Do you know who your client is?
24th June 2021
24th June 2021
Do you know who you client is? That may sound like an odd question because, of course, you know who the Landlord, Resident Management Company (“RMC”) or Right to Manage Company (“RTM”) is that has appointed you to manage a development or create a tenancy in relation to a property for rent and, in any event, you will have undertaken due diligence checks upon receipt of instructions - or do you?
It is always surprising how often we are asked to pursue defaulting lessees or tenants and the documents submitted to us by the client or the agent contain incorrect client information. The effect of this is, at best, that the proposed action will be delayed and, at worst, it may prevent enforcement entirely. Ultimately, it is the source of some unnecessary embarrassment for the agent.
What follows here are some pointers on checks that should be undertaken at the point of your instructions, periodically during your appointment or upon drafting notices upon which you will later seek to rely . These are simple steps that take just a few moments and cost nothing or next to nothing, which can help to avoid frustrating issues and potentially large losses.
A. Where you are appointed by a Landlord/Head Lessee (an individual or a company)
Check the freehold/head leasehold title. This process is undertaken online, will take around 30 seconds and cost the grand sum of £3.00 (no VAT).
The title provides confirmation of the full and correct name of the landlord or superior leaseholder to whom your demands/notices should refer. Check this information carefully as from time to time you will see differences between what you have been told by the client/former agent and what is shown on the proprietorship register in the title.
Case Note 1
In a case we dealt with recently here at KDL Law, we were appointed by a portfolio landlord in the North of England, a married couple, whom here we shall refer to as Mr & Mrs Smith. Mr & Mrs Smith owned all of their properties in the name of their Company, which here we will call, A & B Limited, and they use the same agent to manage all of their units. Some years ago they purchased a ground rent unit at auction and handed it to the agent who proceeded to undertake his usual management functions.
KDL Law was later appointed to recover service charges from a number of the leaseholders. On checking the title before taking action, we noticed that the demands, as per usual, had been drafted and served in the name of A & B Limited yet, at the time of the purchase and thereafter, the property had been registered in the name of Mr & Mrs Smith and not A&B Limited. Accordingly, all demands served in the name of A & B Limited were invalid and unenforceable. More importantly, a proportion of the arrears on each flat was older than 18 months and thus potentially the leaseholders had a valid defence under s.20B Landlord and Tenant Act 1985 (the “18 month” rule) to some of those charges. Thankfully, after the agent had re-served all demands we were able to recover all of the service charges but the client (who would likely look to his agent as the error was that of the agent) was at risk of around £5,000 in irrecoverable service charges (plus costs) merely by failing to check the title at the outset of his agent’s appointment.
B. Where you are appointed by a Company including an RMC / RTM Company
Unless the company appointing you is the landlord or superior-leaseholder the ability to check the client’s details on the registered title is not available. However, there remain checks that can and should be made to clarify that you are acting for the body with authority and that you are using the correct name.
As part of your due diligence, you should research the information held for the client available from Companies House. This is available free of charge from the Companies House website (see here).
Ensure that you check the name of the company against your instructions and that the company is shown as “Active”. Also check the list of current officers and ensure that those providing instructions to you are indeed officers of the company. If not check their authority to act in the name of the company.
In addition, where your client is an RMC, they will generally be created by, and obtain power to act under, the lease provisions. You should therefore also undertake the following:-
Check the name of the company as set out in the lease and the extent of the powers granted to it;
Check that the company appointing you is indeed the same named company in the lease;
Check the client name against current records as assumptions can provide huge pitfalls for you.
Case Note 2
This latter point was one that arose in another case that KDL Law were appointed to deal with. An RMC based in Bedford, which we will refer to here as Suchandsuch Road (Bedford) Management Limited had been empowered under a lease granted in 2000 to manage a property and the shareholders in the company were the 8 leaseholder owners of flats in the building. Within 3 years of the grant of the leases that company had become dissolved as a result of mismanagement by the then leaseholder shareholders. The property was then not managed for about 10 years after which a group of the then leaseholders formed a new company, Suchandsuch Road Management Limited. They resolved the issue of the different company name by amending the 8 leases and all of this was undertaken entirely properly.
Three years ago they changed managing agent and in setting up its system the agent spotted the difference in the company’s name between that which the client had informed him and what was in the lease and, without proper research, amended his records to accord with what was shown in the original lease, Suchandsuch Road (Bedford) Management Limited. All demands, notices and correspondence were then served in the name of what in fact was the company that had been dissolved in around 2003 and thus all were entirely invalid.
Upon instructions to recover arrears we highlighted this issue to the agent and client and new demands were served. As with the above case, however, there was a potential s.20B defence available to the leaseholders here. Thankfully, the problem was overcome and the landlord client in the matter did not lose out, but there was a considerable risk to the client here from what was such a simple error.
C. Keep up to date
In addition, regularly checking the name or title of your client is advised. We suggest that this is done at least once a year. This is because corporations can change their name, even subtly, or, for various reasons, transfer properties between sister or associated companies and you may get caught out if you are not informed. That is exactly what happened in the next case example.
Case Note 3
We recently assisted an agent in respect of a development of 8 large blocks of flats, the freeholds of each were all owned by a corporate landlord. All freeholds were originally held by, let’s call the client, “Parent Company Limited” but over a period of three years Parent Company Limited transferred the titles of each block to various sister companies for one reason or another and, by the time of our appointment, all 8 blocks were on separate freehold titles each held in the name of separate sister companies. The effect of that was, of course, that the landlord of each block had changed.
The agent had not been informed at any time of the changes and thus was still sending, and had always sent, demands and notices to the tenants showing the landlord to be “Parent Company Limited”. Each of those demands was therefore invalid for failing to identify the correct landlord or address pursuant to section 47 Landlord & Tenant Act 1985. Again, the issue was thankfully overcome and the landlord did not lose out but the potential losses across the whole estate were huge.
The advice is to try to do the following as regularly as possible and not to necessarily trust as correct the information provided to you by your client or the former agent:-
Always check the title of the property to be clear as to the correct and current name of the landlord or superior leaseholder, as applies;
Where your client is a company, check Companies House to be clear as to the correct name of the client and the details of the officers of that company from whom you might be taking instructions;
Undertake these checks at least annually as not all clients will remember to inform you when things change.
Hopefully, this simple guidance will assist you in avoiding unnecessary problems in the future.
For more information, please feel free to contact a member of the team on 01435 897297 or firstname.lastname@example.org.
This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.
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