(5) Nothing in this section (or in section 14 below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent).

There are certain variations that will operate as a surrender and re-grant of a tenancy which include:

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• Where the extent of the demise is increased [Well Barn Farming v Backhouse [2005] 3 E.G.L.R. 109]
• Where the length of the term is increased [ibid]
• The substitution of one suite of rooms for another operates as a surrender and re-grant. [Giles v Spencer (1857) 3 C.B.N.S. 244]

However, terms that do not operate as a surrender and re-grant but instead are a simple continuation of the existing tenancy include:

• A mere increase in rent does not operate as a surrender and re-grant [Doe d. Monk v Geekie (1844) 5 Q.B. 841; Jenkin R. Lewis v Kerman [1971] Ch. 477; Friends Provident Life Office v British Railways Board [1996] 1 All E.R. 336]

I would hold … In the absence of an increase in the extent of the premises demised or of the term for which they are to be held, both of which would change the legal estate, I can see no reason why the lessor and assignee could not achieve the changes they desired in the terms of the lease without the law implying its surrender and a re-grant for the remainder of the term of the lease. [Beldam L.J. Friends Provident Life Office v British Railways Board [1996] 1 All E.R. 336]

• A reduction in rent is no surrender [Crowley v Vitty (1852) 7 Exch. 319; Buttery v Pickard (1946) 174 L.T. 144.][/amember_protect]

By virtue of paragraph 1(1) of Schedule 1 to the Trusts of Land and Appointment of Trustees Act 1996 any purported grant of a legal estate to a minor will not be effective to pass the legal estate, but will operate as a declaration that the premises are held in trust for the minor.

This essentially means if a landlord grants a tenancy to a minor, then any purported tenancy is held in trust by the landlord for [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']the occupier who becomes the beneficiary to the trust. In order to end the occupation, the landlord must first end the trust which can be very complex.

The Court of Appeal had to consider how a tenancy given to a minor could be ended. In Hammersmith and Fulham London Borough Council v Alexander-David [2009] EWCA Civ 259, The claimant aged 16 applied to the local authority for accommodation under the Housing Act 1996 because she was homeless. The council discharged its duty and entered an agreement on its standard form for adults, where the parties were referred to as landlord and tenant, which gave her a tenancy of the premises.

It was held that a landlord with full capacity to grant a legal tenancy and who granted a tenancy without any express qualification to the effect that something less than a legal tenancy was being granted could not subsequently say that what he had granted was not a legal tenancy but an equitable tenancy. Paragraph 1(1) of Schedule 1 to the Trusts of Land and Appointment of Trustees Act 1996 therefore applied to the tenancy granted to the claimant.

For so long as the council held the premises in trust under that Act for the claimant it could not lawfully destroy the subject matter of the trust by serving notice to quit on her.

See here for the Times report on this case.

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Essentially the changes to the scheme rules and tenancy requirements apply from 1 October 2010 when the threshold increases to £100,000 for when a tenancy is an assured shorthold tenancy. As has been previously discussed, any tenancies currently excluded from being an assured shorthold tenancy because their rent is in excess of £25k will become an AST on this date if the rent is below the new threshold.

The changes affect all those tenancies that become an AST (England only) from this date and there are also significant changes for non assured shorthold tenancies after 1 October 2010 (for example if they are a company let, resident landlord etc.)

The members terms of business must be amended in all cases but this article concentrates on the requirements relating to tenancies.

Each scenario is summarised below:[amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']

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Before you begin marketing the property, you must have an Energy Performance Certificate (EPC). This will be given to “prospective tenants” normally when you are viewing the property. Once you have placed a firm order for an EPC, you may market the property whilst the EPC arrives.

Further information on EPCs is available via this article

Members of the Guild of Residential Landlords can obtain an EPC at a discounted rate by clicking here

Inventory

In addition, [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']whilst the property is empty (or about to be empty) you could take this opportunity to create an inventory. If you are taking a high value deposit, it may be worth considering a specialist inventory clerk who will both perform a check in inventory (when the tenants move in) and a check out inventrory (comparing the property when they move out). This provides independant proof of the condition of the property before and after the tenancy.

