1. Please introduce yourself. Say a bit about yourself and your company

I am Charles Clarke  (no relation to the former MP for Norwich South).  Since November 2009 I have been Chairman of the ELA.  Our association represents the interests of the private landlord in the six counties of Greater East Anglia.  Nationally we are affiliated with the British Property Federation (BPF) – the Voice of Property.

2. How did you first become involved in property?

By chance!  When I married in December 1971 my wife inherited a regulated tenancy.

3. What do you think is your greatest achievement so far?

As a landlord, building up a small portfolio of property, with minimal debt.  On a personal level (1) becoming a dance host (2) being at the Holly Wood Bowl to hear the Independence Day Concert by the Los Angeles Philharmonic Orchestra.

4. Do you or your company have any exciting plans for the future?

What does exciting plans infer?  Myself, I shall continue to expand, but only if the right properties become available.  The ELA is planning to start up new branches in the area of East Anglia.

5. What do you think are the greatest problems facing the private rented sector today?

The problems facing the private rented sector today could fill a book!  Briefly the legacy and culture of unrestricted lending under Brown and Blair will cast a shadow for many years.  110% – 120% mortgages are ‘fools paradise’.  The ineptitude and restrictions of unwarranted bureaucracy.

6. What do you think are the greatest opportunities?

In Boom or Bust times, there has always been openings for entrepreneurs.  My crystal ball has gone cloudy on me.

7. We have a new government. What would you like them to do for the private rented sector?

The new government could help the private rented sector by treating being a landlord as a business with roll over reliefs, tax breaks for having LHA tenants.  Please have a dialogue with all segments of the PRS.

8. Do you use social media (blogs, twitter, LinkedIn etc)? What place do you think it has in the future of the property industry?

I rarely use social media (excepting facebook).  Has it a future in the property industry?  Probably to the under 35′s.

9. What is the most important lesson you have learned during your time in property?

The most important lesson I have learned (property) is do not get carried away with ‘hyperbole’ via the media viz Get Rich Quick and sales pitches of various ‘brokers’ pushing up property prices to unrealistic levels.  Historically, what goes up , comes down again, whether property, stock markets or dubious mining schemes.

10. What advice would you have to someone thinking of entering the property industry today?

Advice I can give to someone thinking of entering the property market is to do your sums / budget realistically.  It isn’t money for ‘old rope’.  Timing of purchasing is also very relevant.

*****

Thank you Charles for your wise words.  Although I suspect you would be surprised to learn how many over 35′s use social media.

Landlords in the Eastern Region who are interested in joining will find the ELA web-site here.

My Notable Property Person this week is Shona Davison, winner of the National Landlords Association Property Women Awards in 2009.

1. Please introduce yourself. Say a bit about yourself and your company

I’m Shona Davison, NLA property woman of the year 2009. As well as being a Sheffield landlady, I work as an analytical consultant building statistical models for credit risk or marketing departments.

2. How did you first become involved in property?

Nine years ago, I was a first time buyer, looking for a flat to buy in Wokingham, the area where I was living. After a long time of searching and one purchase falling through, I realised that my dream of home ownership was becoming increasingly unobtainable. The property market was booming so waiting and saving wasn’t an option. Prices were rising faster than my salary or savings.

I compromised by buying a buy to let in my home town of Sheffield, where prices were lower. The intention was to sell in a few years and use any profits to fund a property to live in. In the end, my boyfriend and I bought a house together so I never needed to sell my buy to let and that was the start of my career as a landlady.

3. What do you think is your greatest achievement so far?

I sold the relatively safe investment of my first buy to let flat and with the cash I released, I bought a much more risky property that needed a lot of work doing. I was stretching myself financially and had to work very long hours fitting the project around my full time job and planning my wedding. I felt a great sense of achievement once this project was finished, it was satisfying to bring a tired old property back to life and see three sets of tenants living there comfortably. The best part of being a landlady is when you go back to the properties once tenants have moved in and see them looking lived in and homely.

