EXCLUSION CLAUSES- Be clear and unambiguous

The Court of Appeal have recently reached their decision  in Persimmon Homes v. Ove Arup Partners. In the High Court decision it was held that Ove Arup could rely on an exclusion clause they inserted in their appointment letter to avoid liability for asbestos. Persimmon Homes appealed arguing that the exclusion clause did not work to exclude liability for negligence. The wording of the exclusion clause was “liability for any claim in relation to asbestos is excluded”. The Court of Appeal upheld the High Court’s decision and said the exclusion clause was all embracing. Interestingly, the Court of Appeal also commented on the contra proferentum rule of construing documents. This rule says that if there is ambiguity in a document then it is construed against the seller or landlord (as the case may be). The Court of Appeal said that this rule would now very rarely be invoked – especially where the parties were of equal bargaining strength.

MIND THE (Registration) GAP

Stodday Land Limited and Ripway Properties v. W M Pye – this is a Court decision this month on the “registration gap” issue.  A buyer completed the purchase of a property, applied to the Land Registry to register the Transfer and then served a notice to quit on the tenant.  The Court held that the notice was invalid as the buyer was not yet registered at the Land Registry as the proprietor of the property.

This is therefore a further reminder as to how the law operates on this issue and reinforces the importance of applications being submitted to the Land Registry promptly after completion of a purchase.  The case also follows the 2001 Court of Appeal decision in Brown & Root v. Sun Alliance where an original tenant assigned the Lease to a group company.  There was a break clause in the Lease that was personal to the original tenant.  Some time after the assignment, it was decided that the tenant no longer wanted to continue with the Lease and the original tenant served the break notice.  The landlord argued that the notice was ineffective as the Lease had been assigned to the group company.  The Court held that the original tenant was entitled to serve the break notice since the assignment to the group company was never registered at the Land Registry.

If that particular decision was to be litigated again today, S.28 of the Landlord and Tenant (Covenants) Act 1995 may well assist the landlord.  The section states that an “assignment” includes an equitable assignment.  There are a few possible ways around this issue where a property is being purchased and it is known that notices may need to be served shortly after completion of that purchase.  When the contract is being negotiated, a clause could be inserted whereby the buyer acts as the seller’s agent in serving notices or otherwise the seller agrees to act in accordance with the reasonable requirements of the buyer (at the buyer’s cost) during the “registration gap”.

This information is published for general information and should not be relied upon without legal or other professional advice.

AST’s – make sure you create the perfect ending

It is now just over a year since the law changed as to how a landlord can validly end an Assured Shorthold Tenancy. A timely reminder then on this important topic. A S.21 Notice (Housing Act 1988) must be served on the tenant to end the tenancy where the tenant is not in breach of any of its obligations. If the tenant is in breach, a landlord has a choice of serving a notice under S.8 or S.21. For the purpose of this note, we are only focusing on S.21 notices. The end date specified in the S.21 notice will either be the expiry of the tenancy agreement or an earlier landlord’s break date. A minimum of two months’ notice must be given.

The important point to note is that for AST’s completed on or after 1 October 2015, a S.21 notice will not be valid unless the tenant has been given:

  • An energy performance certificate
  • A gas safety certificate
  • A “How to rent” booklet

To avoid future disputes, tenants should be issued with the above papers at the start of their tenancies.

Landlords routinely used to serve S.21 Notices at the outset of the tenancy – just in case they forgot to do this towards the end of the tenancy. It is now no longer possible to serve a S.21 notice within the first 4 months of the start of a tenancy – unless that tenancy started before 1 October 2015.

If you need to start possession proceedings if a tenant fails to vacate, landlords must now do this within 6 months of serving the S.21 notice otherwise the notice lapses.

There are other changes too – for example dealing with tenants who have made certain complaints – but the above requirements comprise most of the key changes introduced last year.

Landlords, or managing agents on their behalf, must ensure everything outlined in this note is done correctly otherwise they may find tenants can lawfully outstay their welcome.

This information is published for general information and should not be relied upon without legal or other professional advice.

IHT for Non-Doms (residential property)

We have not seen the economic downturn predicted immediately after the Brexit decision but the pound lost significant value following the referendum result on 24 June 2016. Whilst the currency markets have been predicting further reductions in value of sterling before it begins to stabilise, recently the pound has started to regain some value – perhaps because there was an overreaction or because the US dollar is reflecting its own weakness ahead of the upcoming American elections.

So far the UK has not triggered Article 50 to begin the negotiations to set our exit terms from the EU – so there must inevitably be a continuing period of uncertainty.

In the property market there are price reductions especially at the top end of the market, but there is also evidence at the lower and middle end that a lack of supply of homes is helping to maintain values.

As expected, the Government still intends to bring residential property held in an offshore structure by non doms within the scope of Inheritance tax. This will apply with effect from 6 April 2017 and the Government’s latest consultation paper published last month is available at:- https://www.gov.uk/government/consultations/reforms-to-the-taxation-of-non-domiciles-further-consultation/reforms-to-the-taxation-of-non-domiciles-further-consultation

It is worth noting that commercial property is not caught by these proposals. Similarly only residential property was targeted when Capital Gains Tax for non-residents became payable for the first in April 2015.

The stock market appears to be reasonably sound – anecdotally helped by the lower pound. Everyone should be back from their summer holidays now and it will be interesting to see if the value of sterling and softer prices help kick start the market.

 

This information is published for general information and should not be relied upon without legal or other professional advice.