Alternatively, you can produce your own inventory, this can include photographs of the property and video.

Members of the Guild may download an inventory template (£12.00)

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Members of the Guild of Residential Landlords can credit check the prospective tenant and guarantor using the tenant vetting service. This will check CCJs, Electoral Roll, Bankruptcy etc. and costs £4.95 + VAT for a standard check. Alternatively, there are several credit and referencing organisations on the internet.

Remember, the most important thing about a credit check is [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']finding the prospective tenant and guarantor. We would rather take on a tenant who has had a previous CCJ which they have paid off as opposed to a tenant whom we could not find. More often than not, when you can’t find a tenant, it usually means they are providing false details to ensure you can’t find them!

Check on-line that guarantor is a home-owner at www.landregisteronline.gov.uk. This costs £4.00 and is well worth the small fee.

Check with previous landlord for reference if possible but be wary if it is a current landlord as the landlord may give a good reference if he is trying to get rid of the tenants quickly!

Check with other references the prospective tenant has provided, in particular employers. If possible, you should always contact references by telephone. It’s amazing what you can sense by the tones of voice in these situations. Try and get confirmation of references in writing.

Be wary if a tenant provides written references themselves as they often produce their own and give false signatures (we have had this on many occasion.) To be honest though, as long as you at least credit check and phone one of the references and are happy that should be enough, in particular because you will have the back up of a home owning guarantor.

Landlord should start a new file for each tenancy and keep all documentation relating to that tenancy together. Records must be kept for at least six years and longer is recommended.

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From 1st October 2010, the rent threshold for when a tenancy is an assured or assured shorthold will be increased from £25,000 to £100,000. The legislation making this change is here.

From 1 December 2011, the same increase takes effect in Wales

Retrospective?

It was previously being reported that the change would be retrospective, however this is not the case but all tenancies that are not assured or assured shorthold on the 1st October will become so on that date onwards if the reason they were not assured (shorthold) was because of the rent threshold [s.1 Housing Act 1988.]

Do I need to protect my deposit within 14 days of the change?

To be absolutely certain of no problems, a landlord is well advised to protect the deposit and issue the prescribed information, however it is submitted that this will not be necessary unless a new tenancy agreement is granted.

The reason we don’t believe the deposit will need protecting is because essentially it is why a deposit was received that matters when protecting a deposit and not necessarily what may then happen in the future.

213 Requirements relating to tenancy deposits

(1) Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.

Note the wording of s.213(1) above states that a deposit received in connection with a shorthold tenancy must be dealt with by a scheme. At the time of receiving the deposit, it was not received in connection with a shorthold tenancy. It was received in connection with a contractual (sometimes known as common-law) tenancy.

Section 213(3) goes onto to say:

(3) Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.

Again, it refers to the receiving of a deposit in connection with a shorthold tenancy. (Also note, contrary to popular belief, there is no reference to the “commencement” of a shorthold tenancy.)

It is submitted that because the deposit was never received in connection with a shorthold tenancy, section 213(1) and subsequent sub-sections do not apply and therefore, there is no requirement to protect the deposit.

This is distinguished from a renewal. If a landlord actually grants a new tenancy sometime on or after 1 October 2010, the position is different. This is because the old tenancy has been surrendered and a new tenancy has been granted (this is called a surrender and re-grant by operation of law). In this type of scenario, the deposit has technically been repaid to the tenant under the old tenancy and then the landlord receives a new deposit under the new tenancy (even though no actual money changes hands). See for example Coutinho v Atkinson Clerkenwell & Shoreditch County Court & Saad v Hogan Brentford County Court, 16 February 2009 (appeal heard in the County Court.)

When the rules change on 1 October, there is no surrender and re-grant. It is simply that what was a contractual tenancy becomes an assured shorthold tenancy, a little like when a fixed term assured (shorthold) tenancy ends, it becomes a statutory periodic tenancy.

A statutory periodic tenancy is not a tenancy that a landlord has any choice over as it is granted by statute. A renewal is a voluntary arrangement and provides a physical surrender and re-grant in particular where the length of the term is increased [Well Barn Farming v Backhouse [2005] 3 E.G.L.R. 109.]

