Analysing Your Agreement

BEFORE YOU SIGN

Check the parties provisions carefully.

Cross reference the title deeds and look at the proprietorship register – as there are landlords out there that will fraudulently try to claim they own the property….

Break Clauses

This relates to a period by which you can end your agreement, in effect, simply ‘walk out’ with no consequences. If you do not have this and walk out anyway, your landlord may have a case to bring you to court to recover a debt.

Even if it is only for a short term, if you have never met your landlord and/or have no recommendations from people that you TRUST you should always try and negotiate a break clause.

Obligations

As a licensee, you will be under obligations (varying from one agreement to the next). Make sure that the licensor’s obligations are sufficient for you – i.e. it may be unacceptable for you if they expect you to keep the noise down after 11pm but they are allowed to keep their TV on FULL volume until all hours of the night.

Ensure there is an obligation on them to return your deposit on termination of the license.

Deposit

Check that the deposit complies with the Tenant Fees Act.

Utilities

If there is a provision stipulating that the Licensor can demand a proportion of the utilities costs to be paid (i.e. if they are higher than normal) – ensure it states a REASONABLE proportion and you have the right to request evidence (receipts/invoices) – otherwise they may attempt to charge you thousands extra one month for an ‘alleged increase.’

Health & Safety Regulations

Ensure there is an obligation on the licensor to comply with these. If you are unsure as to what these should be, check out my guidance here.

Limitation of Liability

“The Licensor is not liable for the death of, or injury to, the Licensee or visitors to the Property.”

This is an ATTEMPT on the licensor to limit their liability – this is expressly outlawed so always query this if you see it in your agreement.

NB: just because your agreement contains this clause, does not mean that the entire thing is invalid. The courts will simply disregard this clause but look at the rest of the agreement if they have to determine its validity.

PARTIES: Is your landlord a company?

If so, always check Companies House. If they are a dissolved company DO NOT SIGN.

On this note, if your landlord is purporting to use an Estate Agency – check them out as well. Mine was attempting to claim hundreds for a dissolved company. Whilst this is fraud, it seemed that the courts didn’t really care about this at my hearing — again, going back to my point that I had a very idealised idea about the law. In this instance, the best you can do is report them to the Trading Standards.

Be careful if you are signing a contract with a limited company. Due to the concept of separate legal personality, in most situations, if you take your landlord to court, they will not be personally liable for the debt. A company is classified as a separate entity from the directors and shareholders that are associated with it:

As such, if you win and attempt to recover your money, you may find the company is insolvent and can no longer trade. In this instance, it may enter into a creditors voluntary liquidation, which is where the company is closed down and the assets are sold. The funds raised from the sale would firstly be used to pay for the liquidation process. Anything left over would then be distributed equally amongst the creditors. As such, whilst you may recover some of your money, it is unlikely you would recover all of it. Going to court may prove to be more expensive than it is worth.

The best way to cover yourself in these situations is to ensure your landlord gives a personal guarantee. If they do not then pay off the debt, you can start bankruptcy proceedings against them:

Individual insolvency procedures

This process is commenced to realise an individuals assets and distribute them amongst their creditors.

There are certain conditions which need to be satisfied before presenting a bankruptcy petition against a debtor. A creditor must ensure that:

• The courts of England & Wales have bankruptcy jurisdiction;
• the amount of their petition debt is equal or greater than the bankruptcy level – see s267(4) IA 1986;
• Their debt is for a liquidated sum* (a specific amount which has been fully and finally ascertained) payable immediately/at a certain future time;
• The debtor is unable/has no reasonable prospect of being able to pay the petition debt**;
• The petition debt is unsecured and
• there is no outstanding application to set aside a statutory demand that was served for the petition debt.

*An unliquidated debt can be converted into a liquidated debt by agreement with the debtor, consideration or where the debtor’s conduct gives rise to estoppel.

**In order to establish this, the creditor must first serve a statutory demand on the debtor, unless the following is satisfied:

• The debt is a judgment debt in favour of the creditor;
• the debt is payable immediately and
• execution or other process issued in respect of the debt has been returned in whole or in part.

In practice, most creditors’ petitions are based on an unsatisfied statutory demand because if 3 weeks pass after serving the demand and it has neither been complied with/set aside, the debtor will be considered unable to pay the debt for the purposes of the bankruptcy petition.

A creditor may present a bankruptcy petition before 3 weeks has expired IF there is a serious possibility the debtor’s property/value of his property will be significantly diminished.