Tenant Insolvency – early warning signs for landlords

The recent downturn in the economy is undoubtedly having an adverse effect on the cash flows of a large number of businesses in the UK.  Businesses are keeping a much closer eye on outgoings and expenses, and may be looking to ease financial pressure by making payments due to creditors as late as possible.

For a business operating from leased premises, quarterly rental payments are likely to be one of the biggest outgoings. The longer the rental payment remains in the tenant's bank account, the more interest they will accrue and the more likely that cash flow issues will be eased.

However, late payment of rent could prove to be an early warning sign of real financial difficulty – that the tenant is unable to pay its debts as they fall due. Should the tenant enter into a formal insolvency procedure, the landlord will be dealing with the insolvency practitioner (IP) appointed to the company in order to secure return of the premises. Subject to rights of hypothec in Scotland, the landlord will have only an unsecured claim for any rent that remains unpaid.

Early action is key
The key advice for landlords is to remain vigilant. Ensure that systems are in place in order that late or non payment of rent or other non-compliance with lease covenants is identified as early as possible. Take steps to remedy the position at the earliest opportunity. Companies in financial difficulty will often give priority to those creditors that are pressing most for payment. However, payment should only be made of those amounts that have fallen due; accepting payment of future rentals runs the risk of reversal of the payment if the tenant subsequently enters into a formal insolvency procedure.

Right of hypothec
Changes have been made to the landlords' right of hypothec which applies in Scotland. (View our recent E-Bulletin article on the revised rights of hypothec available to landlords.)

Formal insolvency
Again, the key advice here is to take early steps to contact the IP.  The IP appointed to the tenant will in the majority of cases have little or no prior knowledge of the tenant's contractual position.  Often, the tenant's books and records will be less than adequate and directors/employees may not be on hand to assist the IP.  We would therefore suggest that the IP is provided with a copy of the lease and details of the rental payments outstanding or due.

Landlords should also establish in the early course their proposed approach to their tenant's insolvency.  In some cases, if the IP intends to trade the business on, in the hope of achieving a going concern sale, he may agree to meet the ongoing rent. In some cases, the IP may seek to vary the terms, and possibly the amount of payment, possibly by agreeing a slightly reduced rent and/or that payment will be made on a monthly, rather than quarterly, basis.  It is of course a commercial decision for the landlord whether the terms offered are acceptable.  The hope is of course that a business sale will lead to the assignment of the lease to a new, solvent tenant.

If variations to the terms of payment are agreed however, steps should be taken to ensure that the IP agrees to pay the ongoing rent as an expense of the insolvency procedure.  This will ensure that the rent is payable in priority to the unsecured creditors, preferential creditors and any floating charge holder, rather than as another unsecured liability of the tenant.

Establish value
It is worth bearing in mind that the lease may be a key asset of the tenant and a primary concern of the IP.  If this is the case, the landlord will be in a stronger bargaining position than otherwise.  Retention of the lease, and possibly agreement to an assignation or assignment of the lease when a sale is secured, may be key from the IP's perspective.  The landlord should give early consideration to the terms on which consent to any assignation or assignment will be given, subject to the terms of the lease.

What type of insolvency is it?
It is also important to establish the type of insolvency proceedings that the tenant has entered into.  This will determine whether the landlord's right of irritancy is immediately available (assuming there has been a breach of the terms of the lease giving rise to the right).  If the tenant has entered into liquidation or receivership, there should be no bar to the exercise of rights of irritancy, subject to any requirements to act reasonably.  In liquidation in particular, the IP will have limited rights to continue the business of the tenant and he may be happy for the landlord to exercise his rights of irritancy forthwith.

However, if the tenant has entered into administration, an automatic stay on any proceedings against the tenant will arise. This will prevent the landlord from exercising his rights of irritancy without the leave of the administrator or consent of the court.  Generally, the administrator/court will not grant leave in the very early days of the administration, the rationale being that the administrator requires a period of time to establish what steps should be taken in the interests of the creditors of the tenant as a whole.

However, case law has established guidelines that an administrator should follow when considering whether to grant the leave requested. In particular, leave should normally be given to a landlord to exercise his proprietary rights where that exercise is unlikely to impede achievement of the purpose of the administration. A balancing exercise requires to be carried out, weighing the interests of the landlord against those of the tenant's other creditors. Great importance should however be placed on the landlord's proprietary interests.

Generally, the court will take a dim view of the actions of an administrator who refuses leave where there are no good grounds to do so, resulting in the landlord being required to make an application to court for leave instead. The recent English case of Metro Nominees (Wandsworth) (No.1) & Ors v K Rayment & Ors is a case in point.  For commentary on this aspect click here and here for previous e-bulletin articles.

