August 2011 News Articles
Court ruling will impact on buy to let landlords
Many buy to let landlords buying a new property rely on the valuation carried out by the surveyor acting on behalf of the mortgage lender.
Until now they have been reasonably secure in doing so because the law accepted that these surveyors owed a duty of care to the purchaser. It meant that if the valuation was wrong, the purchaser would have a legal comeback against the surveyor.
This principle was established in the case of Smith v Bush in 1990. The reasoning then was that the purchaser was effectively paying for the valuation and so was entitled to rely on it, even though it was being carried out primarily for the lender.
However, the Court of Appeal has now ruled that this principle only applies when the purchaser is an ordinary householder buying a home to live in. It doesn’t apply to buy to let landlords who buy a property to rent out.
The issue arose when landlord Emmet Scullion bought a property he wished to let out. The mortgage lender engaged a firm of surveyors who provided a report on the value of the property and the monthly rent that could be achieved.
The landlord relied on these figures but they turned out to be over optimistic. The rental value didn’t even meet the cost of the mortgage repayments.
The landlord sold the property four years later at a loss and sought damages from the surveyors claiming they had been negligent.
The case went all the way to the Court of Appeal which ruled against the landlord. It held that people who bought properties to let were likely to be richer and more commercially astute than owner occupiers, and would be able to afford an independent valuation.
They could not therefore bring a negligence claim in the same way as an ordinary householder.
The court also held that a valuer in these circumstances would expect a prudent buy to let purchaser to obtain his own advice about issues such as how easy it would be rent out the property, the rent that could be achieved and other terms or fees that would need to be agreed.
The ruling may seem a little harsh but means landlords will need to commission their own surveys if they want to be legally protected in future.
Please contact us if you would like more information about commercial property issues.
Contract terms means English company must apply Indian law
Companies entering into contracts with businesses abroad need to take care over the small print if they want any future disputes to be settled under UK law.
Failure to do so could prove costly, as one UK company recently discovered.
The company entered into an agreement with an Indian supplier to provide it with condoms to be sold in the UK.
It was part of the company’s standard terms and conditions that disputes with foreign partners should be settled under English law. It drew up a purchase order, which it thought included those standard terms and conditions, and proceeded with the contract on that basis.
However, the Indian supplier never saw the full purchase order; it only saw the purchase order number.
This led to difficulties when a dispute arose later and the English company sought an injunction ordering the Indian supplier to provide the condoms as agreed.
The Court in England held that the dispute would have to be settled under Indian law. It held that the Indian supplier could not possibly have subscribed to the English company’s terms and conditions as it had not seen them.
It followed therefore that those terms could not have been incorporated into the contract.
Please contact us if you would like more information about the issues raised in this article or any aspect of contract law.
Businesses failing to protect themselves against late payers
Many businesses are failing to take simple steps that could protect them against late payers, according to research by the Institute of Credit Management (ICM).
A survey of ICM members found that a quarter of them don’t use the payment performance data provided by B2B credit reference reports.
Researchers also found that two thirds of businesses don’t share payment performance data about their customers with credit reference agencies.
This is in spite of the fact that three quarters of them rely on such information when making their own decisions about whether to offer credit.
Philip King, the Chief Executive of the ICM, said he found the attitude puzzling. “You would expect both positive and negative information to be passed on so other businesses can benefit from the agencies’ reports.
“Instead, it just builds up a confused picture of many businesses’ finances and can result in more companies not getting paid.”
It is, of course, important to take precautions to reduce the risk of dealing with late payers and, in more extreme cases, people who default on their debts.
In reality, however, even the most stringent precautions won’t eliminate the problem completely.
When faced with late payers, it is important to take legal action as soon as possible to ensure settlement. Even something as simple as a solicitor’s letter can be enough to secure prompt payment.
Please contact us if you would like more information about credit control and debt collection.
Huge rise in number of home-based businesses
The number of businesses operating from people’s homes has increased dramatically over the last year.
Research by Lloyds TSB Business Insurance revealed there are currently 5.9m home-based businesses in the UK. More than a quarter of them were set up in the last year.
The new businesses cover a wide spectrum from IT and computer consultancy to gardening.
Unemployment and redundancies due to the recession were the main reasons for the increase, although many people said they simply wanted to be their own boss or to explore a new direction.
Stuart Curtis, head of commercial lines at Lloyds TSB, said: "The number of enterprising people opting to turn their home into their business hub is set to increase over the next year as the recession continues to bite."
Starting a new business can be very exciting and even a little scary. Budding entrepreneurs need to make sure they do their homework as there are several pitfalls that could easily stifle progress or lead to failure.
Start-up businesses need to consider a variety of issues from employment matters to business contracts. There could also be concerns about how to structure the business.
Getting good legal advice at the outset can prevent damaging problems emerging later.