The DCLG were insisting that all deposits required protecting within 14 days of 1 October 2010, however it is being widely reported that they have revised their position after several commentators including this website said it wasn’t necessary. They now say:

We do not consider that deposits taken before 1 October will need to be protected as these were not taken in connection with a shorthold tenancy and therefore do not meet the criteria for protection specified in the Housing Act 2004.

However, agents and landlords should be aware that this is a matter for the Courts to decide and it would be wise to protect deposits on 1 October and certainly on any renewal of the tenancy.

If a landlord wishes to play it safe and protect a deposit anyway, we have confirmed with Kevin Firth of the Deposit Protection Service (custodial scheme) that even if the deposit doesn’t need protecting, they will accept any deposit even for non ASTs. The Dispute Service also allow protection of non AST deposits. Finally, MyDeposits have new rules taking effect from 6 April 2010 which seem to be attempting to stop certain late protections, or charge a fee for a late protection. It is unclear from the rules whether a deposit that doesn’t need protecting under the Housing Act 2004 is allowed and if so whether a late protection would be allowed.

Terms of the tenancy

A potential problem with the change is if the terms of the tenancy in the old agreement are not compatible with an assured shorthold tenancy. Or if there are terms missing from the contractual tenancy that had a landlord or tenant known there was going to be this change would have incorporated.

However, in essence, often the clauses of the two types of tenancy will be similar, so the terms of the contractual tenancy would continue with the assured shorthold tenancy. The main difference will be the notice period for a landlord. The current contractual tenancy will no doubt have a clause allowing the landlord to give one months notice. However, this will be overruled by section 21 Housing Act 1988 and the usual two months notice would be required.

Possession

After the change

As discussed above, after the 1 October, a section 21 notice will need to be served and NOT a notice to quit as would have been the case previously.

There will be no ability for the landlord to forfeit the tenancy after the change.

A section 8 notice will need to be served after the change should the landlord require possession on the grounds of rent arrears or breach of tenancy etc.

Transitional cases

The rules that allow the threshold to be changed unfortunately don’t allow for any transitional provisions. Only the actual threshold figure is to be changed.

Forfeiture for non-payment of rent

If the tenancy is forfeited for non-payment of rent before the change (usually by service of court papers), it is submitted this will remain in place even if the possession hearing takes place after 1 October. This is because the act of forfeiture brings the tenancy to an end immediately and so there will be no tenancy on the 1 October to turn into an assured shorthold.

It has been suggested that a court might order that a section 8 notice should have been served if the forfeiture is during the transitional period. In addition to the above argument that the tenancy was ended before the change, It has also been suggested that, it could be argued that the court has power to dispense with service of the notice. However, bear in mind, this is not available for ground 8 claims (2 months or more arrears) [s.8(5) HA 1988] but the court can dispense with the requirement for other grounds (therefore it should be argued on grounds 10 and 11) but these are discretionary.

8.—    Notice of proceedings for possession.
(1) The court shall not entertain proceedings for possession of a dwelling-house let on an assured tenancy unless—

(a)    the landlord or, in the case of joint landlords, at least one of them has served on the tenant a notice in accordance with this section and the proceedings are begun within the time limits stated in the notice in accordance with subsections (3) to (4B) below; or

(b)    the court considers it just and equitable to dispense with the requirement of such a notice.

…

(5) The court may not exercise the power conferred by subsection (1)(b) above if the landlord seeks to recover possession on Ground 8 in Schedule 2 to this Act.

Notice to Quit

If a notice to quit has been served and expired prior to 1 October, it is submitted, even if a possession hearing takes place after 1 October 2010, there will be no assured shorthold tenancy because similar to forfeiture the expiring of a (valid) notice to quit brings the tenancy to an end. There will therefore be no tenancy on 1 October 2010 to drift into being an assured shorthold.

If a notice to quit is served before 1 October but expires after, the position is less clear. It is submitted that the notice will be valid because it would have been the correct notice to serve at the time of service. The only difference would be that rather than ending the tenancy like a notice to quit normally would, the tenancy would only end after any possession order subsequently obtained was executed [s.5(1A) Housing Act 1988.]

