They have introduced a new restriction which requires a solicitor to verify the identity of a seller. It is thought that this new restriction was introduced with overseas investors buying property in England and Wales in mind. They have also introduced new rules to provide additional security for trustees by preventing the beneficiary of a trust from dealing with the land without the trustees’ being aware of it.

Concentrating on property fraud, the Law Society has identified high value properties without a mortgage and high value properties with mortgages along with foreign residence owners as being more vulnerable to property fraud, particularly where properties are vacant or tenanted with foreign landlords. With the amount of information available online and title documents so easily accessible from the Land Registry a fraudster can quit easily find out all the information they need on a specific property, such as the owners names and where they live (if different to the property address – making it more likely that the property is unoccupied or occupied by tenants).

Then, under the current system, fraudsters can simply send the Land Registry fraudulent documents, particularly if they have also duped or are in cahoots with a rogue conveyancer or mortgage broker, to make themselves out to be the legal owners of the property. This would allow them to either mortgage or sell the property and leave the legal owner without the property or in a lot of debt. This would obviously a lot more difficult if the owner lived in the house because their presence would be apparent to a potential buyer and their conveyancing team.

Accordingly all property owners, especially those living abroad, should contact the Land Registry and complete Restriction Form LL, which will ensure that a solicitor will have to certify their identity to the Land Registry before their property can be mortgaged or sold. It costs £50, which is a small price to pay by comparison. This does not of course remove the risk as stated above, that a solicitor gets duped by fake documents or may even be acting in concert with a fraudster but this is a very rare occurrence.

Unfortunately, it is difficult to eradicate property fraud entirely as fraudsters are always looking for new ways to scam the system; nevertheless this is a welcome positive step from the land registry especially when foreign investors are increasingly looking at property in England and Wales as investment opportunities.

House in Multiple Occupation (HMO) is a term used in property letting, to describe shared occupation of a single property by at least three persons forming more than one household.

What is a household?

In the context of HMO licensing, a household can be formed by either one individual or a family.

For example, in view of the above, two brothers sharing an apartment with an unrelated friend would be classified as two separate households (i.e. a family of two brothers and an unrelated individual).

Most common examples of HMO include:

• Houses split into separate private rooms with shared facilities such as kitchen and toilet;
• Shared houses or apartments with independent tenancy agreements between the landlord and multiple tenants who form more than one household (i.e. are unrelated);
• B&Bs and hostels which are not exclusively used for holiday purposes also fall within the scope of legislation governing HMOs.

What is an HMO licence?

Why HMOs require a licence

Larger rented properties require an HMO licence. The reason behind HMO licensing is to exercise a certain degree of control over landlords, by ensuring that they are fit to provide letting services and provide properties compliant with appropriate maintenance that is in line with all the applicable health and safety requirements.

HMO licences also help the local councils to actively manage social integration of certain areas and neighbourhoods, tackle anti-social behaviour and promote environmental policies. The licences also help the councils to see if the properties in question are not occupied by too many individuals.

Do you need an HMO licence?

Typically, you will need an HMO licence if:

• your property has more than three habitable storeys;
• you let it to more than five persons who form more than two separate households;
• the tenants share facilities such as kitchen and toilet.

If your property falls within any of the above three categories you should contact your local council and seek advice on whether or not you must register for an hmo licence.

What is a habitable storey?

In the context of the first bullet-point, a ‘habitable storey’ is any storey that is occupied for residential purposes (this includes self-contained units). Typically this will include the following:

• basements and attics converted for residential occupation or used in connection with the occupation;
• storeys occupied by live-in landlords and their families;
• all storeys occupied by residents (even self-contained);

Are there any exceptions?

 Certain properties are exempt from the HMO licensing:

• Properties operated by public sector bodies;
• Properties subject to other overriding acts;
• Halls of residences offered to students by educational organisations;
• Buildings occupied by religious groups;
• Properties occupied by freehold or long leasehold owners;
• Properties occupied by no more than two households each consisting of no more than one person;
• Properties rented out by live-in landlords with no more than two other unrelated tenants.

Fire safety

It is important for landlords to be aware of the HMO licensing as it has legal implications in respect of health and safety.

Landlords should consider the following:

• Ensure that a fire risk assessment is carried out on a regular basis;
• Consider prescribed fire precautions in the common areas of the HMO building ;
• Consider exit and emergency routes and ensure that all relevant fixings such as exit windows comply with the relevant regulations;
• Consider potential sources of ignition and the need for fire and smoke detectors;
• Consider all of the above in view of the tenant’s characteristics. Certain additional measures may be required for elderly or disabled occupants.

How can I apply for an HMO licence?

Applications should be made to local councils on special HMO licence application forms that are provided by the councils.  HMO licence will normally be issued for five years and will need to be renewed before its expiry. Councils have the power to issue shorter term HMO licences if they consider it to be necessary. There usually is a fee for application fee. Different councils charge different rates, therefore you should inquire about HMO licensing fees with your local council.