Conclusion
The key message for landlords is to remain diligent, watch for the early warning signs outlined above and to take immediate action when the landlord suspects that the tenant may be in financial difficulty.

30 July 2008

The limits of a receivers' duty of care when disposing of company assets

Philip Bell v Philip Long, Andrew Thomson, PKF and Weatherall Green & Smith (North) Limited [2008] EWHC 1273 (Ch)

Background
The receiver's duty to exercise care in disposing of the company's assets and to ensure he obtains the best price reasonably obtainable at the time of sale was considered recently in the English case of Bell v Long & Others.

Mr Thomson and Mr Long acting as administrative receivers of Dimple Property Limited (DPL) sold a portfolio of four properties for a combined purchase price of £775,000. Mr Bell, director and shareholder of DPL, felt that the receivers had failed in their duty to obtain the best price reasonably obtainable for the properties in the open market. Mr Bell was of the view that if the properties had been sold as individual properties there would have been a greater return to DPL.

Duty to the company
It is clear that a receiver owes a duty of care to the company when dealing with the company's property. In England, the receiver's duty has been described as "a duty in equity to all those interested in the equity of redemption" to obtain a proper price for the property. The test in Scotland is similar and the Scottish Courts have indeed suggested that the approach to the duties of a receiver should be as close as possible in England and Scotland.

However, notwithstanding that general duty of care, the receiver has a degree of latitude not only as to the timing of any sale but also as to the method of sale to be employed. The receiver must still exercise any power of sale in a bona fide manner and obtain a fair price but he has the right to effect a quick sale of the assets even though the market could improve if he held back.

Facts
In this particular case, Mr Bell did not challenge the sale process gone through by the receivers' selling agents but the prior decision to sell the property as a portfolio. The selling agents' initial advice was that the properties ought to be sold individually. However, following interest from a purchaser (PCPL) in buying the properties as a portfolio, the advice to the receivers changed and they recommended a portfolio sale. Following the sale of the portfolio to PCPL, they subsequently negotiated onwards sales of each of the four properties. Mr Bell argued that the subsequent prices achieved by PCPL demonstrated that had the receivers maintained their original marketing strategy they could have achieved a better price for the properties.

Findings
Under cross-examination Mr Bell's expert conceded that the advice to market a portfolio sale could not be described as incompetent. He further conceded that it was an option for the receivers but one which he felt did not produce the maximum return.

On the basis of that evidence, the Court had no difficulty with finding that there was no negligence on the part of the selling agents or the receivers. Mr Justice Patten said:

"There is nothing to suggest that [the selling agent's] assessment of the situation in April was not a reasonable one, his preference for the certainties of a sale to PCPL at £730,000 [as it then stood] over the uncertainties of a longer period of marketing, against a background of changing market conditions, was one which the receivers were entitled to adopt consistently with the right to choose the time of the sale. I do not see how as a matter of law it can be suggested in this case that they were bound to wait for an indefinite period in the hope of obtaining a higher return when they had a competitive bid for all the properties in excess of any individual offers. The duties they owed to the company do not require them to take those kind of risks."

Comment
Given the current market uncertainty, this case will reassure receivers that they do not have to become property speculators and second guess the market. The case does, however, reinforce the need for receivers, when agreeing a strategy for the sale of assets or contemplating a change of strategy, to keep a detailed note of the reasons why a particular strategy was deemed to be the best one in all the circumstances of the case and of any change to that strategy.

It should also be remembered that while the time of sale and method of sale can, to an extent, be dictated by the receiver, this does not mean that he can choose just any time or any method and he must always exercise a reasonable degree of care in disposing of the company's assets.

Interestingly, in another decision recently issued by the High Court in England, (Re Delberry [2008] EWHC 925 (Ch)), the Court upheld a liquidator's application under section 236(3) of the Insolvency Act 1986 to force a company's administrative receivers to disclose documents relating to the receivers' strategy and planning and in particular the decision of the receivers to sell quickly. This simply emphasises the need for a clear audit trail to be kept justifying each step in the decision making process.

30 July 2008

Licensing - the effect of insolvency on premises licences

The Licensing Act 2003 came into force on 24 November 2005, and introduced a new system in England and Wales for licensing premises in relation to the sale of alcohol, public entertainment and the provision of late night refreshment.

Under the terms of the 2003 Act any person or organisation engaged in a licensable activity must have a premises licence for the premises where the activity is being carried out. All premises that sell alcohol also require a "designated premises supervisor" (DPS) who must be the individual named on the premises licence. The DPS must also hold a "personal licence", this personal licence is entirely separate from the premises licence.

