Court Sucess
I had a recent result in court defending a possession claim brought by a landlord using a technical defence that not a lot of people seem to know about, because it relied on something not immediately related to housing law.
It was one of those legal points that I knew of years ago and simply forgot about until the opportunity arose afresh.
It is the vexed question of how legal documents are signed where the landlord is a limited company. Section 44 of the Companies Act 2006 states:-
“Execution of documents:-
(1) Under the law of England and Wales or Northern Ireland a document is executed by a company—
(a) by the affixing of its common seal, or
(b) by signature in accordance with the following provisions.
(2) A document is validly executed by a company if it is signed on behalf of the company—
(a) by two authorised signatories, or
(b) by a director of the company in the presence of a witness who attests the signature.
(3) The following are “authorised signatories” for the purposes of subsection (2)—
(a) every director of the company, and
(b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.”
A previous case
Those with clearly better memories than my shaky old one may recall back in 2016 the case of Bali v Manaquel Company Limited, ably covered by Nearly Legal here where a s21 was held to be invalid because the service of the prescribed information of the deposit scheme being used had not been executed in accordance with the requirements of the Companies Act.
The appeal judge quoted by Giles said:-
“it was a certification of the accuracy of the information for a ‘formal legal purpose”, meaning it had to be Companies Act compliant.
My case put forward
My recent argument, using the same logic, was that the s21 served on the tenant was similarly invalid because the landlord issuing it was a limited company and therefore bound by s44. A point that the judge on the day agreed with.
Only later did I do a bit of digging on this to see if I was actually on the money or just got a good judge in a good mood on a good day. I found the case of Hilmi & Associates Ltd v 20 Pembridge Villas Freehold Ltd [2010], where a notice was served by leaseholders on a freeholder, notifying that they wanted to purchase the freehold under the Leasehold Reform, Housing and Urban Development Act 1993.
One of the leaseholders was a company and the notice was therefore not considered to have been properly executed.
Further evidence
In a recent issue of Legal Action magazine March 2018 veteran housing judge Nic Madge, co-author of the Housing Law Casebook suggested that there is a “Strong argument” that notices served by landlords on tenants could be invalidated in the same way and it certainly worked in my case.
Giles Peaker, in his article on the Bali judgement, goes further and suggests that this may well also be the case where prescribed information notices or notices seeking possession are signed by letting agents who are themselves a company.
A word of advice
While I use this knowledge to help defend possession applications landlords would also be wise to bear it in mind, particularly when instructing letting agents. In his legal Action article Nic informs us that this defence is proving very common with court duty advisers, of which I am evidently a late-comer.
And finally
I doubt he ever reads my stuff but I’ll just add my congrats to Nic who I hear is finally retiring. When I was a freshly minted housing adviser (with hair) in about 1989, Nic ran the first legal training course I ever attended, back in the days of SHAC. I remember a warm amiable guy who took great delight in pointing out several times throughout the day, that I wasn’t as knowledgeable as my cocky, younger self thought he was.
Like everyone in this game, I’m still learning Nic.
This is an interesting one, particularly since the S21 Form 6a has no requirement for a witness to attest the signature?
That doesnt surprise me Laura. The additional requirements for service of s21 ushered in by the Deregulation Act were not reflected in the N5B court form until over two years after introduction of the requirements.
Under the Civil Procedure Rules a managing agent is unable to sign court papers in possession cases but it doesnt say that on the forms. You have to look it up. I’ve successfully defended possession claims on that basis as well but the problem often arises of who the landlord is in some cases.
Sometimes the agent is listed on the agreement as the landlord but when you question them they say they are just the agent.
This is a big issue for landlords, especially since so many have recently transferred property into companies due to the tax changes.
Yes, not all issues have been flagged up to landlords doing this.
For example, landlords running their property business through a company cannot take advantage of the consumer legislation eg the Foxtons case about unfair agents commission clauses in agency agreements.
How does it stand for witnessing when the signature is electronic?
We need a company lawyer to tell us this!
The law on the signature of documents is very old fashioned although I think the Law Commission is looking into it, with a view to bringing in new legislation.
So far I have never issued a S21 but I plan to sell a property next year. I spoke to my letting agent and she said that she will send one on my behalf 2 months before I plan to sell. Does this mean that I have to sign the form myself? I own that property in my own name, The agen uses a company.
A bit worrying as the effect of section 44 seems to be very wide-ranging. Does every notice served by a company which needs to be signed have to comply with the section? What about notices which need to be signed served by solcitors who are incorporated? Do they have to comply wth the section?
I have no idea whether or not the Companies Act, in relation to landlords or agents who are corporate also applies to solicitors. Not my area of expertise unfortunately. Tessa may be better placed to answer that one
But what is apparent from both Bali and Hajmi is that documents issued for a formal legal purpose have to be Companies Act compliant. I’m not aware of a more specific definition of what formal legal purpose might mean. On the wording there it would seem to be quite a wide one, encompassing as it does notices seeking possession, as was my experience and even prescribed information of deposit schemes, as in Bali.
We always sign the tenancy agreements with the following wording
[Name of person signing] QuaLETy Ltd for and on behalf of the Landlord
Is this sufficient or do we need to change it?
Looks like you need to change it…
…except that if a document does not need signing does it matter if it is signed that it is not signed properly?
Interesting article.
Does this mean the three properties I purchased in my Limited Company name, where I was the sole signatory on the contract, have also not been properly executed?
I had been wondering about sale and purchase contracts. The relevant act says that the contract “must be signed by or on behalf of each party to the contract”. So the actual party need not sign – someone can sign on their behalf.
Of course if you have completed the transaction the contract becomes a dead letter – at least as regards its main purpose.
In this article on the subject…
https://gowlingwlg.com/en/insights-resources/articles/2015/back-to-basics-signing-your-documents-correctly
….it says that a contract involving a company can be signed by:
– Affixing common seal; or
– signed on behalf of the company by a person with express or implied authority; or
– signed by two Directors or one Director and the Company Secretary or
– signed by one Director and witnessed.
So if a landlord’s contract with an agent gives them signing authority, and if the agent has expressly given a member of staff signing authority, is all OK? (Just simple contracts, not Deeds obv)
Contracts gets a whole different section in the Companies Act, specifically to allow agreements to be made without all the formalities. A statutory notice is not a contract.
That article you cite was written by two lawyers in engineering and construction Mark, not housing and the cases I quoted above of Bali and Hilmi were specifically housing law cases where the courts were quite clear.
If a landlord instructs his agent to serve a section 21, which they are entitled to do and the agent is a limited company, then it seems evident that the Companies Act applies, even if the landlord, who didnt serve the notice, is not a limited company. Its about the validation of documents.
There is a case from a couple of years back which in my memory concerned Birmingham council, whose rubber stamped their possession proceedings in the ‘Statement of truth’ box on the court forms, which was held to be insufficient, rendering years worth of possession orders possibly invalid (Sorry if I’ve misremembered the fine details).
The Civil Procedure Rules do not allow an agent to sign the statement of truth on court paperwork,on the odd occasion you see an application where the agent goes further than allowed and this has always been enough to defend possession.