EMPTY PROPERTY RATES

25^th April 2008

You should be aware that the new regime for empty property rates came into being from 1st April 2008. The main change is that the 50% relief for empty properties has been abolished and empty properties will in future be required to continue to pay 100% of the rates after the three month exemption period after first becoming empty.

Previously industrial and warehouse properties were exempt from any empty rates, now they join all other properties and are subject to the 100% payment but after an exempt period of six months (ie twice as long as for other commercial property). The previous exemptions continue to apply, so small hereditaments with a rateable value of less than £2,200 are still exempt.

The aim of the new rules (apart from raising more money for the Treasury!) is to encourage empty property to be let, or to be redeveloped/refurbished and then let or occupied. It is hoped that this pressure to re-let quickly will stop landlords holding out for substantial periods of time to try and get a high rent. It is hoped the result will be that rents may fall and help business occupiers.

Reliefs for charities and communal amateur sports clubs will also continue as before.

Attempts to get round the problem of having to pay empty rates by stripping out services etc in empty buildings to make the property incapable of beneficial occupation are also likely to fail in the future. The new legislation contains provisions to allow the government to stamp out such practices if they become widespread by introducing new regulations. This has not been done yet but could be done quickly in the future if avoidance becomes widespread.

David Hughes

Programme Leader

MOL Property Division

“What will you achieve in the next 18 months?”

MOL is offering you an exciting career opportunity

Have you considered taking the NAEA Diploma qualification to enhance your property career but were concerned about your academic ability or time commitment? MOL has the perfect solution…….their ‘Fast Track’ NAEA Diploma programme! Now just an 18 month course, MOL provide all the assistance needed to pass this exciting, nationally recognised qualification. And don’t worry if you haven’t studied for some time, since all you require is some experience in the profession and the motivation to succeed. MOL, as a leading flexible and distance learning provider will bring all the experience and professional study resources needed to help you pass this highly regarded qualification.  

Let us give you an example of this. 

The Diploma examination partly involves writing essays. Even if you haven’t written these for many years (or perhaps never) this blog will demonstrate that with a guiding hand from us, you can be shown how to produce winning essays. This isn’t a skill that you’re born with……..it is simply one that can be taught.  

Below is a sample Diploma exam question together with a plan of action as to how to answer it. Once a student has studied the necessary material, it is only a matter of practice to quickly create a template on which to ‘hang’ the actual exam answer. And the good news is that once you’ve practiced this a few times it becomes easier and eventually second nature. 

Question      Percy is an estate agent and managing agent.  He sells a property for Jim at 30% less than its market value.  He employs a caretaker for a block of offices he manages without taking adequate references.  Sally has an office in the said block and has anumber of items stolen. Advise Jim and Sally if they can sue Percy for negligence.  

This is an ideal question for students to demonstrate their knowledge of one of the most common torts, negligence. However care should be taken that the information provided relates to the question, and isn’t just a summary of everything the student knows about this subject. 

Step 1

Before proceeding with the question a student may want to brain storm ideas on the subject, writing everything they know on a space on their exam paper. Bearing in mind the above comments, we know that we don’t want all this information but taking a few minutes just to note down ideas may come in useful later to ensure that nothing essential is omitted. 

Step 2

There are a variety of ways that the student can start this essay. One would be to begin by:

• defining what negligence is
• outlining the most basic method of deciding whether it has been breached  ie
  • was a duty of care owed,
  • was this duty of care breached, and if it was,
  • did this result in loss (either financial, physiological, or physical).

Step 3

• The student could now describe under what circumstances such a duty would be expected. This would include, for example, discussion of whether a party could have reasonably foreseen that their activity or inactivity might cause a breach of a duty of care
• whether there was a sufficiently close enough relationship between the two parties for this duty of care to have been reasonably considered.

Step 4

Now having proved to the examiner that we have a grasp of the relevant parts of this subject, it is time to apply it to the answer. 

The first part of the question relies heavily on all the above information. Did Percy, the estate agent, owe Jim a duty of care? Much will depend on the original premise of their business relationship. On what basis did Jim instruct Percy to sell his property? If he was under pressure to sell at any cost then plainly the agent fulfilled his instructions, if Jim formally agreed to accept the offer knowing it was below market value.  

However, if like most conventional sales this was not a forced sale situation then it is likely that Percy did not do the best he could for his client.  He certainly owed a duty of care to achieve the best possible price within the seller’s timescales, and 30% below market value certainly can not be considered meeting this expectation.  If a higher figure could or should have been obtained there is financial loss for the client.  Consequently it would be entirely possible to sue the agent for negligence. 

Step 5

The second part of the question also considers a slightly different aspect of negligence; that of vicarious liability. 

It is clear that using the above information a duty of care was owned to Sally. Those responsible for managing the block she resided in should have used the concept of forseeability to conclude that failing to take adequate references from a party placed in charge of a building could lead to problems. 