If any of our members needs to serve a notice that may be affected by this transitional period, please contact us, as we will be able to produce a suitably worded notice that will comply with both a notice to quit and a section 21 notice which should avoid any problems.

Pre 28 February 1997 tenancies

One important point to watch out for is any tenancy granted after 15 January 1989 and before 28 February 1997 which was not assured or assured shorthold due to the threshold. As the Painsmith blog points out, these tenancies would turn into assured tenancies and not assured shorthold tenancies.

This has the effect that the tenant would, from 1 October 2010 have full security of tenure for life (albeit at market rent).

Therefore, ideally to avoid any doubt as to whether the tenancy has ended or not, a landlord would be well advised to issue a notice to quit promptly and then commence eviction proceedings against the tenant unless the landlord is happy to have a secure tenant.

Of course, if the landlord does nothing and allows an assured tenancy to take effect, the section 8 notice and in particular ground 8 (two months arrears) will still be available. It’s just the section 21, two months no reason notice that is not available. Also, in this case, there will be no question as to any deposit because it wouldn’t need protecting as a deposit only needs protecting against assured shorthold tenancies.

In University of Plymouth v European Language Centre Ltd [2009] EWCA Civ 784 the Court decided that in legally binding e-mail correspondence it is essential to have an unequivocal offer and acceptance, together with agreed contract terms.

In the case itself , the parties had been in a contractual relationship since 1998. The University of Plymouth had provided European Language Centre Ltd (ELC) with student accommodation and teaching facilities, by a series of annual written contracts. Until 2005, previous contracts had recognised both parties’ intention to continue the contractual relationship in the coming year. However, the 2005 contract contained no reference to contractual obligations for the coming year, 2006.

During 2005, the parties had discussed by e-mail correspondence, the possibility of the University reducing the number of student accommodation available for ELC to use. ELC did not initially reply, but then in later e-mail correspondence expressed that they found the reduction unacceptable and the parties did not therefore formally produce or agree to a contract. ELC later alleged the University was in breach of contract by failing to provide the reduced beds and submitted that that the email of May 2005 constituted an offer of a reduced number of beds, which it had accepted and relied upon.

The Court noted that the parties had established a degree of mutual trust since 1998, and that it was usual for negotiations to be formally concluded by an annual written contract. The Court therefore held that the e-mail correspondence was lacking in detail and considered that it did not amount to an offer nor a clear acceptance. The Court held that an acceptance must be communicated in a way that objectively sets out on what basis the acceptance was being given and based on the facts before them ELC had done nothing which amounted to acceptance, either by words or conduct. The parties’ comments within the exchange of emails together with the previous contracts were not enough to determine that an unequivocal offer and acceptance had been made.

This decision emphasises the importance of the four essential elements which must exist for there to be a legally binding contract that is; offer, acceptance, consideration and an intention to create legal relations.

Agents are therefore advised to ensure that there is clear communication with Landlords and Tenants and ideally all negotiations should be concluded by written contracts which are clear and free from ambiguity. We have noted that many agents automatically place the phrase ‘Subject to Contract’ within their signature which will have the effect of preventing any contract being concluded this way. However, they should ensure that they obtain instructions and clarify that they or their clients do not want to be bound by informal email or telephone exchanges and should not assume that this is the best position.

I advertised a property at £450pcm. The particulars showed this amount and so did the advert. On signing the tenancy, the tenant also paid £450 first months rent and £450 deposit. The following month, £357 rent was paid instead of £450 along with a letter pointing out that the tenancy agreement stated the rent was £357.00pcm and this was all they were going to pay from now on. On investigation, I have found I have made a mistake on the tenancy agreement and the rent does state £357pcm when it should have said £450. The tenancy is for twelve months.

A:

Crucially, in this case, it seems there is a good amount of evidence showing that both parties intended the rent to be £450. In particular, this is evidenced by the tenant paying £450 at the commencement of the tenancy.

Unfortunately though, getting this put right is not going to be simple.

