Tenant trumps landlord on technicality in court

The High Court recently considered an appeal from the County Court in relation to the important question of whether certain statutory notices had to be executed in accordance with the Companies Act 2006 when they were being signed by a corporate landlord.

Specifically, the Court was looking at a notice served under s8 of the Housing Act 1988 (s.8 notice) and also the Prescribed Information Certificate given to confirm compliance with tenancy deposit regulations (Confirmatory Certificate).

Northwood Solihull Ltd v Fearn

The case related to a claim for possession based on rent arrears.  The landlord, a company, had served an s.8 notice signed by its property manager, and then issued possession proceedings.

The tenant argued that the notice was not validly signed and counterclaimed that the landlord had not complied with the requirements to provide the tenants with a valid Confirmatory Certificate.

S44 Companies Act 2006 requires a document to be executed by a company in one of the following ways:

• affixing its common seal
• by two authorised signatories (authorised signatories being every director of the company and the secretary of the company, if there is one) signing the document
• by a director of the company signing in the presence of a witness, who attests the signature

An s8 notice is a prescribed form.  In the form are the following words:

“To be signed and dated by the landlord or licensor or the landlord’s or licensor’s agent (someone acting for the landlord or licensor). If there are joint landlords each landlord or the agent must sign unless one signs on behalf of the rest with their agreement.”

Underneath is a place for the signatory to sign, with the further words:

“Please specify whether: landlord / licensor / joint landlords / landlord's agent.”

Because the form is not required to be signed by the landlord (it can be signed by the landlord’s agent) the Court held that it could be signed on behalf of the landlord by an authorised signatory without needing to comply with s44 Companies Act 2006.  The notice in this case, when signed by the landlord’s property manager, was valid.

How the landlord’s argument unravelled

The Confirmatory Certificate is required by virtue of s213 of the Housing Act 2004.  This sets out that prescribed information must be given in a prescribed form.  These are both the subject of the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 (Order).

The Order required the certificate to be signed by the landlord, who must give certain confirmations, when signing. The Order was amended by the Deregulation Act 2015 to include reference to the initial agent being able to sign the certificate.

In this case the certificate was signed by one of the directors of the landlord company.  If s44 of the Companies Act 2006 applied, then it would not be a valid certificate.

Falling foul of the Companies Act 2006

The court held that, because one of the purposes of the Confirmatory Certificate was to enable the landlord to confirm that the required information was accurate, there was a formality to it which required compliance with the Companies Act 2006.

The landlord sought to argue that the form was a form “substantially to the same effect” as the prescribed form, in order to persuade the Court that the failure to comply with the Companies Act 2006 in signing the certificate was not fatal to its validity.

The Court rejected that argument.  The reasons for this were because compliance with the Companies Act 2006 when signing is a binary issue.  Either you have complied or you have not.  It is not a matter of fact and degree.

Further, the court held that the signature is not part of the information which must be provided to the tenant which must be given in the prescribed form or a form to substantially the same effect.  As such the Confirmatory Certificate was held not to be valid and the landlord was subjected to a penalty for failing to comply with the tenancy deposit requirements.

Sarah’s view

A point of interest is that the Court appears to have formed its view on the basis of the Order as it was before the amendments made by the Deregulation Act 2015, as the tenancy was entered into and the Confirmatory Certificate was given before the date on which the Deregulation Act 2015 came into force.

However, somewhat unusually, the Deregulation Act 2015 inserted a provision saying that the amendments made (including that the certificate could be signed by the initial agent) are to be treated as having had effect since 6 April 2007.

This therefore leaves things in a rather uncertain state so far as corporate landlords are concerned, as it is not clear whether the Court would have decided the case differently had it taken into account the changes made by the Deregulation Act 2015.

Certainly, going forwards corporate landlords would be well advised to ensure that any Confirmatory Certificates are signed in accordance with the Companies Act 2006, until the Court have had an opportunity to review this and for a judgment on this issue to be given which deals with the post Deregulation Act 2015 version of the Order.

For more help and advice, contact Sarah Barratt on [email protected] or 0191 211 7923.