However, the question asks whether Percy can be sued? This is where we turn to the concept of vicarious liability, ie an employer being responsible for an employees actions. While this relies on a number of factors, the most fundamental of these is the need for there to be an employer/employee relationship and for the tort (in this case negligence) to have occurred during the course of the employment. 

There are some simple tests that can be made to decide if the caretaker is an employee or not.  Who pays the caretakers wages, who decides when and where the caretaker works, who pays national insurance contributions, who deducts tax, who decides when and how many holidays are taken. 

The question makes it that there is likely to be an employer/employee relationship between Percy and the caretaker, and so again Sally can expect to take Percy to court for failure to look after her interests.  

Step 6

If the student has time to spare you could also explore the possibility that the caretaker could have been an independent contractor. Determination of this depends on the many factors outlined above. 

If this party is indeed independent then there usually is no vicarious liability as the contractor is not an employee. However, even in this situation the agent would have responsibility. There would be a need to check the contractor’s references. As this was not done here, then negligence is a distinct possibility. 

Step 7

Re-read the question and answer to ensure that all necessary information has been included and that the answer does relate directly to the needs of the question. 

If you have any questions relating to this blog, please call Paul Jager or David Hughes on 0161 920 3381. 

There have been numerous reports in the media about HIPs and the way in which estate agents are handling them. Some of the reports are quite disturbing, including the latest Which? Magazine report for April 2008, where mystery shopping techniques were used to check how estate agents are handling HIPs. It is worth considering what is happening and what the legislation actually requires of estate agents.

There have been numerous reports of estate agents refusing to show the HIP to potential buyers. In some instances estate agents have refused to show the HIP to their seller clients!

In some instances estate agents have simply refused to allow the HIP to be seen without any explanation, in other instances a number of excuses have been reported such as

• The HIP is private to the seller or ‘owner’ of the HIP
• It is illegal to mail a copy of the HIP
• The HIP will be shown when an offer has been made
• The HIP will be made available when exchange of contracts has occurred

All the above reasons are untrue. The legislation was passed in order to ensure that the information contained in the HIP was available to potential buyers at the earliest opportunity. This means when they first enquire about a property.

The duty to provide a copy of the HIP is contained in section 156 of the Housing Act 2004. This requires the ‘responsible person’ (usually the estate agent) to make a copy of the HIP available where a request is made. The copy must be made available within the ‘permitted period’. This is usually 14 days from the date of request.

However, the seller may impose conditions on releasing the HIP. In such a case the 14 days starts when the conditions are complied with by the potential buyer. The conditions allowed are

• The payment of a reasonable charge for a copy of the HIP (but not where an electronic copy is made available, or a copy is viewed at the estate agent’s office)
• The acceptance of specific terms regarding the use and onward disclosure of the HIP documents – the estate agent can only impose such conditions where they result from the seller’s instructions

The estate agent can also refuse to make a copy of the HIP available where

• There are reasonable grounds to believe the person making the request for a HIP cannot afford to buy the property
• It is reasonably believed the person making the request for a HIP is not really interested in buying the property
• It is reasonably believed the person making the request for HIP is not someone the seller would want to sell to

It may be that where media reporters have been trying to get information from estate agents the estate agent has recognised that they are reporters and not interested in buying the property on which the request for a HIP has been made. However, there are numerous other reports of this happening to genuine buyers.

At the moment buyers are likely to be unaware of their rights in this new area. However, if they simply made a complaint to the local Trading Standards Department there is the possibility of the estate agent refusing to supply a HIP being served with a penalty charge notice. The penalty charge is currently £200.

David Hughes

Programme Leader

MOL Property Division

Many of you will have seen that the OFT have issued High Court proceedings against Foxtons regarding their letting agreements with landlords. They are taking the action under the Unfair Terms in Consumer Contract Regulations 1999. The case concerns the way that Foxtons are allowed to charge for work done – or in the OFT’s view not done!

This will be an interesting case and likely to hinge on whether or not landlords are consumers as defined in the 1999 Regulations. The 1999 Regulations at regulation 3 interpret the word ‘consumer’ as follows

‘consumer’ means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession

There is debate within the lettings industry on this point. The general view is that most, if not all, landlords are not consumers, so the 1999 Regulations would not apply. All landlords could be said to be letting the property as a business. Certainly it would apply where landlords have more than one property. It would also presumably apply where a landlord bought a property as a buy-to-let and have only the one property.

There might be a grey area where an owner finds they have to move away for a period with their job and want to let the property while they are away but intend to re-occupy on their return. This type of landlord might well be classed as a consumer.

The 1999 Regulations also exempt certain terms within contracts, known as core terms. Usually price is a core term. The fee charged by the agent is the price in the contract with the landlord. Presumably, therefore, the fee charged, or the method of charging the fee is outside the scope of the Regulations as long as the clause covering the fee is written in plain English.

If the OFT win their case it will certainly shake up the lettings industry and the way that agencies charge landlords for their services. It can only be assumed that if the OFT win that agencies will put up their charges at the outset if they cannot charge repeat fees. We will watch with interest the outcome of the case and will make further comment if necessary.