General

The difficulties with seeking possession under the section 21 regime.

A section 21 notice is served under section 21 of the Housing Act 1988 and is used to provide notice to the tenant(s) that the landlord is seeking possession of the property, either after the fixed term of the tenancy ends or during a tenancy with no fixed end date.  

The Deregulation Act 2015

The Deregulation Act 2015 imposed a series of requirements on landlords of Assured Shorthold Tenancies (ASTs) in England, restricting the ability of a landlord to serve a section 21 notice.

The Deregulation Act 2015 provisions apply to all ASTs of property located in England, regardless of whenever the AST was granted, from 1 October 2018.

What requirements are imposed by the Deregulation Act 2015?

The Deregulation Act imposed the following requirements:

• A prescribed form of section 21 notice – this is available from the Gov.UK website.
• It is not possible to serve a section 21 notice within the first 4 months of a fixed term AST.
• Possession proceedings must be commenced within 6 months of when the section 21 notice was given. If the tenancy requires more than 2 months’ notice to be given, then the possession proceedings must be brought within 4 months of the termination date.
• The landlord must provide the tenant with an energy performance certificate and a gas safety certificate – the landlord cannot validly serve a section 21 notice if these requirements have not been complied with.
• The landlord must also provide prescribed information to the tenant, set by the Government, which relates to the rights and responsibilities of the parties under the AST – again, a landlord cannot validly serve a section 21 notice if these requirements have not been complied with. This information is currently set out in the How to rent: the checklist for renting in England guide which is available for download from Gov.UK.
• The Landlord must also comply with the tenancy deposit scheme legislation and Houses of Multiple Occupation legislation.

Can the landlord remedy a failure to adhere to the requirements?

Following the introduction of these provisions, there have been cases in the County Court where the question as to whether landlords can comply with the obligations in relation to providing gas safety certificates and energy performance certificates to the tenant has been debated. Each respective court found that the issues could not be remedied late and therefore the landlords were precluded from serving a section 21 notice.

Binding authority from the senior courts is awaited on this point, although it cannot be taken that Parliament’s intention was to preclude a landlord from serving a section 21 notice in these circumstances, so further clarification is awaited on this point.

The Tenant Fees Act 2019

The Tenant Fees Act 2019 (TFA 2019) has also had a profound effect on the ability of landlords to seek possession under the section 21 regime. The Act introduced protections for most residential tenants in the private rented sector in England.

The TFA 2019:

• Restricts the type and amount of payments that landlords and letting agents can require from tenants of most assured shorthold tenancies, student accommodation and under licences to occupy.
• Restricts the amount of tenancy deposit.
• Restricts the amount of a holding deposit and sets a timetable for dealing with repayment of the same.
• Imposes non-compliance sanctions.

The provisions came into force on 1 June 2019 and apply immediately to the grant of new tenancies, with a grace period of one year for existing tenancies.

Which payments are prohibited?

Payments are prohibited under the TFA 2019 unless they are expressly listed as a “permitted payment”. These include:

• Rent payable.
• Tenancy deposit (limited to five weeks’ rent if the annual rent is less than £50,000, or six weeks’ rent if annual rent is over £50,000).
• Holding deposit (limited to one week’s rent).
• Payments on certain default events (loss of key/security device, a failure to pay rent or other reach of the tenancy).
• Fee for the variation, assignment or novation of the tenancy (limited to £50/reasonable costs).
• Payment due to early termination of the tenancy.
• Other payments including Council tax, Utilities, TV licence, landline phone, internet and cable/satellite TV.

What kind of tenancies do the restrictions apply to?

The tenancies included are Assured Shorthold Tenancies (not including social housing or long leases (i.e. more than 21 years)), student lettings and licences to occupy in relation to housing.

A landlord for the sake of TFA 2019 is a licensor and a person who is either proposing to be or ceased to be a landlord or licensor. A tenant for the sake of TFA 2019 includes a licensee and a person who is either proposing to be or ceased to be a tenant or licensee.

A letting agent for the sake of TFA 2019 encompasses a very wide definition and is a person who engages in letting agency work. This is defined as where, in the course of a business, a person acts on instructions from a landlord seeking to find someone to whom to let housing or from a tenant looking for housing to rent.

The prohibition

A landlord or letting agent must not require a tenant, a tenant’s guarantor or a person acting on behalf of the tenant to do any of the following actions “in connection with a tenancy”:

• Make a prohibited payment to the landlord or to a third party.
• Enter into a contract with a third party for the provision of a service or for insurance, other than a contract to provide a utility or communication service to the tenant.
• Make a loan to anyone.

‘In connection with a tenancy’ includes the following scenarios for landlords:

• In consideration of the grant, renewal, continuance, variation, assignment, novation or termination of a tenancy.
• Pursuant to a provision in a tenancy agreement that requires, or purports to require, them to do any of those things listed above:
  • in the event of an act or default of a relevant person; or
  • if the tenancy is varied, assigned, novated or terminated.
• On entry into a tenancy agreement that requires, or purports to require, them to do any of those things in any circumstances otherwise than in the event of an act or default of a relevant person or if the tenancy is varied, assigned, novated or terminated.
• As a result of an act or default by a relevant person relating to the tenancy or the housing which is let by the tenancy unless pursuant to, or for the breach of, a provision of a tenancy agreement.
• In consideration for provision of a housing reference for that person.

‘In connection with a tenancy’ include following situations for letting agents:

• In consideration of arranging the grant, renewal, continuance, variation, assignment, novation or termination of a tenancy.
• Pursuant to a provision of an agreement with the person relating to the tenancy in the event of an act or default by a relevant person, or if the tenancy is varied, assigned, novated or terminated.
• As a result of an act or default of a relevant person relating to the tenancy or the housing which is let by the tenancy unless pursuant to, or for the breach of, an agreement entered into before the act or default.
• In consideration for provision of a housing reference for that person.

Therefore, the definition of ‘in connection with a tenancy’ is widely drafted in respect of both landlords and letting agents.

What happens to a term in an agreement which breaches these rules?

A term in a tenancy agreement or letting agent agreement which breaches the prohibitions on requiring payments are not binding on the tenant, the tenant’s guarantor or anyone acting on behalf of the tenant. The rest of the agreement will continue to have effect so far as it is compatible.