4. Do you or your company have any exciting plans for the future?

Currently no big property projects can be planned as I’m doing lots of hospital treatment to try and have a second baby. It took years of travelling up and down the motorway to have Pre-implantation Genetic Diagnosis (PGD) in London to get my first baby, who is now 1 year old. We are now starting the whole process again to try and get a second child. We have chosen to do PGD as I have a type of Muscular Dystrophy called Myotonic Dystrophy so having a baby naturally would mean there would be a 50% chance of the baby being born severely disabled.

As soon as PGD is successful (or we decide to give up) I will start thinking about the next property project. My husband and I would love to build ourselves a house to live in. I also want to expand my buy to let portfolio and would choose properties that need some work doing as I enjoy development projects.

5. What do you think are the greatest problems facing the private rented sector today?

Difficulty of obtaining credit is a big issue as it limits the possibility of expansion for many landlords. It is a more serious problem for those who need to remortgage but can’t because of lower amounts of equity or lower rents.

The amount of legislation has increased so much since I first became a landlady. It is essential to keep on top of it. I do this by being a member of the NLA, reading landlord websites and magazines and going to landlord meetings and conferences. The meetings are a good way of meeting other property investors, so you can learn from them.

6. What do you think are the greatest opportunities?

There are so many opportunities, that is why I love investing in property. Not only can you benefit from capital gains in the long run, you get the short term profit from the rent. I see my portfolio as my future pension, yet other than my first ever deposit, I have never paid any cash into it, only time and lots of hard work.

7. We have a general election coming up – what would you like to see in the winning parties manifesto as regards the private rented sector?

I’d like to see the idea of having a national landlord register scrapped. From my personal perspective a landlord register is an extra bit of legislation that may discourage new landlords from entering the market. Therefore as an established landlord who already does everything by the book it may be good for my business.

However, I can’t see how reduced competition and higher costs for landlords is good for the market as a whole, it will have a negative effect on tenant choice and that may feed into higher rents. I don’t believe it will help remove the bad landlords from the market as they already flout many laws so who is to say they won’t ignore this one too. If the register is going to be introduced as seems likely, then it needs to be enforced.

The use of planning laws for restricting HMOs is a bad idea. It will only lead to fewer landlords investing in HMOs which will push up rents for those people who use them.

8. Do you use social media (blogs, twitter, LinkedIn etc)? What place do you think it has in the future of the property industry?

Social media is a useful tool for marketing your business. I am a member of LinkedIn but don’t blog or use twitter. I use LinkedIn for my consultancy work.

9. What is the most important lesson you have learned during your time in property?

Property is not an easy investment. You have to be organised and flexible. It requires a lot of your time, which can be difficult to manage alongside a career and family, especially with the fluctuating volume of work it creates. Things such as tenants vacating and maintenance issues may all happen at once.

10. What advice would you have to someone thinking of entering the property industry today?

I would say “do it”! Be prepared for a lot of hard work and make sure you research all the legislation. I can’t stress enough how much you need the backing of an organisation such as the NLA if you are a novice, as you can then use their advice helpline.

You need to have a fairly laid back personality. If you are the kind of person who gets stressed when furniture gets scratched then you will not have an easy life as a landlord.

Don’t invest everything you have in property, it’s essential to have some savings set aside. They are necessary not only for unexpected repairs, but also for if a tenant stops paying their rent or other unexpected costs arise. Having cash in the bank gives you time to respond to the crisis.

*******

Thanks Shona, and good luck with the PGD. You are an inspriation to us all.

The NLA Property Women awards are a great idea and I hope lots of people apply for the 2010 awards – there is still time, but nominations close at 12 noon on Monday 12 April 2010. Anyone interested will find more information and the forms here.

1. Please introduce yourself. Say a bit about yourself and your company

My name is David Salusbury and I am Chairman of the National Landlords Association (NLA). The NLA is the leading organisation for private-residential landlords. We campaign for the legitimate interests of landlords by seeking to influence decision-makers at all levels of government and by making landlords’ collective voice heard in the media. We also seek to raise standards in the private-rented sector while aiming to ensure landlords are aware of their statutory rights and responsibilities.

