Determining validity

In recent months, there have been a number of changes to the law which impact short-term lettings and long residential leases.

First, in relation to short-term lettings, section 97 of the Anti-social Behaviour, Crime and Policing Act 2014 (ABCPA 2014) came into force on 20 October 2014, creating a new mandatory ground (ground 7A) for possession of a property let on an assured tenancy. The court must grant possession under ground 7A if any one of five conditions is met.

Condition 1, 2 or 3 will be met if the tenant,
a member of the tenant’s household or a person visiting the property has been:

• convicted of a serious offence and the offence was committed on or after 20 October 2014; or
• found by a court to have breached an injunction obtained under section 1 of the ABCPA 2014 (which relates to anti-social conduct); or
• convicted for breach of a criminal behaviour order obtained under section 22 of ABCPA 2014.

The offence or anti-social conduct must have been committed in, or in the locality of, the dwelling-house, or have affected a person with
a right to live in the locality of the dwelling-house, or the landlord or a person connected with the landlord’s housing management functions.

Condition 4 will be met if the tenant’s property has been closed under a closure order obtained under section 80 of the ABCPA 2014 as a result of anti-social behaviour in or near the property, and the total period of closure (under the order or under a preceding closure notice) was for a continuous period of more than 48 hours.

The fifth and final condition will be met if the tenant, a member of the tenant’s household or a person visiting the property has been convicted for breach of a notice or order to reduce their noise in relation to the tenant’s property under the Environmental Protection Act 1990. Again,
the offence must have been committed on or after 20 October 2014.

Invalid notices

In relation to short-term lettings, the Court of Appeal received the case of Charalambous and another v Maureen Rosairie NG and another [2014] EWCA Civ 1604 in December 2014. In the case, the court considered whether a notice under section 21 of the Housing Act 1988 seeking possession
of a property let under an assured shorthold tenancy was valid if, at the time it was served,
a security deposit paid in respect of the tenancy
was not protected in accordance with the statutory scheme provided under the Housing Act 2004.

The Court of Appeal held that because the deposit was received by the landlord before the tenancy deposit scheme came into force, the landlord was not subject to any of the penalties specified by the legislation for failing to register
the deposit or give the tenant the information required.

While the landlord was not directly obliged to register this deposit because of the time it had been received, the landlord could only serve a section 21 notice if the tenancy deposit was protected at the time of service or the deposit had been returned to the tenant. The landlord had served its section 21 notice without protecting the deposit under one of the authorised schemes or returning the deposit to the tenant, so the notice was invalid. However, the landlord would not be liable for the financial penalties imposed by section 214 of the Housing Act 1988.

The decision in this case underlines how important it is for anyone serving notices under
a statutory regime to check that they are valid
in accordance with that regime.

Consequence of non-compliance

The question of validity of notices and the importance of compliance with statutory procedures was also considered in the context
of long residential leases. In Natt and another v Osman and another [2014] EWCA 1520 Civ, the Court of Appeal considered the validity of a collective enfranchisement notice served under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993).

The Court of Appeal held that a notice served under section 13 of the LRHUDA 1993 claiming
a right to collectively enfranchise was invalid because the notice did not contain the information prescribed by section 13(3)(e) of
the LRHUDA 1993. The consequences of non-compliance with statutory procedures (where not expressly stated in the statute) were determined by looking at the statutory scheme as a whole. The information required by section 13(3)(e)
went to the heart of the collective enfranchisement right because the notice
was intended to disclose key information
about whether the qualifying criteria for the enfranchisement claim were met. The notice should disclose the number of qualifying tenants at the building, whether it was given by the tenants of at least half the flats in the building and whether at least two thirds of all the flats in the building were held by qualifying tenants.

Paragraph 15 of schedule 3 to the LRHUDA 1993 specifically provides that certain inaccuracies do not invalidate a section 13 notice and that the notice is capable of amendment in certain circumstances. The fact that the Act contains these provisions led the court to an assumption that parliament must have intended other inaccuracies to invalidate the notice.

In addition, the court held that there was no restriction on the service of a new notice at any time after an invalid notice. The restriction in section 13(9) on the service of a new notice within 12 months of the withdrawal or deemed withdrawal of a section 13 notice only applied to an original notice which was valid. If the landlord challenged the validity of a section 13 notice, a fresh section 13 notice could be served immediately ‘without prejudice’ to the tenants’ contention that the original notice was valid.

Use of the word ‘must’ in section 13(3) indicated that something was required to be done as opposed to being optional. The court was clear that a section 13 notice that does not contain the information required by section 13(3)(e) will be invalid. As tenants are able to serve a new notice where an earlier notice was invalid, tenants should rarely be prejudiced by service of an invalid notice.

This decision is a concise summary of the approach adopted to statutory interpretation.
The court emphasised the importance of looking at the statutory scheme when considering the validity of notices and the consequences of non-compliance with statutory requirements (where the statute does not make express provision for the consequences of failure to comply).

Looking at a statutory scheme, the court was likely to favour invalidity where the notice or missing information was critically important in the context of the scheme and to favour validity where the missing information was of secondary importance or merely ancillary.

‘Sets’ approach

Also, in relation to long leaseholds, in Francis and another v Phillips and others [2014] EWCA Civ 1395, the Court of Appeal restored the ‘sets’ approach when assessing qualifying works for residential service charges under section 20 of the Landlord and Tenant Act 1985 (LTA 1985).

The Court of Appeal overturned the High Court’s decision and rejected the ‘aggregated’ approach, hold that it was wrong. The court deemed the approach not to be sensible or intended by parliament, given the practical problems it created. The correct way to identify qualifying works was to adopt a ‘sets’ approach in which separate sets of work should be identified for the purpose of establishing whether the relevant costs exceeded the recoverable limit and therefore triggered the consultation process. The £250-per-tenant limit was intended to provide a ‘triviality threshold’.

The LTA 1985 consultation requirements imposed a significant administrative burden on landlords. Consultation took time and cost money. Once the £250-per-tenant limit had been reached, the ‘aggregated’ approach would require the landlord to consult with the tenants on any service charge expenditure, including emergency works and minor repair works. Landlords were at risk of being unable to recover all their expenses for emergency repairs unless they were successful in seeking a dispensation. Seeking a dispensation incurred further costs and was not automatic,
so there remained a risk of non-recovery.

Tenants’ real source of protection for routine works of repair and maintenance that were unlikely to have been the subject of a detailed advance plan was afforded by section 19 of the LTA 1985, which provides that costs must be reasonable and reasonably incurred. SJ

Belinda Walkinshaw is a partner at SA Law