What are the consequences?

A section 21 notice cannot validly given in respect of an AST if the landlord is in breach of the prohibitions applying to landlords and while a prohibited payment paid to the landlord or holding deposit held in breach of the prescribed terms has not been repaid to the relevant person, unless they have consented to the money being applied towards rent under the tenancy or towards the tenancy deposit.

Where a person has breached the prohibitions, repayment obligations or requirements for holding deposit monies, an enforcement authority can apply a financial penalty of up to £5,000 where they are satisfied beyond reasonable doubt. Usually the local trading standards authority is the appropriate enforcement authority, if not the local district council.

A landlord or letting agent is guilty of an offence if they commit a further breach of the prohibitions within five years of having had a financial penalty imposed or being convicted of an offence for an earlier breach. The penalty for the criminal offence is an unlimited fine and a banning order offence under the Housing and Planning Act 2016, meaning that these persons cannot make a transfer of an estate in land without the permission of the First Tier Tribunal.

As an alternative to prosecution, an enforcement authority can impose a financial penalty of up to £30,000 where it is satisfied beyond reasonable doubt that an offence has been committed.

This article is for general commentary only and does not constitute legal advice.  If you would like to discuss any of the issues discussed in this article, please contact Liam Meanwell – lmeanwell@cheyneygoulding.co.uk, or another member of our team.

Cheyney Goulding LLP, solicitors in Guildford, Surrey

This article sets out a general overview of the litigation process in England and Wales under the Civil Procedure Rules (CPR), including steps to be taken before a claim is commenced. It does not cover every possible stage of the process, but highlights those which are likely to apply.

As each case is different, the particular steps required, whether a particular protocol applies and the timetable to be followed, will depend on the facts, circumstances and the dispute. There are also factors that cannot be predicted in advance, such as actions taken by the other side, evidence that emerges during the case and directions or orders given by the court. The following summary is intended to give a general indication of the procedure and steps that may be required.

The overriding objective

One important principle that underpins litigation in the English courts is the “overriding objective” of enabling the court to deal with cases justly and at proportionate cost. The key factors include:

• Enforcing compliance with the CPR and any court orders.
• Dealing with a case in a way that is proportionate to the amount of money involved, importance, complexity of the issues and the financial position of each party.
• Saving expense.
• Ensuring that the case is dealt with expeditiously and fairly.

These factors must be borne in mind at each step of the litigation process. As part of its case management powers, the court may impose penalties on any party that does not comply with the court rules or orders. These penalties can include costs sanctions or striking out all or part of the evidence or claim.

Pre-action protocols

The courts will expect potential parties to act reasonably in exchanging information and documents relevant to the dispute before proceedings are even commenced. The aim is to avoid the need for legal proceedings where possible. There can be adverse costs consequences if a party fails to follow the relevant pre-action procedure.

To ensure compliance with the courts’ guidelines, it is normal to send a “letter before claim” to the potential defendant. This letter sets out the details of the claim and the remedy sought and lists the key documents relevant to the dispute. It may include a request for documents or information from the defendant. The letter should also invite the defendant to agree to some form of alternative dispute resolution (ADR) procedure, such as mediation.

It is normal to allow the defendant a reasonable time to respond to the letter before claim. Depending on the response, it may be appropriate to issue proceedings, or to continue correspondence with the defendant.

Statements of case

Each party to the proceedings must prepare certain documents that contain the details of the case they wish to advance. These documents (the statements of case) must be filed at court and served on the other party.

Proceedings are started by issuing a claim form at court and paying the required court fee. The claim form contains a concise statement of the nature of the claim and the remedy sought (for example, damages). It must also include a statement of value of any money claim.

The particulars of claim set out full details of the claim, including the alleged facts on which the claim is based.

The defendant must file an acknowledgment of service within 14 days of service of the particulars of claim, if he does not file a defence at this time.

Unless the defendant admits the whole of the claim, he must file a defence. In the defence, the defendant must state which allegations in the particulars of claim he admits, which he denies and which are neither admitted nor denied but he requires the claimant to prove. Where the defendant denies an allegation, he must state reasons for the denial and put forward his own version of events.

If a defence is not filed, it is possible to apply to the court for judgment in default of defence.

Depending on the factual circumstances, the defendant may make a counterclaim against the claimant, or an additional claim against another party to the claim or a third party. For example, he may make a claim for a contribution or indemnity from another party.

A counterclaim or an additional claim may be served with the defence without the court’s permission, or at any other time with the court’s permission.

Subsequent statements of case

For the claimant, it is possible to then file a reply to the defence, but there is no obligation to do so.

In principle, it is then possible for there to be further statements of case, such as a reply to the defence to counterclaim. In addition, a party may seek to amend its claim or defence, although it is likely to require the court’s permission to do so.

Statements of truth

Each statement of case must be verified by a statement of truth. This confirms that the person making the statement believes that the facts stated in the document are true. Statements of truth must also be signed in each witness statement and certain other documents filed in proceedings.

Interim remedies and final judgments without trial

There are certain procedures where it is possible to obtain a remedy or judgment before a trial. In some circumstances, this might avoid the need for a trial altogether. Some examples of interim remedies are mentioned below.

If the defendant fails to file an acknowledgement of service or defence within the relevant time limit, it may be possible to obtain a judgment in default of defence, which means that judgment is entered on the claim without a trial.

Summary judgment is a means of obtaining judgment against the defendant at an early stage, avoiding the need to pursue the claim to trial. It may be appropriate to apply to court for summary judgment, either on the whole of the claim or on a particular issue, if it can be established that the defence has no real prospect of succeeding or there is no other compelling reason why the claim or issue should be disposed of at a trial.

Summary judgment may also be sought by a defendant on the grounds that there is no real prospect of the claim succeeding.

The court has the power to strike out a party’s statement of case (including a claim form, particulars of claim or defence), either in whole or in part, if the statement of case discloses no reasonable grounds for bringing or defending the claim the statement of case is an abuse of process or there has been a failure to comply with a rule or court order.

