre for Effective Dispute Resolution (CEDR).
How does the process work?
The next step is identifying a date that all parties including the mediator can make. On the day of the mediation itself, there will usually be an opening meeting that involves all parties, allowing the mediator to explain the process and ground rules. Each party then has the opportunity to run through the most important parts of their side of the dispute. The parties then go into different rooms with the mediator going backwards and forwards to hold separate exploratory sessions in which the mediator works to understand each party’s version of events, exploring possible solutions and settlement options. The final terms of settlement are then recorded in writing.
While the above focuses on disputes between tenants and landlords, the principles are equally applicable to situations where a tenant may have a complaint directly against their property management company.
In an ideal world, disputes will always be avoided. In reality it can be impossible to avoid them. Getting any dispute resolved quickly and to the satisfaction of both sides is the goal and in many cases mediation can achieve this without resorting to costly and time consuming litigation.
Gordon Monaghan is a dispute resolution solicitor with Fairlead Mediation, with more than 15 years’ experience of working with both commercial and private clients. He has a particular interest in disputes relating to property; he is a CEDR accredited commercial mediator and a member of The Property Lawyers Association.
Events
15 August 2018 - Associate Exam Workshop - London
16 August 2018 - Associate Exam Workshop – London
04 September 2018 – Associate exam - Glasgow
11 September 2018 - Associate Exam in London & Birmingham
13 September 2018 – Regional Seminar - Brighton
26 September 2018 – AGM
02 October 2018 – Regional Seminar - Birmingham
03 October 2018 - Member Exam Workshop - London
04 October 2018 - Member Exam Workshop – London
10 October 2018 – Regional Seminar – Bristol
23 October 2018 – Regional Seminar - Manchester
30 October 2018 - Member Exam in London & Manchester
01 November 2018 – Regional Seminar - London
Just announced
13 June 2019 - IRPM Annual Seminar, QEII Centre, London
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