We have helped numerous new businesses get off the ground and are able to offer advice on such things as whether to set up as a sole trader, partnership or a new company. We also have valuable contacts including accountants, surveyors, valuers and financial advisers who can provide added value to the services we provide.
Please contact us if you would like more information about starting up a new business.
Complaints mount up about unregulated legal services
Thousands of people are getting a shoddy deal from companies providing unregulated legal services, according to a report by the Legal Ombudsman.
All solicitors are strictly regulated and have to be insured in order to practice. It means that if something goes wrong, clients are fully protected.
However, in recent years, several unregulated companies have started offering legal services.
In his first annual report, the Chief Ombudsman Adam Sampson, said this had led to thousands of complaints from people who had received an inadequate service.
The problem arises because some legal services such as conveyancing, family law and will writing are not regulated and can be carried out by unqualified staff at unregulated companies.
Mr Sampson said he could not investigate these complaints because he could only deal with cases involving qualified lawyers.
He said: "One service which crops up a lot is will writing. It's a service carried out often by will-writing firms who aren't regulated. Because of this, customers are left with little means of redress when things go wrong.
"We've seen similar confusion about claims management companies, with lots of consumers believing they're getting a legal service even though most of the work is carried out by a non-authorised person. Again, we can't help.
“Thing aren’t helped by many unregulated companies masquerading as traditional law firms, branded with more legal wigs and gowns than you can shake a quill pen at.”
Mr Sampson is calling for greater protection for consumers and has the backing of the Law Society and the consumer organisation, Which.
The Legal Services Consumer Panel has called for will writing to be regulated and that is now being considered by the Legal Services Board.
Please contact us if you would like more information about any of the issues raised in this article.
Sharp rise in civil partnership ‘divorces’
There has been a sharp rise in the number of civil partnerships being dissolved in the UK.
In 2010, 509 gay couples separated and dissolved their civil partnership. That was a 44% increase on 2009.
Civil partnerships came into effect in December 2005. Since then, nearly 50,000 same sex couples have used them to formalise their relationships. More than 6,000 civil partnerships were registered in the UK last year, a slight increase on 2009.
The rise in the dissolution figures is thought to be largely down to the fact that many couples have now been in a partnership for up to five years and, like many heterosexual couples, have had time to grow apart and decide they want to separate.
The figures, from the Office for National Statistics, show lesbian couples are twice as likely to separate as gay men.
Only 1.6% of civil partnerships involving gay men have been dissolved since 2005. That compares with 3.3% for lesbian couples.
Gay couples who dissolve their civil partnership face the same kind of issues as married couples who divorce.
They should seek legal advice on how to reach a settlement that is fair to both partners. They may also need to update their wills to reflect their changed circumstances.
Please contact us if you would like more information about the issues raised in this article.
Woman fails to overturn her grandmother’s will
A woman has failed to overturn her grandmother’s will, which left the entire estate to a friend and carer.
The court heard that the woman had expected to inherit but was surprised to find that she had been cut out of the will.
The issue arose because the grandmother, who was 85 when she died, had suffered from progressive vascular dementia.
She became friendly with a man who began to visit and care for her in the period before she made her final will. She decided to leave her estate to him.
After she died, her granddaughter challenged the will saying the friend had exerted undue influence. She said her grandmother had lacked testamentary capacity when she made the will – that is, she did not fully understand what she was doing, due to her dementia.
The court, however, refused to revoke the will. The judge said the granddaughter’s hostility towards her grandmother’s friend had led her to overstate matters.
The evidence suggested that the grandmother did know what she was doing. She left her estate to her friend both as a way of thanking him for his help and as a way of encouraging him to continue helping her.
She was also clear and settled in her mind that she did not want her granddaughter to benefit.
There was no arguable case that the friend had exerted undue influence and so the will should be allowed to stand.
Please contact us if you would like more information about wills and probate.
Increase in number of first time buyer mortgages available
The number of mortgage packages targeted at first time buyers has risen sharply in the last few months, according to an online survey.
The rise comes after a difficult few years for first time buyers with many banks and building societies requiring large deposits of 25% before they’ll lend.
It’s one of the main reasons that the housing market has been struggling for so long.
Now many lenders are providing a more flexible range of mortgages in an attempt to stimulate the market.
Research by moneysupermarket.com found there had been a 17% increase in the number of first time buyer mortgages on the market between June and July. It says there are at least 312 products available for people with only a 10% deposit – the highest number since November 2008.
The average interest rate on these mortgage deals was 5.87%. That’s a fall of 0.53% compared with last year.
The housing market is still struggling to recover but it’s encouraging to see lenders are making more products available to help first time buyers get on the property ladder.
Please contact us if you would like more information about the issues raised in this article or any aspect of buying and selling a property.