An injunction is an order that requires a party to do, or to refrain from doing, a specific act or acts. For example, a freezing injunction could be sought to preserve the defendant’s assets, pending judgment or final order, if there is a risk that the defendant will dispose of assets that would otherwise be available to meet his liability.

An application for injunctive relief is not a step that should be taken lightly. A claimant is usually required to give an undertaking in damages, that is, an undertaking to compensate the defendant for any loss incurred, should it later transpire that the injunction was wrongly granted.

Case management

After a defence has been filed, the court will serve a notice of proposed allocation to either the small, fast or multi track. Subject to the track case, the notice of proposed allocation will require the parties, by the specified date, to:

• Complete, file and serve a directions questionnaire.
• File proposed directions.
• Comply with any other matters such as filing and serving costs budgets.

Directions questionnaire

The aim of the directions questionnaire is to provide information to assist the court in allocating the case to the appropriate track and in giving directions for how the case should be conducted.

The directions questionnaire must be filed by the date specified in the court’s notice of proposed allocation.

Case management conference

A case management conference (CMC) is a procedural hearing where the court gives directions for the future conduct of the case until trial. There may not be a CMC if the parties have agreed directions, or the court issues its own directions, and there is no other reason to have a hearing. The court may order that a further CMC be held, particularly in complex cases.

Interim applications

An interim application is made when a party seeks an order or directions before the trial or substantive hearing of the claim. An application may be made for a variety of procedural or tactical reasons, depending on the circumstances (for example, to seek an interim injunction, specific disclosure of documents or an extension of time to complete a procedural step).

If the other side makes any interim applications, it will be necessary to incur additional time and cost in responding to them. Any costs orders that the court makes in relation to an interim application may have to be paid during the course of the proceedings.

Settlement, Alternative Dispute Resolution and Part 36 offers

It is important to keep settlement in mind at all stages of the proceedings. The CPR and the courts encourage settlement of disputes in a number of ways; in particular, by the use of ADR or Part 36 offers to settle the case. Although the court cannot order the parties to enter into ADR, it may impose costs penalties on a party who unreasonably refuses to participate in a form of ADR. If there are any prospects of settling, it usually better to do so sooner rather than later, to avoid further legal costs.

Evidence

To succeed in litigation, a claimant must prove his case on a balance of probabilities. It is necessary to adduce evidence to support each of the essential ingredients of the claim. The defendant will also need to adduce evidence to support his defence to some or all of the essential ingredients of the claim.

The evidence usually comprises:

• Contemporaneous documents (including electronic documents as well as hard copies) intended to prove the issues in dispute.
• Statements of factual witnesses, to tell the story behind the dispute and to fill in any gaps that the documents leave.
• Expert evidence (where appropriate and permitted), to assist the court when the case involves complex technical, academic or foreign law issues.

Disclosure of documents

The purpose of disclosure is for each party to make available documents which either support or undermine any party’s case. This may include documents that are harmful, sensitive or confidential. Disclosure is often a time-consuming and costly stage in litigation.

Initially, it will be necessary to identify:

• What documents exist (or may exist) that are or may be relevant to the matters in issue in the case.
• Where and with whom those documents are or may be located.
• The estimated cost of searching for and disclosing them.

Documents are disclosed by listing them and serving the list on the other side. It will be necessary to sign a disclosure statement in the list of documents, certifying understanding of the duty of disclosure and that, to the best of their knowledge, they have complied with that duty.

The most important point to note is to preserve all documents that are potentially disclosable, including electronic documents such as emails, voicemails and text messages. Care should also be taken to avoid creating any document that might damage the case, and to limit the circulation of existing documents relating to the dispute.

Inspection of documents and privilege

After the parties have exchanged their lists of documents, each party is entitled to inspect the other’s disclosed documents. In practice, inspection often takes place by way of exchange of copy documents.

Privilege entitles a party to withhold documents from inspection. In particular:

• Legal advice privilege protects confidential communications between a client and his lawyer that came into existence for the purpose of giving or receiving legal advice.
• Litigation privilege arises when litigation is contemplated, pending or in existence, and protects communications between a client or his lawyer and a third party, provided certain criteria are satisfied.
• Without prejudice privilege applies to communications made in a genuine attempt to settle a dispute.

Witness statements

If the claim proceeds, it will be necessary to prepare a written statement of the evidence that each individual intends to give to support the claim. These statements will be sent to the defendant, who will prepare and serve his own statements.

The time period for exchanging witness statements will be agreed by the parties or ordered by the court at the first CMC. The court may also give directions identifying the witnesses who may give evidence, or limiting the number of witnesses and the issues that may be addressed.

A witness statement must:

• Be in the witness’s own words, if practicable.
• Indicate which of the statements in it are made from the witness’s own knowledge and which are matters of information or belief and state the source of those matters.
• Include a statement of truth.

A witness may be called to trial to be cross-examined on his statement.

Expert evidence

Expert evidence is used where the case involves matters on which the court does not have the requisite technical or academic knowledge, or the case involves issues of foreign law.

The court’s permission to call expert evidence is always required. If it grants permission, the court will limit the evidence to the named expert or field ordered and may specify the issues which the expert should address. The court may order that expert evidence is to be given by a single joint expert, namely an expert who is instructed on behalf of both parties.

Expert evidence is usually given in the form of a written report, which must be the independent product of the expert. The expert’s overriding duty is to the court and not to the party that instructed him. Where separate experts are instructed by the parties, reports are usually exchanged simultaneously, but may be exchanged sequentially.

Following the simultaneous exchange of expert reports, a party may put questions to the other party’s expert for the purpose of clarifying his report. Questions must normally be put within 28 days of service of the report. There is then likely to be a discussion between the experts for the purpose of reaching an agreed opinion on the issues where possible. An expert may give oral evidence at trial only with the court’s permission.

Preparation for trial

The courts are reluctant to postpone a trial date or period that has been fixed without a very good reason. Therefore, although most cases settle, it is important to be properly prepared in case the matter does proceed to trial. Some of the steps required are set out below.

Pre-trial review

The court may order that a pre-trial review (PTR) be held, particularly in more substantial cases where there are significant issues between the parties. The main purposes of the PTR are to:

• Check that the parties have complied with all previous court orders and directions.
• Prepare or finalise a timetable for the conduct of the trial, including the issues to be determined and the evidence to be heard.
• Fix or confirm the trial date.

