This may sound like an odd question because, of course, you know who your client is as you will have undertaken due diligence checks upon receipt of instructions. However, despite that, it is always surprising how often we are asked by agents and clients to pursue defaulting lessees and upon receipt of instructions, either the leaseholder information or those of the client are not entirely correct.  This update focuses on the latter issue and how to address that.

The effect of having an incorrect name or address for your client on your system is that, at best, there may be a delay in taking action to remedy a breach but, at worst, enforcement may be prevented entirely with significant losses for your client. 

As an example, where the landlord details on a demand are incorrect that demand will not be valid and those charges cannot yet be enforced until the issue is corrected.  There is therefore a delay in recovery where demands need to be re-served but also, and of more concern, if any part of those charges are more than 18 months old any of the leaseholders may have, by virtue of section 20B Landlord and Tenant Act 1985, an absolute defence in respect of those older charges. 

What might you do to avoid this?

The following are suggestions on how issues arising from incorrect information might be avoided.

Where you are appointed by a Landlord/Head Lessee

Check the freehold/head leasehold title.  This process can and should be undertaken online, will take around 30 seconds and cost the grand sum of £3.00 (no VAT) per block.  The title provides you with confirmation of the correct name(s) of your client and thus the name in which your demands should be served.  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. It is important to correct that before demands and notices are served. 

We act for a portfolio Ground Rent Landlord, a married couple who own all of their units in the name of their company which, for the purposes of this update, we will call A & B Limited.  They use the same agent to manage all of their units. Some years ago they purchased a new block and handed it to the agent, who simply added it to the rest that he manages and proceeded to undertake his usual management functions. 

Around two years later we were instructed 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.  However, on purchasing the property the client’s conveyancing solicitor had registered the title in the name of Mr & Mrs rather than A & B Limited.  Accordingly, all demands served in the two years preceding our instructions stated the wrong landlord name and address and thus 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 defence under s.20B Landlord and Tenant Act 1985.  Thankfully, after the agent had re-served all demands, we were able to recover all of the service charges but 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 instructions.

Where you are appointed by an RMC/RTM Company

Rarely will an RMC or an RTM company hold title in the property that they are responsible for and thus obtaining the freehold title, as suggested above, will generally be of no use in identifying details relating to your client.  However, there remain checks that can and should be made to clarify that you are acting for the corporate body with authority and that you are using the correct name.

You should (and no doubt do) obtain a company search from Companies House which will confirm the correct name of the client company in each case.   Do check the name used against what is on your database as we frequently see misspelling errors or entire words absent, all of which may invalidate a demand or, at the very least, potentially cause costly issues in any enforcement action.

You should also use this search to confirm that that company shows on the search as “Active”.  Where you are not also appointed as Company Secretary for your client, you should undertake annual checks to ensure that your client remains “Active”.

Check the extent of the powers of an RMC   

An RMC will generally be created by, and obtain its power to act, under the lease provisions.  Do check the name of the company as set out in the lease and any variations thereto.  Importantly, also check  the extent of the powers granted to the RMC to be clear that what you are being asked to do is within its power and obligations.

Name/Address Changes

It is not uncommon for Landlord/RMC/RTM Companies to amend either their name or registered office, or both.  Our advice is to check by way of the free search facility at Companies House, at least annually, to ensure that the company name has not changed and also to check the freehold title, just as frequently, to ensure that the client has not sold the unit on.  It is not always the case that the agent gets informed of such things promptly, or at all.

By way of example, we have recently been instructed on a large London development consisting of a number of separate blocks where this exact problem has occurred.  The landlord client changed its name in relation to part of the development retained and transferred the freeholds of other parts of the development into subsidiary companies under the same corporate umbrella.  The client failed to inform the agent of these changes. This of course meant that all demands served after the changes were sent out containing an incorrect landlord name.  Of course, all of those demands were invalid and are now having to be re-served before being enforced.  The issue is that a number of those changes took place several years ago and thus there is a risk of section 20B defences across almost all of that development.

The moral of the story is check and double check all details when you receive your initial instructions, but don’t stop there.  An annual check on the freehold or title for your client and at least an annual check on the name, addresses and status of the client for the purposes of demands should form part of your continuing due diligence.

For more information, please contact Kevin Lever on 01435 897297 or Kevin.Lever@kdllaw.com.

Disclaimer

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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