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High Court ruling that could affect thousands of agents and landlords is pending

The judgement could effectively prevent Section 21 orders progressing and could expose affected letting agents to claims against them of up to three times the deposit.

The Negotiator

high court

We reported early last year on the case of two tenants who challenged a Section 21 order on the basis that it was incorrectly signed. See our report here.

The Court of Appeal heard appeals yesterday against the judgement which could effectively prevent Section 21 orders progressing and could expose letting agents to claims against them of up to three times the deposit.

Three High Court judges, Lord Justice Lewison, Lord Justice Newey, Lord Justice Snowden heard the appeal and have retired to consider their judgement.

David Smith image

David Smith, JMW Solicitors

The background of the case, Northwood Solihull Ltd v Fearn & ors, the is summed up by leading lawyer representing the landlord in the case, David Smith of law firm JMW Solicitors, who commented, after the initial judgement, “The reality of this case is that, as things currently stand, if you as an agent have signed a prescribed [rental deposit] information certificate on behalf of a landlord and you’re a corporate agent, then if it has not been signed by a director and witnessed, then the certificate will be defective”.

“This means attempting to serve a Section 21 will not be possible, and a tenant could turn around, make a claim against you for up to three times the original deposit.

“So I am concerned about the possibility of a massive blast of claims against agents because the High Court judgement is retrospective going back six years as well as looking forward.

“This could wipe out some lettings agencies if their insurance won’t cover it.” David Smith and barrister colleague Justin Bates are now representing the landlord in the case.

The appeals turned on the nature of the documents and how and by whom they were and the requirements of Section 44 of the Companies Act (2006) which details the requirements for proper signing of contracts by company directors and agents. The focus was on the rental deposit certificate, which it was contested, should be properly signed by two authorised signatories, or one director in the presence of a witness, as required by S.44. It’s this point which opens up the possibility that thousands of tenant deposit certificates may be invalid if not signed within the legal requirements.

In Northwood Solihull Ltd v Fearn & ors, the certificate was signed by one director only, without reference to the agent company, making the document defective, in the opinion of the counsel for the tenants.

The Neg will report on the ruling, as soon as it is known.

January 19, 2022

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