Preparation of trial bundles

Trial bundles are files of the statements of case, relevant orders and key evidence that are used by the court and the parties during the trial. Preparing the trial bundles is usually the responsibility of the claimant’s solicitors but the court expects co-operation between the parties to try to agree the documents to be included. It can be a time-consuming task and requires significant planning and attention to detail.

Preparation of skeleton arguments

Each party will be required to supply the court and the other party with a written skeleton argument, namely a written outline of that party’s case and arguments before trial. Skeleton arguments are usually drafted by counsel.

Trial and judgment

• The length of the trial will depend on the complexity of the legal and factual issues to be resolved and the number of witnesses permitted to give evidence.
• The trial will be held in public, unless the court has ordered that it may be held in private because it involves matters of a confidential nature and publicity would cause harm or damage.
• The trial will normally be heard by a single judge alone.
• The judgment may be given immediately after the trial but is often “reserved” to a later date, particularly in complex matters. This means that the parties would not know the judge’s decision until sometime after the end of the trial.

Costs

The general rule regarding costs in litigation is that, if the claim succeeds, the claimant will be entitled to recover their costs from the defendant. On the other hand, if the claim fails, the claimant would be required to pay the defendant’s costs. However, the court has discretion to make a different costs order. The court will take into account factors such as the conduct of the parties and any Part 36 or other admissible offers to settle the case.

It is very unusual for a party to be able to recover all of the costs incurred in the litigation. The actual amount of costs to be paid is subject to an assessment process, unless the parties can agree the amount that will be paid. The standard basis of assessment is to allow costs to be recovered that were reasonably incurred, reasonable in amount and proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred.

If costs budgets are involved, the court will also take into account the party’s costs budgets for each stage of the claim. Each party is required to submit a costs budget and to revise it as appropriate as the case progresses. If a party’s actual costs exceed its budget, the excess may not be recoverable from the paying party.

The estimated costs of the litigation can be one of the most significant factors to consider when deciding whether to pursue a case.

Enforcement

Once judgment has been obtained, the judgment debtor should pay voluntarily any money owed under the judgment. If payment is not made, there are a number of enforcement procedures available to the judgment creditor to enforce payment. Examples include:

• Execution against goods owned by the judgment debtor, where an enforcement officer is commanded to seize and sell a judgment debtor’s goods.
• An attachment of earnings order, under which a proportion of the judgment debtor’s earnings is deducted by his employer and paid to the judgment creditor until the judgment debt is paid.
• A charging order over property owned by the judgment debtor.

The appropriate procedure will depend on the circumstances, including the nature and location of the debtor’s assets.

Appeals

It is open to the unsuccessful party to apply for permission to appeal a judgment or order. A decision may be appealed only on the basis that it was either wrong or unjust because of a serious procedural or other irregularity in the proceedings. The general rule is that notice of an appeal must be filed within 21 days of the judgment or order (subject to certain exceptions).

If there is an appeal, it may be necessary to apply for a stay of any order or enforcement of the judgment.

This article is for general commentary only and does not constitute legal advice.  If you would like to discuss any of the issues discussed in this article, please contact Sam Major – smajor@cheyneygoulding.co.uk , or another member of our team.

Cheyney Goulding LLP, solicitors in Guildford, Surrey

And how will it affect me and my loved ones?

Inheritance tax (IHT) is charged on your death at the rate of 40% based on the value of your assets. Everyone benefits from something called “the nil rate band”. This means that at the moment a 40% tax rate applies if your estate exceeds £325,000.

However, since 6 April 2017, a further additional residence nil rate band (RNRB) connected with your house can sometimes be claimed, meaning that less IHT may be paid when the family home is left to children, grandchildren and some other individuals.

The exact wording of your Will, and the way you own your property, can potentially affect the ability to claim this additional relief, so it is crucial that everyone reviews their Will, or, if they do not have one, make sure a Will is put in place as soon as possible. to make sure that your family can claim the RNRB when you or your spouse, or civil partner, die.

How will the RNRB impact my estate and family?

If you leave your interest in the family home to direct descendants, such as your children or grandchildren, or even some other individuals such as stepchildren or foster children, your estate may well be able to claim the tax benefits offered by the RNRB. This is in addition to the existing £325,000 Nil Rate Band,

This can mean that by having the correct wording in your Will and using the RNRB,  many thousands pounds worth of additional assets could pass to the next generation without a charge to IHT.

Although the RNRB cannot be claimed on the estate of someone dying before 5 April 2017 there are still further benefits available, as your surviving spouse or civil partner may be able to carry forward RNRB which can be used when they eventually die.

At the moment, subject to some conditions, your family can benefit if:

• You leave an estate valued at less than  £2 million. This is likely to rise with inflation from 6 April 2021. The RNRB is tapered down for estates worth more than this.
• You leave your home to “qualifying beneficiaries”.

Even if your estate exceeds £2 million it is still prudent to have your Will reviewed as, with proper planning, it may still be possible to arrange your affairs so that the RNRB can be claimed.

How much is the RNRB worth?

Tax year	Residence Nil Rate Band	Standard Nil Rate Band	Combined nil rate bands for both spouses (or civil partners)
Before 2017-18	£100,000 (can be carried forward for surviving spouse or civil partner’s use).	£325,000	£850,000
2017-18	£100,000	£325,000	£850,000
2018-19	£125,000	£325,000	£900,000
2019-20	£150,000	£325,000	£950,000
2020-21	£175,000	£325,000	£1,000,000

The table below shows the RNRB levels that the government has announced (which can be added to the main nil rate band to increase the amount of assets in your estate that will be taxed at 0%). The combined nil rate bands could be worth as much as £1 million by 2021.

Selling your home.

The good news is that even if you sell your home or downsize usually the RNRB is still available (provided that you sold your home on or after 8 July 2015) and at least part of your estate is inherited by a qualifying beneficiary.

I live in a property I have already gifted to my children.

If you have already given away your home to your children, it does not automatically disqualify your estate from claiming the RNRB. If, for example, you are continuing to live in the house, and are not paying any rent, it may still be possible to claim the RNRB, and likewise if you live with your children in the house together. However, make sure your Will is reviewed to avoid problems later.

