Property UPDATE

Issue No.8 November 2007

Residential Landlords – Make sure your rent and service charge demands are correct!

If you are a residential Landlord (including a Landlord of mixed properties) from 1st October 2007 you will be unable to collect service charges and administrative charges unless the demands for these include certain information. The new Regulations affect residential long leases granted for more than 21 years. Each time a service charge or administration charge demand is sent you must now provide the tenant with a summary of his or her rights and obligations. The required information must be typed or printed in legible form of at least font size 10.

Service charges must be reasonable. They relate to amounts payable for services, repairs, maintenance, improvements, insurance or management. The information that you need to include is set out in the statutory instrument which can be found at www.opsi.gov.uk under Statutory Instruments for 2007 no. 1257.

Administrative charges must also be reasonable. They include charges for obtaining your approval under the lease, the provision of information or documents such as insurance details, charges for non-payment of rent or breaches of tenant’s covenants The required information can be found on the OPSI website under SI 2007/1258.

Similar provisions are already in force for rent demands. If you have not already done so you should include the required information on all rent demands which can be found as above under SI 2004/3096

The sanction for non compliance is significant. The tenant is entitled to withhold the rent, service charge or administration charge payment. If you require further information, please get in contact with us. We can also advise you about the transitional provisions. These deal with where a first demand is sent before the 1 October 2007 for service or administration charges due for payment before that date but where these remain unpaid after that date so that a further demand needs to be sent.

Energy Performance Certificates (EPCs) for Commercial Properties – Planning to rent or sell your property?

At present the requirement for a Seller to supply to prospective buyers an EPC only applies to residential properties with 3 or more bedrooms as part of a Home Information Pack. Commercial property owners should note that from 6th April 2008 EPCs will be required for the construction, sale or leasing of commercial properties over 10,000 sq m. The previous intention that this should apply from such date to commercial properties of 500 sq m has been abandoned.

From 1 July 2008 many more commercial properties will be affected as the requirement will apply to commercial properties of over 2,500 sq m.

It will be the Seller in the case of a building to be sold, the Landlord in the case of a building to be let or the person responsible for the construction of a new building that has the duty to provide the EPC free of charge to prospective buyers or tenants. The requirements also apply to the construction, sale or renting out of parts of buildings. If you are a Landlord (or a tenant intending to sublet) of say, a shop within a shopping centre or a suite of offices within a larger block and intend to let only that unit it seems that you will need to obtain an EPC for the whole building. The position regarding say, an assignment of an existing building or unit for no consideration is at present unclear.

The Regulations impose a duty on those who have an interest in or are in occupation of a building (or part) to allow energy assessors entry to prepare the EPC.

Rent Review Update – preserving the liability of former tenants to pay increased rents

In our September 2006 issue (No 6) we reported on a case which suggested that if there is a rent review outstanding where the original tenant has assigned the lease, the former tenant will only be liable for the increased rent on default of the tenant if a Notice is served on the former tenant within 6 months of the review date (even if there are no arrears outstanding at that time).

Earlier this year the Court of Appeal confirmed that this approach is correct.

If you are the Landlord of premises where a rent review is in progress and you want to preserve the liability of a former tenant to pay any increased rent resulting from the review, you should ensure that the appropriate Notice (a s17 Notice) is served on the former tenant within 6 months of the review date even if the current tenant has not yet defaulted. The Notice needs to quantify the amount to be recovered and so where the tenant is not in default this must state “nil” but also state that the rent is being reviewed. A new Notice must be served within 6 months of each rent payment date until the review is agreed or determined and then within 3 months of that date.

Note:

Please note that this newsletter is not intended to be a comprehensive statement of the law and should be used for guidance purposes only. If you require specific legal advice please contact Alastair McClean, Michael O’Shea, Sharon Rutter or Lisa Duke or by telephone 020 7493 2903.