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Property Manager FILE April 2011

Brethertons Launches PM Knowledge Hub

Brethertons have launched a new web based information hub, f for members of the property management industry, known as the ‘Property Management Alliance (PMA) Knowledge Hub’.

The Hub is designed to provide up-to-date information on legal matters relating to the residential property management sector. It contains a range of articles, factsheets and newsletters

to which clients, potential clients, students and other contacts can subscribe free of charge.

For a direct link to the PM Alliance Knowledge Hub, please visit http://www.brethertons.co.uk/pm-alliance.

IRPM Exam Revision Weekend

On 12 March, Brethertons solicitors once again hosted the IRPM exam revision weekend, which was attended by 92 delegates. The feedback received from delegates following the

weekend was very positive. Brethertons wish each of them the very best of luck. We look forward to hearing how well they have all done!

Invalid Company Signature Renders Notice Invalid

A group of tenants who sought to acquire the freehold of the property they occupy met with failure recently, after the Court of Appeal found that the notice served on their landlord was

invalid because it was not correctly signed by one of the tenants.

The tenants wished to exercise their right of collective enfranchisement, under the Leasehold Reform, Housing and Urban Development Act 1993, and in 2007 they served a notice on

their landlord under Section 13 of the Act. Such a notice must be signed by ‘not less than half’ of the tenants. In this case, there were seven tenants, and the notice had been signed by three individual tenants and one limited company tenant. The subject of the court case was whether or not the signature of one of the directors of the limited company, a Mr Hickey, amounted to a signature of the company.

Notices under Section 13 must be signed ‘by each of the tenants, or […] by the tenant’, unlike most other notices under the Act which can be signed ‘by or on behalf of’ the tenants. As the company’s Articles of Association were not referred to by either party, the court considered the position under general law. The Companies Act 1989, which applied when the notice was served, states that a company can sign via the signature of either two directors or those of one director and the company secretary, or by affixing the company seal.

Overturning the decision of the lower court, the Court of Appeal held that, as the notice had been signed by just one director, the requirements of the Companies Act had not been complied with and the company’s signature was therefore invalid. This meant, in effect, that the notice served on the landlord was itself invalid, as it had not been signed by the requisite number of tenants.

Loss of Light – Demolition Ordered

Loss of light can be a major irritation and the law provides two remedies where it occurs. The usual remedy is for the developer of the structure responsible for the loss of light to make a payment to the person whose property’s light is impaired. The other, less commonly used, remedy is for an injunction to be granted which prevents the loss of light. This remedy is clearly highly disruptive to a development and is rarely used, unless by way of a prohibition of a development which has not already taken place.

An injunction can order the removal of the cause of the loss of light in certain circumstances, however. Normally, an injunction will only be granted where:

the injury to the rights of the adjoining property is not small;
the value of the injury to the rights is difficult to estimate in money or compensate for by the payment of money; and
the granting of an injunction would not be oppressive.

However, the court’s reluctance to use injunctive relief should not be relied upon by developers, as a recent case shows.

The case was not a straightforward application for injunctive relief against a developer, but was brought by the developer of an office block to confirm the legal position with regard to a challenge for ‘taking the light’ of an adjacent property.

The developer of the office block built it in the knowledge that the owner of the adjacent property (a Grade II listed Victorian building) had threatened legal proceedings with regard to the top two floors of the office block. By the time the dispute reached court, the office block had already been built and part of the building which was the subject of the dispute had already been let.

The completion of the construction and letting by the developer proved to be a dangerous strategy, because the court considered that the criteria for granting injunctive relief were met.

Instead of ordering the developer to pay a sum in compensation, the court ordered the demolition of the top two floors of the building, which the developer estimated would cost between £1 million and £2.5 million. The developer had budgeted £200,000 for settling the ‘loss of light’ claim.

An appeal seems more than likely.

The case is particularly worrisome for developers who do not make sure any such issues are dealt with before construction is finished. The order by the court that the top two floors of the building should be demolished will clearly have a much greater financial effect on the developer than an order not to build them in the first place would have had. It might have been thought that faced with the fait accompli of the building, the court would have considered a payment in compensation to be more appropriate than injunctive relief, but the judge decided otherwise.