I own more than one property.

As long as one of them has been your residence during your lifetime, your executors can decide which one will benefit from the RNRB.

Review your will or make one for the first time

As you can see the Residential Nil Rate Band has made an enormous difference to the way we plan our Wills, and how we leave our assets to our loved ones. We strongly recommend that you review your will (or make a will if you don’t have one). The conditions for claiming the RNRB are complicated, and we would be delighted to explain them to you, to ensure that your family can benefit from the enhanced nil rate band when you or your spouse or civil partner die.

It is particularly important to be aware that your existing will may well need to be updated to make maximum use of this new tax-saving measure.

Examples of common situations

The surviving spouse wants a life interest in their spouse’s share in the house.

John and Mary, a married couple, jointly own their home. They have four adult children. John’s will states that Mary should have a life interest in his half of the home after he dies and for the four children to inherit his half when Mary dies. Mary’s will mirrors Paul’s. If Paul dies before Mary his estate will not benefit from the RNRB, but Mary’s estate can carry forward his unused RNRB as well as using her own RNRB.

Home already sold

Douglas is a widower with two adult children. His wife died in 2014. He sold his home in August 2015 and now lives in a rented, warden-assisted flat. Even though he no longer owns a property, he can benefit from the RNRB if he leaves some of his estate to his children. He can also carry forward his wife’s unused RNRB even though she died before 6 April 2017.

Unmarried and no children

Michael is not married or in a civil partnership. He owns his home jointly with his partner Sarah who is a widow. She has two adult children from her marriage. Michael cannot benefit from the RNRB because he does not have any children and has not adopted Sarah’s children. She can potentially benefit could benefit from the RNRB IF she leaves her interest in the family home to her children. It would be different if Michael and Sarah were married as Michael could use his RNRB because Sarah’s children would be his stepchildren.

Home already gifted

If, for example, a parent has already gifted her home to her daughter some time ago, the RNRB will be available if the parent but continues to occupy the property without paying rent and dies on or after 6 April 2017.

Assets worth over £2 million

Let’s say Tim and Patricia jointly own a house worth £1 million. They have two adult children. Tim has investments worth £1 million and Patricia likewise. Tim’s will gives his entire estate to Patricia if he dies first. Patricia’s will mirrors Tim’s. Tim will not be able to benefit from the RNRB when he dies because his estate will pass to his wife rather than his children. If Patricia survives Tim and inherits everything, her estate could be worth more than £3 million, so the RNRB cannot be claimed on her death. In these circumstances we can help you take the necessary steps to avoid this. For example, Tim and Patricia could revise their wills so that part of the estate of the first to die is inherited by their children, even if their own rights are fully protected until their own demise.

We would be delighted to offer you a free initial meeting so that we can discuss what planning may assist you and your family. Please contact Christopher Seddon (cseddon@cheyneygoulding.co.uk) or another member of our team.

This article is for general commentary only and does not constitute legal advice.  If you would like to discuss any of the issues discussed in this article, please get in touch.

Cheyney Goulding LLP, solicitors in Guildford, Surrey

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Store closures, services moving online and retailers losing business.  What challenges do companies face on the UK high street in 2019?

Businesses in various consumer facing sectors are facing uncertain times and economic hardship.  Last week saw the department store retailer Debenhams undergoing Company Voluntary Arrangements (CVA) to close numerous stores and the travel agent Thomas Cook announced their closure.  Some commentators have declared there to be a high street ‘crisis’; but is this really the case?

Unfortunately, there are some valid reasons and statistics to support these concerns.  The first half of 2019 recorded a total of 2,868 store closures, equivalent to approximately 16 shops a day.  This figure is up by more than 6.5% from closures reported last year and is possibly one of the most severe declines the retail sector has faced in 6 years.  The consequences of this are evident.  Major chains and household names have gone into administration including Patisserie Valerie and Debenhams.  Not only have closures cost thousands of jobs, but a mark has been left on the high street to the extent that 1 in 10 shops in the UK are reportedly vacant.   

The ‘crisis’ is not merely limited to retail stores and outlets. Indeed, the restaurant industry has been experiencing significant pressure.  High profile restaurant groups and chains including Carluccio’s, Gourmet Burger Kitchen, Byron and Prezzo have all been forced to close large numbers of stores.  

One of the most publicised collapses happened to Jamie Oliver’s chain of Italian restaurants.  Upon the closure of Jamie’s Italian restaurants, Mr Oliver cited the ‘struggles of the casual dining sector’ and ‘soaring business rates’.  While the reasons Mr Oliver provides are genuine issues, a closer inspection of his business would argue differently.  Less than favourable reviews, a failure to adapt to modern consumer needs as well as an unsustainable expansion plan are possibly more plausible reasons for the closures.  Additionally, the business failed to capitalise on the boom of tech starter-ups, like Deliveroo and Uber Eats, which provide a powerful new means for businesses to connect to customers. 

Equally, the case with Thomas Cook, the 178-year old holiday operator, is both tragic and unfortunately expected.  The product and services the company provided were becoming less in demand.  Consumers seeking to travel have become more reliant on booking services directly online which, consequently, removes the need for holidaymakers and agents entirely.     

With new online businesses emerging and consumer behaviour shifting away from physical stores, the internet has created new opportunities and threats.  The added convenience and accessibility of online shopping has naturally contributed to the decreased footfall in local shopping centres.  Retailers also must contend with rising operating costs from increased minimum wages, commercial leasehold rents and business rates.

In response to this, the government has established the Future High Street Fund.  This scheme will invest over £1 billion in order to breathe new life into a large number of shortlisted towns and cities.  Local authorities will be supported with the development of projects, improving transport, converting empty retail units and other plans to make high streets worth visiting.    

While this is an interesting matter to follow, high streets and town centres are not going anywhere, and any ‘crisis’ is unlikely to change that.  The UK high street plays a crucial role in generating income for the UK economy.  The government’s high street scheme is therefore welcomed, if the result boosts infrastructure, improves the environment where retailers operate and increases consumer footfall.  Now, more than ever, businesses must remain conscientious of consumer behaviour and market trends.   