Effect of insolvency on premises licence
The important point for insolvency practitioners to note is that under the new regime introduced by the 2003 Act, the premises licence lapses immediately upon insolvency. In relation to an individual this includes the following:

• the approval of a voluntary arrangement proposed by him;
• being adjudged bankrupt or having his estate sequestrated; or
• entering into a deed or arrangement made for the benefit of his creditors or a trust deed for his creditors.

In relation to a company, the licence will lapse on:

• the approval of a voluntary arrangement proposed by its directors;
• the appointment of an administrator;
• the appointment of an administrative receiver;
• the company going into liquidation.

The definition of insolvency in the 2003 Act refers only to formal insolvencies under the Insolvency Act 1986 and not to LPA receiverships. A chargeholder/bank could therefore appoint an LPA Receiver who would be able to continue to trade with the original premises licence without fear of it lapsing.

Insolvency practitioners should be aware that no licensable activities may lawfully be carried on from the premises from the moment the licence lapses: any trading from the premises before the licence is reinstated is unlawful. The licence can only be reinstated if the insolvency practitioner submits to the relevant licensing authority an "interim authority notice" within seven days (not working days) of the approval of the relevant voluntary arrangement or of the relevant appointment. If no such authority notice is submitted within the seven day period the licence cannot be reinstated and a new licence would need to be obtained.

A copy of the interim authority notice must also be given to the Chief Police Officer for the area. Provided the notice is properly served, the premises licence is reinstated from the time that the notice is received by the licensing authority; and from that time the person who gave the notice is the holder of the premises licence. The reinstated licence lasts for a period of two months. If a transfer application is made during that two-month period it will extend the life of the interim authority until that transfer application has been determined. Unfortunately trading cannot continue beyond two months unless such an application has been made. It is generally understood that a fresh premises licence cannot be transferred back to the original holder if the relevant entity has survived the insolvency process (although the legislation is not particularly clear on this point).

Failure to act quickly to protect the licence would lead to the business ceasing trading and the loss of the ability to sell it as a going concern.

While a new licence could be applied for, there is no guarantee that it will be granted and insolvency practitioners may be reluctant to initiate this process, as the application procedure is likely to take some time.

Some insolvency practitioners might wish to file the interim authority notice to reinstate the licence, and subsequently appoint a managing agent experienced in licensed premises to hold and operate the premises. The managing agent can then apply to have the premises licence transferred to them while managing the premises. This would mean the insolvency practitioner avoids any potential liability issues connected with being the holder of the licence.

Quick action required
Often the books and records of an insolvent company are incomplete and it may be a difficult task for the insolvency practitioner to obtain a copy of the licence and establish the relevant details of it.

It is clear that upon insolvency urgent steps need to be taken within seven days to lodge either an interim authority notice which can only be given by the insolvency practitioner himself, or a transfer application in either the insolvency practitioner's name, the name of a managing agent or a buyer (if there is one already lined up). If the insolvency practitioner intends to disclaim the lease it could offer to transfer the premises licence to the landlord so that the landlord is able to re-let the premises with the benefit of the licence. This could prevent the landlord claiming damage to the value of the reversion by the loss of the licence. The insolvency practitioner also needs to ensure that the DPS named on the licence continues to work at the premises.

The new procedures mean that insolvency practitioners need to plan carefully in advance to ensure a quick sale can be achieved if the business is to be sold as a going concern. Advance planning is also required to ensure continuity of trade and the proper management of relationships with key personnel such as the DPS.

Given the very short time frames within which action must be taken it is clearly important to obtain early specialist advice.

The position in Scotland
Similar rules are to be introduced in Scotland under the Licencing (Scotland) Act 2005  which comes into force in September 2009. Under the new legislation a premises licence will cease to have effect in the event that the premises licence holder (individual, partnership or company) becomes insolvent, unless the applicant applies for the transfer of the premises licence within 28 days of the occurrence of that event (a more generous time frame than in England).

30 July 2008

Will the reaction to flood risk constrain development in the UK?

Introduction
The impact of the 2007 summer flooding has sparked interest in and led to a new approach to the management of flood risk. The economic costs of the flooding during summer 2007 were enormous with at least £3 billion being paid out on insurance claims alone. Some idea of the number of properties damaged is given by the fact that there were in the region of 180,000 claims including 30,000 relating to commercial properties.

The insurance industry is reassessing provision of insurance against flood risk. The Association of British Insurers has been in consultation with the government to address the balance between the government's management of flood risk and the insurer's commitment to continuing to provide insurance cover against flood risk. If the risk is not managed the insurers may be unable to continue to offer cover for flooding as a standard feature of buildings insurance.

