Obtaining possession as a corporate landlord

The recent appeal case of Northwood Solihull Ltd v Fearn & Ors deals with whether a notice seeking possession (in this case a section 8 notice under the Housing Act 1988) or a tenancy deposit prescribed information certificate signed by a corporate landlord have to be signed in accordance with section 44 of the Companies Act 2006.

Section 44 requires either two authorised signatories or a director of the company in the presence of a witness who attests the signature. An authorised signatory is any director or secretary of the company.

So if a corporate landlord signs without going through these steps, what is the consequence if the landlord then tries to obtain possession?

The facts in Northwood Solihull Ltd v Fearn & Ors

Northwood Solihull Ltd ("the Landlord" and the initial claimant in the proceedings) let a property to the first and second defendants ("the Tenants") pursuant to an assured shorthold tenancy dated 25 July 2014. The third defendant (the Tenants' guarantor) did not participate in the proceedings.

It was accepted the Tenants paid to the Landlord a deposit in the sum of £1,025 which was to be protected in one of the three government approved protection schemes. Following non-payment of rent, the Landlord served a section 8 notice on 27 March 2017 ("the Notice"). The Landlord issued a claim for possession which was defended on the following basis:

• The Notice was invalid as it purported to be signed by the Landlord although not in accordance with the Companies Act – as the Landlord's property manager signed.
• The Tenants made a counterclaim for payment of penalties as the Landlord failed to provide a valid prescribed information certificate.

The court at first instance decided section 44 of the Companies Act did not apply to notices seeking possession but did apply to the prescribed information certificate. Both parties appealed.

The decision on appeal – the notice issue

The appeal court held the court was correct to determine that section 44 of the Companies Act did not apply to notices seeking possession as there is no express requirement under section 8 of the Housing Act 1988 Act for the notice to be signed "by" the landlord – rather, it expressly contemplates a notice being signed by a landlord's agent. The dispute only arose because the Landlord's property manager crossed out the wrong wording on the Notice and the appeal was dismissed.

The decision on appeal – the certificate issue

As the deposit was given in July 2014 the rules in force at that time required the certificate be signed "by" the landlord. Here, the certificate was signed by one director only and, if the Companies Act applied, would not have been a valid certificate. The appeal court again held that the first instance decision was correct and dismissed the appeal. The reasoning applied was that if a document is to be signed "by" a company – as the rules did require in this scenario – then section 44 of the Companies Act prescribes how that company must sign the document.

Comment

The Deregulation Act 2015 amended the law so either a landlord or initial agent can sign the prescribed information certificate. These rules retrospectively apply from April 2007; it does not appear this was highlighted to the court, however, as the Judge confirmed (at paragraph 90 of the judgment) the Deregulation Act did not influence the construction of the previous rules in their original form.

Notwithstanding the above, the decision should be a point of concern for landlord companies as any prescribed information certificates must be signed in accordance with section 44 of the Companies Act. It is unclear whether this applies to certificates signed by agents or only corporate landlords.

A failure to provide a valid certificate will likely result in a fine, however, it will also render any section 21 notice invalid and means a landlord cannot serve a section 21 notice unless the default has been rectified prior to service – in cases of deposit protection this requires the return of the deposit in full.

If you are a corporate landlord of a property and this may impact you, then please get in touch with the real estate dispute resolution team at Howard Kennedy LLP to discuss your options.