This article is for general commentary only and does not constitute legal advice.  If you would like to discuss any of the issues discussed in this article, please get in touch.

Cheyney Goulding LLP, solicitors in Guildford, Surrey

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Deliberate Confusion in respect of Goods or Services provided?

Passing Off is commonly defined as “nobody has the right to represent his goods [or services] as the goods [or services] of somebody else”. It is often encountered in matters relating to title, name or get-up (normally a visible mark or sign, which can be the goods themselves, or, more often, the packaging or logo), normally in a business context.

It can also be an important action in the protection of characters in cases which fall outside the ambit of copyright and trade mark protection and is also central to internet domain name disputes where there are no relevant registered trade marks.

There has been significant case law to consider what would constitute a successful Passing Off action, initially with the characteristics found in the case of Erven Warnik BV v J. Townend & Sons (Hull) Ltd [1980] RPC 3 (the Advocaat case). Subsequent case law continued (and continues) to modify the law of Passing Off however it is arguable, further to the case of Reckitt & Colman v Borden [1990] RPC 431 HL (more commonly known as the Jif Lemon case), that Passing Off could be expressed in terms of the following three elements:

1. That there was a goodwill or reputation* attached to the goods or services which the Defendant supplied in the mind of the purchasing public by association with their get-up;
2. That there was a misrepresentation (that does not have to be deliberate) to the public likely to lead the public to believe that the goods or services offered by the Defendant were the goods or services of the Claimant or associated with the Claimant; and
3. That the Claimant is suffering or is likely to suffer damage by reason of the erroneous belief engendered by the Defendant’s misrepresentation. It is irrelevant whether or not the public was aware of the Claimant’s identity as the manufacturer or supplier of the goods in question, so long as they were identified with a particular source.

*Reputation alone does not suffice for Passing Off.

One of the key points in a Passing Off claim is the likelihood of confusion or actual confusion in the public and what constitutes the public in respect of the alleged confusion. Again this is fact specific and some instances may be easily defined. In the case of Whirlpool Corp. v Kenwood Ltd [2009] RPC 2, p.19 there was found to be no confusion by the relevant public when selecting and purchasing a “Classic” KitchenAid Artisan mixer (which at the time was over £300 and was the only domestic mixer in this price range) and a kMix Kenwood product.

There are a number of defences to a claim for Passing Off and each claim will be fact specific, however  it may be possible to show how many companies include a similar name or term, trade mark registrations, showing sufficient goodwill and reputation already acquired – turnover, advertising spend, media coverage and social media etc. which may impact on whether or not there is a misrepresentation or confusion to the public and prove a successful defence.

For a good defence, speed is often of the essence, as the less time that has elapsed between the “wrongful” trader adopting the mark or sign and an action being commenced, the greater the chance of an injunction application in preventing the initial use of a mark or sign and the less evidence of confusion will have to be adduced.

This guide is for general information only and does not constitute legal advice.  If you would like to discuss anything in this article please get in touch.

See other recent articles we have written:

Buying and selling your home, a step by step guide

The section 1 statement – changes due in April 2020

Articles of association, a short guide

If you have any questions, please contact Sam Major at smajor@cheyneygoulding.co.uk or on 01483 796 003

Cheyney Goulding LLP, law firm in Guildford, Surrey

The conveyancing process can be daunting, particularly if you are a first time buyer or if it has been a while since you last moved home. We have created the below step by step guide based on a freehold sale and purchase.

Finding a Solicitor

When you are close to agreeing a sale it is a good idea to start looking for a solicitor and requesting quotes. Recommendations from friends and family are often a good place to start. You should consider what you are looking for in a solicitor. For some buyers price may be the most important factor, though you should be aware you often find you “get what you pay for”. Cheaper firms often have larger caseloads, work more slowly and do not provide such a high level personal service.  If you require a transaction to go through quickly and smoothly and require direct access to your solicitor you will likely find yourself paying a bit more. Here at Cheyney Goulding we pride ourselves on providing a first class service, progressing every matter as quickly as possible and being readily available to speak with our clients.

Once you have found a firm you are happy with you should confirm your instructions. The solicitor will then provide you with their client care letter setting out their terms and conditions. They will require two forms of identification from you, often in the form of a passport and driving licence or utility bill.

The Draft Contract Pack and Searches

Once your offer has been accepted your estate agent will send out the memorandum of sale (which sets out the details of the sale) to the solicitors.

At this stage the buyer should ensure he or she has submitted their full mortgage application if relevant.

The seller’s solicitor will then produce the draft contract pack containing the following to send to the buyer’s solicitor:

• Draft contract
• Official copy title entries for the property
• Property information form (containing standard questions on the property and responses from the seller)
• Fittings and contents form (listing the items to be left at the property and any monies to be paid in relation to specific items)
• Any other relevant documents and guarantees such as planning and building regulation certificates and gas and electrical certificates

Once the buyer’s solicitor has received the pack they will submit the property searches which will usually include the following:

• Planning search– this provides information on planning applications in the local area.
• Local authority search– this provides planning information relating to the property along with other important information, for example relating to public highways, proposals for new roads, rail schemes or planning decisions that could affect the property  (please note local search results can take over three weeks to arrive).
• Environmental search– this gives details of the past uses of the land and the land in the vicinity of the property and whether such past uses are likely to have caused any potential contamination of the land on which the property is situated.
• Water and drainage search- this will reveal whether the property is connected to mains water and drainage and whether there are any public drains or sewers within the property.

Pre-contract Enquiries

The buyer’s solicitor will now review the contract pack and raise any initial enquiries with the seller’s solicitor. At Cheyney Goulding we aim to review the contract pack and raise enquiries within 48 hours, other solicitors often take in excess of 10 working days to do the same.

Once the search results have been received it is often necessary to raise additional enquiries.

The seller’s solicitor will forward on the enquiries to the seller for their comments and obtain any documents requested. The Seller’s solicitor will then provide the buyer’s solicitor with replies.

This process repeats until the buyer’s solicitor is happy with the replies.

Report on Title

The buyer’s solicitor will now finalise their report on title and send this to the buyer along with supporting documentation to review.

The report is often lengthy and pulls together all of the important information contained in the search results, contract pack and replies to enquiries.