2. How did you first become involved in property?

Like many landlords, I inherited property from my mother who was a landlord on a small scale in Kingston-upon-Thames.

3. What do you think is your greatest achievement so far?

I would like to think that I have had some part in creating a national representative body for private landlords that is run professionally and recognised as an authentic contributor to the national housing debate. In that way, the NLA could have a positive influence on the development of the private-rented sector.

4. Do you or your company have any exciting plans for the future?

As part of our drive to raise standards we are developing a landlord accreditation scheme which will need no funding from local authorities or central government. We have plans for moving further towards creating one, unified voice for landlords at the national and – increasingly – at the European level.

5. What do you think are the greatest problems facing the private rented sector today?

The central issue is how to drive out the rogue landlords while avoiding making life even more difficult for the vast majority of landlords who are reputable and honest. We must also bring cohesion and consistency to the huge amount of regulation affecting the letting of private residential property. In the shorter term (hopefully) something must be done about the lack of mortgage finance which is crippling landlords’ ability to manage their portfolios.

6. What do you think are the greatest opportunities?

It is probably a truism that investing in property has for many years been, and remains, one of the few means of accumulating capital in Britain. Given the increasing importance of the private-rented sector, I would say to most people contemplating becoming a landlord ‘give it a go’, but ensure you are up-to-speed with all the requirements. It may not be rocket science, but it is a responsibility that shouldn’t be taken lightly!

7. We have a general election coming up – what would you like to see in the winning party’s manifesto as regards the private rented sector?

Before any more regulation there must be a commitment to a thorough review of existing legislation to see what is no longer needed. We would very much like to see the Government persuading local authorities to improve their expertise in the private-rented sector and to encourage local authorities to focus their enforcement activity on the rogue landlords within their area.

8. Do you use social media (blogs, twitter, LinkedIn etc)? What place do you think it has in the future of the property industry?

The NLA does, yes. We believe their importance should not be underestimated.

9. What is the most important lesson you have learned during your time in property?

That the business principles of courtesy, cooperation and cheerfulness are pretty good starting points for any activity. It’s not always easy, but one has to start somewhere.

10. What advice would you have to someone thinking of entering the property industry today?

Research, research, research. Once you’ve decided to take the plunge in letting residential property, join the NLA and make full use of the advice, information and support on offer. Then use the NLA’s benefits and services to the full to help you make a success of your lettings business. And do not underestimate the time and energy needed to be not just a good landlord but a great landlord.

Looking at the program, the main theme is the future, with talks and panel sessions looking at proposed legislation changes and future trends. The speakers include Ian Austin MP, Caroline Davy of Shelter and Ian Potter of ARLA, along with Simon Gordon and David Salusbury of the NLA. It should be an interesting event. NLA are a good organisation and do a lot for their members, for example the recent undertaking obtained from the Conservative Party on payment of local housing allowance.

Mind you, the NLA is not the only landlords association around, and those in the Eastern Counties looking for an organisation to join may also want to consider the Eastern Landlords Association, plus there are others, either nationally or in other specific locations. However, the NLA is now the largest, particularly after its recent merger with the SPLA.

If you attend the NLA Conference, I would be interested in your feedback, so please do leave a comment below.

I have now been provided with a copy of the Judgement in this case by the NLA, who wondered if I could put it into layman’s language! Judgements are tricky to read for non lawyers, because the Judge is mainly concerned to explain the legal reasons for his decisions to other lawyers. So ordinary readers are often baffled! This judgement is par for the course but it not too impenetrable, if you know where (and how) to look. The decision was that of HH Judge Pelling QC (sitting as a Judge of the High Court) and was made on 21 May 2009. NB Most quotations (i.e. where I do not say otherwise) in this post are extracts from the Judgement.

There were six claimants. The first was Mr Michael Stimpson, the driving force behind this case. The five others were members of the SPLA who agreed with him.

