Residential tenancy agreements – validity of executed documents and the potential impact on corporate landlords considered

Northwood Solihull Ltd v Fearn & Cooke [2020] EWHC 3538 (QB)

 

A case which could have serious implications for landlords in residential tenancy cases was heard by the Court of Appeal yesterday. Judgment is currently reserved.

The tenants in this case occupied a property by way of an assured shorthold tenancy and had fallen into rent arrears allowing the landlord to serve a notice pursuant to Section 8 of the Housing Act 1988. The notice was in the correct form and set out all the matters required to be included in such a notice.

The notice had been signed by a property manager who was employed by the landlord.

Proceedings for possession were issued and the tenant defended the proceedings on the basis that the notice served was invalid as the landlord was a corporate body and the notice should have been executed in accordance with the requirement set out in the Companies Act 2006 but it was not.

In addition the tenant also brought a counterclaim on the grounds that the prescribed information (regarding the deposit) required a signature by the landlord and in their case, had only been signed by one director of the landlord company without that signature being witnessed. They argued that the failure to correctly execute the document entitled them to a penalty award of up to three times the deposit.

In the initial trial, the Court decided that the Section 8 notice was valid and made an order for possession. However the judge considered that the confirmatory certificate did need to be executed correctly but was not and therefore awarded against the landlord in respect of the counterclaim.

The judge’s decision was based on a previous case (Hilmi & Associates v 20 Pembridge Villas Freehold Ltd [2010] EWCA Civ 314, [2010] 1 WLR 2750) which required him to consider statutory wording. Where the landlord and no other person was required to sign the document it had to be executed in accordance with the requirements of the Companies Act. Where either a landlord or their agent can sign, there is no requirement for execution.

The tenants were granted permission to appeal the findings in relation to the Section 8 notice. The landlord responded seeking to uphold the original decision but also to cross-appeal the finding against them in relation to the prescribed information confirmatory certificate.

The First Appeal

The appeal was heard in the High Court. The judge gave the landlord permission to cross-appeal in relation to the landlord’s confirmatory certificate. He dismissed the tenant’s appeal on the section 8 issue and also the landlord’s cross appeal on the basis that :

  1. The section 8 notice may be signed by either landlord or an agent and therefore there is no requirement for execution.
  2. The confirmatory certificate was required to be signed by the landlord alone and the trial judge had been correct in the original decision that it was not validly executed.

The Second Appeal

The landlord appealed the High Court’s order to dismiss the cross-appeal previously applied for. They submitted that the decision was wrong and the current law could expose thousands of landlords to potential claims because the judges had not taken into account changes to the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 were retrospective and had proceeded in error on the basis that an agent could not sign the confirmation certificate.

Judgment has been reserved.

If the appeal is not successful the potential impact on landlords and agents is vast. Although since March 2015 it has been possible for a landlord’s agent to sign the confirmatory certificate as well as the landlord, this will impact on all tenancies where prescribed information was given before that date. All corporate landlords and lettings agencies which act on their behalf should check all prescribed information documents which have been given before 26 March 2015 on all existing tenancies. Where they have not been properly executed in accordance with the requirements set out in the Companies Act 2006, it is recommended that new versions should now be given to the tenants. As case law currently stands, failure to do so will render any subsequent notice served invalid.

 

If you wish to discuss the possible implications for your tenancy or require advice and assistance in relation to tenancy agreements generally then please contact either

Amanda Nudds  (01328 852804)

Harriet Rossi (01328 852833)

 

 

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