The buyer should read through the report and discuss any concerns or points they do not understand with their solicitor.

If the buyer is happy with the report and the solicitor has received the mortgage offer from the lender (if applicable) the buyer will now be ready to exchange contracts.

Exchange of Contracts

The solicitors will send the contract, transfer document and mortgage document (to the buyer only and if applicable) to their clients to sign and return to their solicitor in hard copy.

The buyer and seller will agree a date for completion of the sale and the buyer will transfer their deposit (usually 10%) to their solicitor.

The solicitors will then call each other to exchange contracts with completion to take place on the agreed date. At this point both parties will be contractually bound to complete on the said date and the buyer will forfeit their deposit if they fail to do so.

The buyer’s solicitor will request completion monies from the buyer’s lender. Lenders usually require 7 days’ notice in order to release the monies, there is therefore usually a week or more between exchange of contracts and completion of the sale to allow for monies to arrive.

Completion

On the day of completion the buyer’s solicitor will send the completion monies to the seller’s solicitor.

Once the seller’s solicitor has received the monies they will phone the buyer’s solicitor to confirm completion and instruct the estate agent to release the keys to the buyer.

Both solicitors will date the transfer document and the seller’s solicitor will send their transfer document to the buyer’s solicitor. The seller’s solicitor will then pay the estate agent’s invoice and redeem any mortgage registered on the property before returning the balance of sale proceeds to the seller.

Once the buyer’s solicitor has received the transfer document they will send it to the Land Registry along with an application to register the property in the buyer’s name. The buyer’s solicitor will also submit the stamp duty land tax return to HMRC and make the SDLT payment.

Once the registration is complete the Land Registry will notify the buyer’s solicitor who will send the updated official copy title document to the buyer showing them as the registered owner.

The process usually takes around 6-8 weeks, though we do everything in our power to work to our client’s timescale. It is not unheard of for our transactions to go through in under two weeks!

Leasehold transactions are more complex and there will be additional steps involved. We are happy to discuss these steps with you if you wish.

If you have any questions, or if you would like to obtain a no obligation fee quote, please contact our property solicitor Charlotte O’Leary at Coleary@cheyneygoulding.co.uk or on 01483 796 007 and she will be very happy to assist.

This guide is for general information only and does not constitute legal advice.  If you would like to discuss anything in this article please get in touch.

See other recent articles we have written:

The section 1 statement – changes due in April 2020

Articles of association, a short guide

Increase in probate fees to begin in April 2019

Cheyney Goulding LLP, law firm in Guildford, Surrey

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Under section 1 of the Employment Rights Act 1996 employers are required to provide employees with a written statement of certain terms of their employment.  Certain information must be provided to the employee in a single document (the principal statement). Other information can be given either in the principal statement or in a supplementary statement or statements, which together make up the section 1 statement. This information is often incorporated into a written employment contract.  As it stands the written statement needs to be given within 2 months after the employment begins and applies to employees whose employment is to continue for more than one month. 

The law relating to written statements will be changing from 6 April 2020. Employers will need to provide these statements before employment starts and to employees irrespective of how long the employment is to last.  Additional information will also need to be provided.  At Cheyney Goulding we frequently review and update employment contracts on behalf of our clients.  Employers should check whether the employment documentation they provide to employees will comply with employment law including the upcoming changes.

The information that must be included in the written statement is summarised below. 

The following information is required to be given in the principal statement:

1. The names of the employer and employee.
2. The date the employment starts (including any applicable period of continuous employment).
3. Pay.  This should include the means by which it is calculated and the intervals of payment (e.g. monthly).  Non-contractual pay such as bonuses should also be included.
4. Hours of work.
5. Holiday entitlement (including in relation to public holidays) and holiday pay.
6. The employee’s job title and/or a description of the work.
7. Place of work. Where the employee may be required, or is permitted, to work at various places, an indication of that fact and the address of the employer.
8. A person to refer any appeal if the employee is dissatisfied with any disciplinary or dismissal decision.
9. A person to apply to in connection with any grievance and the way any such application should be made.

From 6 April 2020, additional particulars must also be provided to all employees in the principal statement:

1. The days of the week the employee is required to work and details of how these may vary.
2. Any entitlement to paid leave, including maternity leave and paternity leave.
3. Any other remuneration or benefits.
4. Details of any probationary period.
5. Any required training including details of any training the employer will not be paying for.

Also from 6 April 2020, the following particulars that may currently be provided in a supplementary statement must be given in the principal statement:

1. The notice periods for termination by the employer and employee (if applicable, reference to the relevant law on minimum notice periods is adequate).
2. Terms relating to absence due to incapacity and sick pay.
3. Terms as to length of temporary or fixed-term work.
4. Terms related to work outside the UK for a period of more than one month including how long they are to work outside the UK, the currency in which they will be paid, any additional pay or benefits due as a result of working outside the UK and any terms relating to returning to the UK.

Particulars that may be given in another reasonably accessible document (e.g. staff handbook)

The employer can choose whether to put the following information in the principal statement, in supplementary statements or in reasonably accessible documents that are referred to in the section 1 statement (or supplementary statement):

1. Terms relating to absence due to incapacity and sick pay.
2. The notice periods for termination by either side, subject to the specific provisions referred to below.
3. Information about disciplinary and grievance procedures.
4. Terms as to pensions and pension schemes.

Particulars that may be given in a supplementary statement up to 5 April 2020

Until 5 April 2020 certain information can be given in “instalments” by way of supplementary statements, at different times to the principal statement, as long as all the information is given within two months of employment starting.  Please note that from 6 April 2020 this will be changing (as above):

1. Terms related to work outside the UK for a period of more than one month.
2. Terms as to length of temporary or fixed-term work.
3. A note giving certain information about disciplinary and grievance procedures.
4. Details of any collective agreements affecting the employment.

From 6 April 2020, all the required particulars must be provided by the start date save for the following which may be given in instalments up to two months after the beginning of employment:

1. Terms as to pensions and pension schemes.
2. Details of any collective agreements affecting the employment.
3. Details of any training provided by the employer.
4. A note giving certain information about disciplinary and grievance procedures.