Buying a house is a stressful process for anyone but changes in policy of mortgage lenders at the beginning of this year left many pulling their hair out over the purchase of their properties.

In the 2010 budget Alistair Darling announced new bands of stamp duty to be paid when purchasing property. As part of his budget he introduced a 2-year stamp duty holiday for first-time buyers whose property cost less than £250,000. The holiday came to an end on 25^th March 2012. As a result the early part of the year saw a rise in the number of properties purchased for under £250,000. Many first-time buyers were then in a race with time to complete before the deadline and save themselves up to £2,500.

Meanwhile in January 2012 many mortgage lenders, in an effort to reduce mortgage fraud, drastically reduced the number of solicitors they allowed to be involved in house purchasing transactions. One such lender was HSBC, who published a panel of just 43 law firms for its customers to pick from to perform all the legal tasks required. If customers wanted to use solicitors outside the panel a fee of £192 became payable. The effect of this was that the increased load of eager first-time buyers had to be squeezed through a tightened channel to complete the legal aspects of their transactions, resulting in greater delays to the overall process. This drove the completion date for buyers closer and closer to the deadline.

Frustrated and angry first-time buyers found themselves unsure of whether they would complete on time after two to three week delays in the process. Some experienced the prospect of the sale falling through altogether as a result with sellers assuming that the delay was down to the buyers themselves. It appears that the frustration has mainly stemmed from buyers being kept in the dark about what was going on and how long things would take. HSBC customers complained of being totally unable to speak directly with the panel solicitor they had chosen. Others complained of inefficiencies with both HSBC themselves and Countrywide Conveyancing Services, who manage the panel for HSBC.

It must be noted that HSBC are amongst the cheapest mortgage providers at the moment and hence one of the most popular, delays are necessarily incurred by the amount of buyers using them. Further, HSBC have reported that since the introduction of the new panel scheme they are able to monitor transactions and minimise problems and delays. They plan to build the number of solicitors included in their panel as time goes on, this should speed things up for those in the process of buying.

Any new scheme has its teething problems and this is no exception. It is a shame that the introduction of HSBC’s panel coincided with the deadline for first-time buyers leading to further distress and worry. However, generally the scheme seems aimed towards a more controlled system where transactions can be monitored and hopefully instances of delay, dissatisfaction and dishonesty can be further reduced. One can only hope that customers will be kept informed during the more stressful times in order to make the whole process a little less painful.

What is the right to manage?

The right to manage (RTM) is available to the owners of leaseholds of flats and enables the leaseholders to take over the management responsibilities from the landlord. The responsibilities include services and repairs as well as decisions on the budget. The right gives decision making powers to the leaseholders and does not require any proof of the landlord’s bad management.

How is it obtained?

1. As the first step in order to obtain the RTM you need to set up a RTM company. There is no minimum number of leaseholders that can set up a company. It will need to be incorporated with Articles of Association, which regulate the purpose of the company. There needs to be a chairman, directors and a secretary.

2. Once the company is registered it needs to invite the remaining leaseholders to join the company by sending them a ‘Notice to Participate’. The landlord is also entitled to be a member of the company once the right to manage has been transferred.

3. 14 days after sending the Notice to Participate the Notice of Claim should be sent to the landlord. The notice asks the landlord to transfer his responsibilities to the RTM company and gives him at least one month to reply.

4. The Landlord responds by sending a ‘Counter Notice’ in which he can agree the RTM company’s takeover, challenge the right or not respond.

Conditions to qualify

• The leaseholder must hold a long lease (the original term for which the lease is granted is longer than 21 years)

• The building must have at least two flats

• At least 2/3 of the building needs to be held by ‘qualifying tenants’ (owners of long leases)

•  If part of the building is for commercial purposes it cannot exceed 25% of the total building

•  The minimum number of tenants joining the RTM company must be at least half the total number of flats in the building

When does the right to manage not apply?

You cannot obtain the right to manage if the landlord or any qualifying tenant is a Local Housing Authority.

The right to manage does not apply if the premises fulfil the Residential Landlord Exception, i.e.:

• The premises are other than a purpose-built block; and

• Comprise of not more than 4 flats; and

• One of the flats is occupied by the freeholder as their principle home for the past year.

 What are the costs?

The RTM company can register its right on the proprietorship register of the land using the AP1 form. The application must be supported by evidence that the applicant is an RTM company which has obtained the right to manage. The cost of the application is £50.

The RTM company will also have to pay the landlord’s reasonable costs incurred in the process, such as legal or accountancy costs.

Taking over

The Notice of Claim will specify an ‘Acquisition Date’ which is the date when the RTM company takes over the landlord’s responsibilities.

The landlord might have some contracts in place for the management and repairs of the building. A Contractor Notice must be served on every contractor appointed by the landlord clarifying the situation of change in management and identifying the RTM company as a body responsible for future assignments.

The landlord has a duty of disclosing all the information relevant to the management of the property once such information has been requested.