Building Owner Must Indemnify Neighbour Against Damage

When the owner of a building intends to carry out work covered by the Party Wall etc. Act 1996, the owner of an adjoining building has the right to request security from the owner planning the work where this involves a risk to their property. This is so even if carrying out the work does not necessitate accessing the adjoining owner’s land or property, following a High Court ruling.

The case involved building owner Mathew Lawrence, who wished to carry out various works on his property, and neighbour Geoffrey Kaye, the owner of the adjoining property. In June 2009, Mr Lawrence issued a notice under the Act to Mr Kaye stating that he intended to build within three and six metres of Mr Kaye’s property and listing the work that was planned.

Mr Kaye raised objections to the work via his surveyor and an independent surveyor was appointed in order to resolve the dispute, as required by the Act. The independent surveyor ruled on three matters under dispute, two of which were resolved. The third, relating to the lodging of security, was not.

Mr Kaye had requested security from Mr Lawrence against any potential damage to Mr Kaye’s property. The surveyor ruled that security would not be required as the planned building works did not include any work on Mr Kaye’s property. Mr Kaye disputed this ruling.

During the ensuing High Court hearing, it was argued by counsel for Mr Lawrence that the provisions of the Act that allow for the payment of security against damage did not apply unless the work planned included work on the adjoining property. In this case, the planned work would be at least three metres away.

However, the judge held that there was nothing in the Act that drew a distinction between work on or away from the adjoining property. The court ruled that the independent surveyor was wrong to say that security could not be requested and ordered the findings of the surveyor to be changed accordingly.

It will now be left to the parties’ respective surveyors to agree an appropriate amount of insurance cover for the risk of damage to Mr Kaye’s property.

Prison Not Available to Enforce Tenant Debt Hearing

Threat of committal to prison for contempt of court should never be used simply to speed up a debt collection process, however long it has gone on. This was the ruling of the Court of Appeal in a case concerning Emeka Okonkwo, a tenant of Broomleigh Housing Association in Croydon, Surrey.

From 1999, the Housing Association made three separate claims for possession against Mr Okonkwo, all of them eventually withdrawn on terms that he must pay costs amounting to £441.68 in total. Orders to pay these amounts, dated up to 30 April 2004, were ignored and so the Association applied to Croydon County Court for an order for Mr Okonkwo to attend court to answer questions about his ability to pay.

In instances like this, a judgment creditor, such as the Housing Association, is entitled to obtain a court order for a debtor to attend court to be questioned about their means. In order to compel attendance, however, evidence must be supplied by the creditor to show that the order has been served. It is not unusual for the creditor to find it difficult to serve notice on the debtor.

In this case, the Association’s officers made repeated attempts to serve the court orders but were unable to do so, resulting in four separate scheduled court hearings being adjourned.

At the fifth attempted hearing, on 22 November 2006, one of the Association’s officers gave evidence that he had served the papers, although this was later denied by Mr Okonkwo, who in any case did not appear at the hearing. As a result, the judge made an order in December committing Mr Okonkwo to prison for seven days, suspended provided he attended court on 13 March 2007. Further problems were encountered, resulting in a further three such orders being made. The fourth and final committal order was issued in February 2009, requiring Mr Okonkwo to attend court and answer questions on 5 May 2009. This he did, resulting in the committal orders being discharged. The appeal against the orders was allowed, however, because Mr Okonkwo was considering a career in law, and he felt that the committal orders could damage his prospects. There were also points of law that the Court of Appeal wished to consider.

At appeal, it was submitted that, before a judge can properly make a committal order, he must not only consider all the evidence but also allow the judgment debtor to be heard in his own defence. Failure to do so, it was said, would involve a breach of Article 6 of the European Convention on Human Rights.

Although a court has the power to make a committal order, to do so requires the exercise of discretion, which in turn requires consideration of the circumstances of the contempt. In the judgment of the Court, committing a person to prison for contempt of court is too serious a step to be undertaken simply as a matter of routine.

The Brethertons View

However frustrating it may be for creditors in situations such as this, a threat of prison cannot be used simply to compel attendance at a court hearing