Rectification

Rectification is an equitable remedy by which the court corrects instruments in order to give effect to the real bargain between the parties. Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. [Mackenzie v Coulson (1869) L.R. 8 Eq. 368, 375, per James V.C.] Thus what is corrected is not the bargain, but the expression of the bargain.

In order for a claim to rectification to succeed[amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest'] on the ground of a common mistake it must be shown by convincing evidence [Joscelyne v Nissen [1970] 2 Q.B. 86, 98; Lansdown Estates Group Ltd v TNT Roadfreight (UK) Ltd [1989] 2 E.G.L.R. 120; London Regional Transport v Wimpey Group Services Ltd (1987) 53 P. & C.R. 356; Brimican Investments v Blue Circle Heating [1995] E.G.C.S. 18.]:

(1) that the parties to the lease had a continuing common intention in regard to the terms of the lease;

(2) that intention continued up to the moment when the lease was executed;

(3) that the common intention was manifested by some outward expression of accord;

(4) that the lease as executed does not represent the true intention of the parties at the moment of the execution of the lease;

(5) that the lease, if rectified would represent their true intention at that time. [ibid.]

The outward expression of accord may be shown by estate agents’ particulars [Central & Metropolitan Estates v Compusave [1983] 1 E.G.L.R. 60.]

The remedy of rectification requires some mistake in the document sought to be rectified.  Rectification is usually granted where words in a lease have been wrongly omitted or wrongly included. [e.g. Cowen v Truefitt Ltd [1899] 2 Ch. 309 (parcels wrongly described).]

The fact that the mistake was negligent is no bar to relief [Weeds v Blaney [1978] 2 E.G.L.R. 84, CA.] ; nor is a clause which states that the written agreement is the parties’ entire agreement. [JJ Huber (Investments) v Private DIY Co [1995] E.G.C.S. 112.]

Actions for rectification are assigned to the Chancery Division. [Supreme Court Act 1981 s.61; Sch.1.] However, any other Division of the High Court may treat an instrument as rectified if the defendant to an action sets up facts which, in the Chancery Division, would entitle him to have it rectified. [ibid.] A claim for specific performance may be joined in the same action as a claim for rectification.

Correction of errors by construction

In some cases the court is able to correct errors as a matter of construction, without recourse to the remedy of rectification. In order to do so the mistake must be clear. [Wilson vWilson (1854) 5 H.L. Cas. 40.]

The principle applies “where a reader with sufficient experience of the sort of document in issue would inevitably say to himself ‘Of course X is a mistake for Y.’ ” [East v. Pantiles (Plant Hire) (1982) 263 E.G. 61.] Thus the court may correct an obvious misnomer of one of the parties [Nittan (U.K.) v. Solent Steel Fabrications [1981] 1 Lloyd’s Rep. 633.] ; or an obviously erroneous reference to a clause in the lease. [Booker Industries Pty. v. Wilson Parking (QLD) Pty. (1982) 149 C.L.R. 600.]

However, The law of construction excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification [para 11.007 Woodfall Landlord & Tenant].

Therefore, an application for the correction of the error as a matter of construction is most likely not suitable in this case because the key evidence is the adverts and particulars which were essentially the negotiations leading to the execution of the tenancy.

What next

The Chancery Division is part of the High Court and the case will be dealt with by a senior judge. Although the Guild can assist, it would be very advisable to employ the services of a solicitor. Hopefully with an adequate letter before action outlining all the evidence would put off a tenant continuing or defending the claim because there could be high costs involved if they were unsuccessful.

The problem of course is a question of costs. Claims in the High Court such as this can be expensive so a balance will need to be struck over the value of claim.

A cheaper “gamble” would be to take the matter to either the small claims court or issue a section 8 notice on Ground 10 (any amount of rent arrears). This would be issued on the hope that the court would look at the case and make an order to the effect that the full rent is “lawfully” due. Of course, a savvy judge may dismiss the claim on the basis that the tenancy must first be rectified as discussed above. However, because of the relative low cost of brining these proceedings as against a claim for rectification, it may be worth the gamble.

Note: If an agent has made this error, it is our opinion that the landlord will still be entitled to be paid by the agent the full proper rent as this would have been a mistake made by the agent that shouldn’t affect the landlord.

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