An overage is an additional payment clause inserted into a contract for buying and selling land. It gives the seller the security of an additional payment that the buyer makes once the land has achieved its full potential.

For example, a buyer and seller agree a fixed price for a piece of land. In a few years time the buyer obtains planning permission to build or develop that piece of land and therefore the land is now worth more than the price paid by the buyer.

Types of Overage

Generally speaking there are two types of overage payment; a “positive overage” and a “negative overage”. A positive overage is where the buyer promises to make an additional payment to the seller upon the occurrence of a specified event.

A negative overage is where the seller imposes a restriction on the buyer which prevents the buyer from undertaking a particular development. In this situation, the activity which will increase the value of the land cannot actually take place without the consent of the seller, which will not be provided without the overage payment.

Regardless of the overage method used, it is important that any sale and purchase contract specifies when overage becomes payable. For example, it could be upon the grant of planning permission or the completion of a development or even after the sale of a completed development. This is a matter of negotiation between the parties.

Calculating an Overage Payment

There are various methods to calculating the overage payment, common examples include:

• A percentage of the increased value of the land
• A percentage of the profit made by the buyer
• A percentage of any profit made by the buyer if it exceeds a specified amount

Securing Payment

Unlike negative overages, where the seller can hinder the buyer’s ability to sell or deal with the land, positive overages require more thought. An important consideration for the seller is how they can ensure that the buyer will make the additional payments. There are various methods of doing this, each with their own merits.

The most common method is by the buyer making a contractual commitment to the seller. The problem here is that the seller is reliant upon the liquidity of the buyer or their guarantor and therefore there can be no guarantee of payment. Furthermore, the obligation to make the overage payment will not be binding on future buyer of that land. It is only really suitable in a situation where the seller is dealing with a large or stable company.

Alternatively, the seller can ask the buyer to enter into a chain with their buyers. This is where the buyer covenants or promises that anyone who takes the land or property after them will enter into a similar contract with the seller to make the overage payment. This covenant or restriction can be noted against the title at the Land Registry, although it may be a turn off for any potential buyer.

A simpler method to the above is for the seller to take a legal charge or lien over the property so that when the land is sold, if the seller has not received the overage payment they can simply take it from the proceeds of the subsequent sale. Whilst this is the safest form of security for a seller, it is likely to be unsuitable where a mortgage company has a first charge over the land.

Alternatively, the seller could also grant the buyer a lease which would include a provision for the rent to take into account any increase in value and if the buyer (tenant) defaults then the seller (landlord) can forfeit the lease. The buyer can then be given the option to purchase the freehold once the overage payment has been made. This lease could also contain a clause that prevents the buyer or tenant from exercising a particular activity on the land without the seller or landlord’s consent, which they will not provide without the overage payment.

The seller could also add a reverse option into any sale and purchase contract. Here the buyer purchases the property and then resells it to the seller once the triggering event has occurred. The resale price will then reflect the increase in value. In practice this is just a method by which the seller can guarantee payment of the overage, there is no real intention for the seller to buy back the land.

As expected things are not great in any sector, even lettings, due to affordability, margins for landlords and myriad other factors.

Of course thje big news in the residential sector was released this week. anyone involved in mortgages or conveyancing in the last 10 years will know that the excesses were there for all to see and things had got completely out of control. Whilst the proper checks on affordability will dampen down the market for years if not decades to come, this kind of action was long overdue and reflects the need to have some kind of responsible free market economics in the future to ensure social stability and the greater good.

Reality bites, as the saying goes.

Any Landlord that has faced the incredibly frustrating scenario of a tenant being in breach of his, her or their tenancy agreement and having to seek a possession order from the court will probably already know that the law in this area is often exploited by tenants.

Among many tactics commonly used by tenants who are significantly in arrears with rent is to file a defence just before a hearing, claiming ignorance. The defence is commonly based on alleged disrepair by the Landlord, which then often results in evidence being needed to prove or disprove that allegation which can set the whole case back by months.

Even where a landlord applies under the accelerated possession procedure based on expiry of the agreed fixed term, this can still take months and many tenants stop paying rent during this period and wait for the bailiffs to evict them even after a court order has been made.

In a press release this week, Helphand claims to have undertaken research which suggests that the frustration for Landlords is only increasing in that tenants are playing games more than ever, taking advantage of every possible ploy and external factor available. In particular, the release suggest that :-

• More cases, some 13% more, are being appealed by tenants this year.
• There is a perception that judges are more reluctant to make possession orders in the current economic climate.
•  Court closures are slowing down an already slow system.
• All of the above factors are against the backdrop of an increase in possession claims which are up more than 10% creating further pressure on the system.

If Helphand are right, this would make what is in our view a skewed system in favour of tenants even more outrageous. That being said, landlords need to be wise to the possibility of the worst happening and to plan accordingly. Vet tenants very carefully, insist on high deposits, consider rent insurance options, insist on personal guarantees from relatives who you have also checked out financially and get good legal representation, these are all key safeguards for landlords.