The defendants were (1) the SPLA itself (i.e. the legal entity), (2) – (5) directors of the SPLA who made the decision (although Mr Richard’s status as director was arguable), and (6) the NLA who, it was claimed, had taken the company’s assets in bad faith knowing that the merger was not properly valid.

By way of background, the Southern Private Landlords Association (SPLA) was set up by Mr Stimpson some time ago, and he was the President and a director of the company. The SPLA (as is the NLA) was a company ‘limited by guarantee’. This is a special type of limited company, which is explained on the Companies House web-site as follows:

“A company limited by guarantee is an alternative type of incorporation used primarily for non-profit organisations that require corporate status. A guarantee company does not have a share capital, but has members who are guarantors instead of shareholders. The guarantors give an undertaking to contribute a nominal amount towards the winding up of the company in the event of a shortfall upon cessation of business. It cannot distribute its profits to its members, and is therefore eligible to apply for charitable status if necessary.”

The purpose of the SPLA, as described by the Judge ,was

“to represent the interests of private landlords by lobbying on behalf of its members, providing advice and assistance to its members, and also providing facilities such as insurance and mortgages for the benefit of its members by negotiation with the commercial providers of such services. Members are members for each year for which they pay an annual subscription. If they fail to pay the subscription they cease to be members one month after the subscription has become due.”

This is very similar to most landlords associations, including the NLA.

The history behind this case is that at the SPLA’s AGM on 4 April 2008, 94% of the voting membership voted in favour of a resolution authorising the committee to start negotiations, and if appropriate to merge, with another suitable landlords association.

The committee duly went away to do this, and the organisation the majority of the board decided they wished to merge with was the NLA. This was not surprising as the NLA is probably the largest of all the landlords associations, one of the reasons for this being its mergers with smaller associations.

As pointed out by the Judge, “objectively, the merger was one that benefited the members, not least because it gave them access to a large organisation providing services which were the same as, or more extensive than, those provided by the first defendant and at a lower annual cost.”

However, the merger was opposed by Mr Stimpson, although “no coherent reason for this has been advanced by him”. In the same paragraph (14) the Judge goes on to say:

“The defendants maintain that the inference is that the first claimant was and is motivated by a desire to maintain or regain control of the [SPLA], which he founded and which he had been involved with for many years and to do so without regard to the objective best interests of the members. This point has been highlighted in the evidence and has not been answered.”

Or in other words, Mr Stimpson wanted to hang on to control of the SPLA at all costs. Presumably this is because if the merger went ahead he would lose the position of spokesperson for landlords which he has enjoyed in the past, as the NLA have their own people for this.

The Judge continued:

“No attempt has been made by the claimant [i.e. Mr Stimpson] to explain why substantively the merger of the [SPLA] with the [NLA] is not in the interests of the members. The claimant’s case is advanced exclusively by reference to points of process rather than substance. There is some evidence … of significant in-fighting at director level which has absorbed funds and distracted attention from the provision of services to members.”

Meaning that being unable to find a good reason to oppose the merger, Mr Stimpson resorted instead to blocking it by other means, and arguing with the rest of the committee. So, how did he block the merger?

The Judge: “there came a point when [Mr Stimpson] decided to stop attending Board meetings in order to prevent such meetings being quorate and so stifle the conduct of the claimant’s business.”

By way of explanation, in companies, for a board meeting to be able to make decisions which will bind the company, there needs to be a minimum number of directors attending – this is called a quorum. Mr Stimpson was able to make the SPLA meetings inquorate because he and one of the other directors, a Mrs Kerslake (‘inferentially’ his ally) stayed away. Putting both of them, as pointed out by the Judge, in breach of their statutory duties as directors.

Two important meetings then took place on the 23 and 30 June 2008. At the first meeting a Mr Harrison was appointed as director. This, it is claimed, was an invalid appointment as the meeting was inquorate at the time (even though the board tried to telephone Mrs Kerslake). This is important because it was only by the presence and votes of Mr Harrison that another director, Mr Anthony Richards was appointed on 25 June, and it was only with their votes that Mr Barry Markham (one of the other SPLA directors) was authorised to sign the agreement to merge with the NLA.