The government is under pressure to demonstrate that flood risk is adequately managed both in relation to risk assessment and the improvement of flood defences. The government has responded by commissioning a review (referred to below) and a number of recommendations have followed. In November 2007 the European Community Floods Directive came into force and this requires to be implemented within the United Kingdom by November 2009. Local authorities are also looking to use the powers of the planning process to prevent or restrict development in high-risk flood areas.

Background
It is generally accepted that the risk of flooding is increasing although the cause and level of increase may be disputed. Traditionally focus has been on coastal and river flooding, the location of which is relatively predictable even if management is difficult. Recently however there has also been a major problem with surface water flooding. Heavy rainfalls are on the increase and due to modern urban design, drainage is often impeded through increased use of impermeable surfaces, for example, for off road car parking in front of properties or where existing drainage systems cannot withstand the sudden surge in the volume of water.

These views are supported by the findings in the Report commissioned by the UK government, led by Sir Michael Pitt and published in June 2008.  While location in relation to rivers and the coastline was an issue, surface water flooding was a significant factor.

It has been identified that due to flood assessment being dealt with separately from water management generally no single authority has ever had overall management. The Pitt Report has made a recommendation that the Environment Agency should have overall strategic responsibility.

Actions
Within Europe, a shared framework between member states for risk assessment and reduction of all types of flooding using areas defined by river basins has been created by the EC Floods Directive. The Directive has set out a three stage process for its member states:

1. a preliminary flood risk assessment, with reviews;
2. creation of flood hazard and flood risk maps, with reviews; and
3. flood risk management plans following from the findings.

Research by environmental assessors is also ongoing in the context of climate change.

Within the UK the recommendations of the Pitt review will be treated as an action plan. One recommendation is that there should be one coherent piece of legislation in England and Wales to deal with flooding and water management, instead of the current piecemeal approach of at least four such relevant statutes. The UK government plans to have a consultation on a draft "Floods and Water Bill" in the course of next year.

In Scotland, the consultation on flood risk management has already closed and a Flooding Bill is expected to be introduced to Parliament later this year. The Future of Flood Risk Management in Scotland similarly seeks to tackle the poor co-ordination among the various duties and powers under different pieces of legislation, and the absence of a national framework for managing flood risk.  It proposes identifying an appropriate authority, likely to be the Scottish Environmental Protection Agency, that would be responsible for implementing the requirements of the EC Floods Directive, with the participation of local and other authorities, including Scottish Water, and produce strategic Area Flood Risk Management Plans, to enable objectives and measures for the management of flood risk to be co-ordinated.

In England and Wales, the Environment Agency is expected to take overall responsibility, and we anticipate that legislative changes will follow. We do know that it is intended that local authorities are set to have greater responsibility for their individual areas.

In the context of the wider picture of prevention and adaptation the Pitt Report calls for rigorous application of the existing controls on development and also for regular review of such controls. This is the type of responsibility that is likely to fall on the local authorities, enforceable through planning permission.

The Planning Policy Statement (PPS) which has been in place since December 2006 does already provide for mapping flood risks and provision of surface water management plans. The Pitt Report commends the PPS but insists that it is now necessary to enforce this. It is recommended that in every case where areas are at a significant risk, all parties with an interest or responsibility should be working together on the management plan. It is not yet clear however how the local authority can enforce this on the water companies in the event of disagreement. It is also recommended that development is assessed at all stages. The infrastructure will be assessed against the flood risk and there may be many more cases of refusal if the balance is not struck.

In Scotland, SPP7: Planning and Flooding sets out the Scottish Government's planning policy on new development and flooding, and aims to prevent further development which would have a "significant probability" of being affected by flooding, or which would increase the liklihood of flooding somewhere else.

The Pitt Report recommends that the costs of flood protection for a new development are the responsibility of the developer. This might affect the feasibility of housing provision and is likely to result in fewer new homes being built. Developers will also be concerned to ensure that they are not being penalised for the historical failures to provide or maintain flood protection.

Potential impact 
It is not yet known which of the recommendations of the Pitt report will be put into practice however the following is envisaged:

• The planning process is likely to prohibit or restrict development in flood risk areas.
• Developers may be expected to meet the increased costs of sustainable drainage systems and flood defences required for their development.
• Developers could lose the current automatic right to connect drainage systems to public drainage systems if it is anticipated that the volume of drainage may cause surface water flooding.
• Water companies are most likely to be expected to achieve higher standards of management of drainage systems and other flood management.
• Individuals may find it more difficult to obtain insurance against flood risks in areas identified for flood risk.
• Individuals may need planning permission before using impermeable paving or surfacing in front gardens and for off road parking and it is anticipated that applications will be met with refusal in certain high risk areas.
• Individuals may see increased water bills and more specific bills identifying foul water, surface water and highway drainage.