Section 4 statement, variations

If there is any change to any of the required information, the employer must give the employee another written statement detailing the change as soon as possible, and no later than one month after the change. If the change requires the employee to work outside the UK for a period of more than one month, the written statement must be given by the time the employee leaves the UK.

A section 4 statement does not by itself amend the employment contract without the employee’s consent.

Transitional provisions

The changes will not apply to employees whose employment started under the existing rules. However, from 6 April 2020, existing employees may request a written statement complying with the new requirements. The employer will be required to provide it within one month. Employees may only request such a written statement once.

This guide is for general information only and does not constitute legal advice.  If you would like to discuss anything in this article please get in touch.

See other recent articles we have written:

Articles of association, a short guide

Increase in probate fees to begin in April 2019

Court of Appeal uphold Employment Tribunal decision that Uber drivers are workers

Cheyney Goulding LLP, solicitors in Guildford, Surrey

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Using a company to run a business is often the most advantageous structure to use when compared to the sole trader and partnership models.  It can provide tax benefits, help protect shareholders and directors from liability and offer a flexible format for obtaining investment.  At the end of March 2019, there were about 4 million companies registered at Companies House (see further https://www.gov.uk/government/publications/incorporated-companies-in-the-uk-january-to-march-2019/incorporated-companies-in-the-uk-january-to-march-2019). 

This guide looks at the role and function of a company’s articles of association.

Articles of association

Every company must have articles of association.  The articles act as a rulebook setting out regulations for the internal affairs of the company.  They form a type of contract between each of the shareholders and the Company.

Companies are free to create their own bespoke set of articles (within the scope of company law generally).  In the absence of doing so companies are automatically incorporated with a standard set of articles called Model Articles as set out in the Companies Act 2006.  The Model Articles for a private company limited by shares can be found here https://www.gov.uk/government/publications/model-articles-for-private-companies-limited-by-shares/model-articles-for-private-companies-limited-by-shares#part-3-shares-and-distributions-1.  Companies will often use the Model Articles as a base, and adapt and add to its provisions to ensure it is fit for purpose for the particular business and its ownership and management structure.

The Model Articles are divided into five sections:

Interpretation and limitation of liability (articles 1 and 2)

Here various terms are defined, and rules of interpretation established that apply to the rest of the document (article 1).  Article 2 indicates that a shareholder who has paid for their shares in full (including any premium) has no further liability to contribute to the assets of the company in respect of those shares.  This is an important concept for most companies limiting the liability of the shareholders to the payment due on their shares.

Directors (articles 3 to 20)

Directors are responsible for the day to day management of the company.  This section sets out how the directors should conduct themselves, hold meetings, make decisions and avoid conflicts of interest.  It also covers rules concerning the appointment and removal of directors.

Shares and distributions (articles 21 to 36)

The Model Articles envisage a simple share structure of one class of ordinary share.  These shares have one vote per share and equal rights to distribution in relation to income (dividends) and other distributions e.g. a capital distribution on winding up.  This section also covers the process for the transfer of shares, which under the Model Articles is largely unrestricted save that the registration of a share transfer is at the discretion of the directors.

Decision making by shareholders (articles 37 to 47)

Shareholders as the owners of the company hold the ultimate decision making power.  This section sets out how the shareholders should conduct themselves, hold meetings and make decisions.  Certain decisions are reserved to the shareholders (rather than the directors) such as the amendment of articles and the issuing of shares on a non-pre-emptive basis.

Administrative arrangements (articles 48 to 53).

A catch all section dealing with items such as insurance and indemnities for directors, company seals and the means by which communications will be made.

Amending the Model Articles

There are a number of areas in a company’s articles that commonly get supplemented.  A few of these are summarised below.  Please contact us to discuss your requirements in more detail:

1. Where a more complex share structure is required different classes of shares can be created and defined in the articles.  For example, where shareholders are contributing to a company in different ways, perhaps by working in the business compared to investing capital, different classes of shares with different rights can be desirable.  Common classes of types of shares are, ordinary shares, preference shares and non-voting shares.  Shares can be given enhanced or no voting rights.  They can also have varied rights to dividends and other distributions.  For example a preference share may entitle the holder to a percentage of the profits each year in preference to the other classes of shares.
2. The basis upon which shares can be transferred.  Under the Model Articles shares transfers can only be registered at the discretion of the directors.  Whist In exercising the power, the directors must act in good faith in a manner that promotes the success of the company, it is often desirable to provide a clearer and more comprehensive procedure for the transfer of shares.  A common addition is to stipulate that a shareholder wishing to sell their shares must first offer them to the existing shareholders.  There is typically a mechanism for determining the fair or market value of these shares.  This seeks to strike a balance between the interests of the selling shareholder looking to exit the company and the other shareholders who may not want a third party becoming a shareholder.  Other related articles include allowing family members to be transferred shares freely and for shares to be automatically offered to the other shareholders on the happening of certain events e.g. death, bankruptcy or breach of contract.
3. Providing for the sale of the company as a whole.  Often referred to as “drag along” and “tag along rights”.  Drag along rights allow a majority of the shareholders to sell their shares to a buyer and “drag” along the remaining shareholders on the same terms.  This ensures that a minority shareholder cannot hold the majority to ransom on a sale.  A buyer will often want to ensure that they are purchasing the entire issued share capital of the company.  Tag along rights on the other hand allow a minority shareholder to “tag” along with any sale of shares that the majority of shareholders may be considering. 

Cheyney Goulding is a firm of solicitors in Guildford, Surrey.  We frequently advise companies, shareholders, directors and investors on articles of association.  When reviewing a company’s articles it is also crucial to consider the terms of any shareholders’ agreement.  Shareholders’ agreements and articles of association should be drafted in such a way as to complement one another ensuring they do not conflict and that between them the internal affairs of the company are regulated in such a way that is fit for purpose and reflects the wishes of the shareholders.

This guide is for general information only and does not constitute legal advice.  If you would like to discuss anything in this article please get in touch. 

See other recent articles we have written:

Increase in probate fees to begin in April 2019

Court of Appeal uphold Employment Tribunal decision that Uber drivers are workers

Equine Industry Issues

Cheyney Goulding LLP, law firm in Guildford, UK