The argument put forward therefore in this litigation was that the merger was invalid as it was agreed at an inquorate meeting.

The thought in my mind as I read this, was that surely it would be wrong (or inequitable, to use the legal word) for Mr Stimpson to be able to rely on his own breach of directors duties, by deliberately not attending the board meetings, to prevent a merger with which he did not agree? This is a point picked up by the Judge later.

At the hearing on 21 May, the Judge had to decide, whether the litigation should be permitted to continue. Directors of limited companies (which in some cases may not be owned by the persons making the decisions) are obliged by law to act in the best interests of the company. Therefore, when deciding this case, the Judge had to ask himself “would a hypothetical director acting in accordance with the law and in the best interests of the company and its members, allow it to continue” (my words here not the Judge’s).

So what were the points that such a hypothetic director (one of a number of fictitious persons regularly called upon by Judges to help them with their decisions) would consider, in the Judges view?

The first point is that this was not a normal trading company but a not for profit organisation existing as a company limited by guarantee Its members do not own it in the normal way but are “transient affiliates” their membership depending upon whether or not they have paid their membership fee.

Second, the directors had not ‘given away’ the company, but acted in accordance with a resolution properly passed at the company’s AGM.

Third, the terms of the transfer were that members would receive the same or better services without additional charge, and indeed the “services to be provided were equal to or better than those provided by the [SPLA]”.

Thus, the Judge decided “a director properly advised would conclude that this claim was a hopeless one, viewed on its own and aside from the quoracy issue“. So apart from a few financial matters which the Judge felt were not important, the only point which had any chance of success was that the merger decision was “tainted by inquoracy”. However, the existence of a realistically arguable claim is not sufficient to justify litigation, in these circumstances. Other things need to be taken into account as well.

First is the actual sum claimed in compensation. In the Judge’s view the basis of the SPLAs potential income claimed, was flawed, as it depended on members continuing to be members. However there were also the assets which had been transferred to the NLA, which could perhaps be returned. But would this be a good decision for the company?

One telling point is the position of the six former employees of the SPLA. Three of these have been employed by the NLA. However if the litigation succeeded, they would be at risk of losing their jobs. To quote the Judge :

“here a relatively small number of employees are at risk when in reality the members of the first defendant are not, for they were provided with services at least as good as those formerly provided by the first defendant, down to the date their subscriptions expired at no additional cost and can obtain continuing services by paying a subscription to the sixth defendant which in fact is less than that that was charged by the first defendant.”

There is then the question of costs. Mr Stimpson, it seems, is wealthy and can afford it (lucky him!). However the SPLA would be at risk of insolvency if it lost, and its prospect of attracting members would be limited if they become aware that a lot of the energy of the company would be concentrated on fighting this litigation rather than looking after their interests. Overall therefore, concluded the Judge, the hypothetic director would probably decide against continuing the litigation.

However, continued the Judge, even if he were wrong about the hypothetic directors probable decision, he still felt it was wrong to allow the claim to continue. Reasons being:

A questionnaire had been circulated to SPLA members, and although there was a majority in favour of continuing the litigation, this majority was quite small.

Mr Stimpson and his co-claimants had not given any evidence to show that the merger was not in the interests of members, and all the evidence was that the NLA would provide a similar if not better service at a lower price. This indicated bad faith on their part.

Finally, there was the conduct of Mr Stimpson himself in attempting to prevent the merger by causing the meetings to be inquorate, rather than attend them and argue against it. “The reality is” concluded the Judge “that the claimant wishes to bring the contemplated proceedings because he does not want to see the first defendant lose its identity or to lose control of it.”

So the Judge’s decision was to refuse permission to continue the litigation, and the order was made regarding costs as discussed in my previous post. An interesting decision, and one which shows that directors who seek to block decisions they do not agree with by improper means will not ultimately be successful.

If anyone wants to read the decision in full, they can do so here.