The importance of successful flood management
Successful flood management is at a relatively early stage with the key players still evolving. The focus is on preventing increased vulnerability by encouraging new development away from areas at flood risk; identifying any flood protection required and requiring the developer to provide the necessary infrastructure and to bear the cost of that. Flood damage remains a serious risk reinforced by the ongoing adjustment to climate change. It is necessary for the government to keep abreast of the pace and type of changes required to achieve successful flood management and this is likely to result in more responsibility also for the end user. It is time for the developer and the individual property owner to endeavour to prevent future losses in an attempt to combat any gap in the protection of their homes and businesses. The government's management of the problem and the insurers ability to maintain the provision of cover is not yet in balance.

The Pitt Review - Learning Lessons from the 2007 Floods is available to view or download from the Cabinet Office website

The Scottish Government Consultation: The Future of Flood Risk Management in Scotland is available from the Scottish Government website

30 July 2008

Tolerated Trespassers

The Court of Appeal recently considered the case of Jones v London Borough of Merton [2008] EWCA Civ 660. This case is important to public sector landlords as well as being relevant for the general interest of the property sector, in giving guidance as to when a person no longer has possession of a property.

Background
What constitutes a tolerated trespasser? A tenant may become a tolerated trespasser when, under a secure or assured periodic tenancy, the period of the tenancy comes to an end but the occupier does not relinquish possession of the property.

In Jones v London Borough of Merton, the court defined a tolerated trespasser as:

"a former secure tenant against whom an order for possession has been made in which the specified date for him to give possession has passed but which has not been executed. So he has a valuable right potentially to secure the revival of his tenancy."

The court also set out the three distinct scenarios in which the tolerated trespasser may exist:

• Actively tolerated by the former landlord – when the parties enter into an express agreement that the former landlord will not take action to enforce a possession order if the former tenant meets certain requirements, such as, payment of rent.
• Passively tolerated by the former landlord – when the former landlord fails to take any action to enforce a possession order and the former tenant remains in possession of the property.
• Tolerated by the court – when a possession order requested from the court by a former landlord is stayed or suspended by powers of the court.

Facts
Mr Jones was the tenant under a secure tenancy of a housing association flat in Mitcham. The London Borough of Merton (Merton Council) was the landlord. On 14 January 2005, Merton Council was granted an order for possession against Mr Jones ordering him to vacate the flat from February 2005. However, Mr Jones continued to occupy the flat and became a tolerated trespasser by virtue of Merton Council's inaction as regards enforcement of the possession order. Mr Jones' physical occupation continued until June 2005 albeit he left some of his possessions in the flat and retained keys to the property. From that date there had been various communications to Merton Council regarding vacating the flat, including a request for a housing transfer.

In a meeting in October 2005 Mr Jones was informed by Merton Council that he could not be transferred to new accommodation until all rent arrears on the existing flat had been settled. This had risen to a sum of £1,231.76 and Mr Jones' father settled the rent arrears on his son's behalf. No further payments were made as payment of rent on the property and Mr Jones sent a friend to the property to remove all his remaining possessions in November 2005.

The Housing Officer at Merton Council advised Mr Jones that he remained liable for the payment of rent on the property as a tenant even though he was no longer living in the flat.  He further advised him not to terminate the tenancy until his re-housing had been finalised. The re-housing took place in June 2006. 

Initial decision
As no rental payments were made on the flat after October 2005 arrears began to accrue again and in December 2006 the County Court ordered Mr Jones to pay Merton Council £3,200 by way of mesne profits (an amount equivalent to the rent during the disputed period of occupation) from October 2005 until September 2006. The decision was based on the judge's acceptance of the argument put forward by Merton Council that the rules for the surrender of a tenancy requiring the tenant to give express notice to the landlord and for that surrender to be accepted, applied also to the date of cessation of liability for mesne profits. The Court concluded that since Merton Council had not accepted that Mr Jones' liability to pay mesne profits had ceased, he remained liable until the date Merton Council agreed to terminate the relationship.

Court of Appeal decision
Mr Jones appealed the decision of the County Court. He had claimed that he had given up possession of the flat prior to 3 October 2005 and if notice was required (this point however being disputed), it had been given on that date. Therefore, Mr Jones was not liable to pay the equivalent rent to Merton Council for any period after that date. Mr Jones claimed that as he was a tolerated trespasser, (passively tolerated by his former landlord), his liability to pay mesne profits continued only until he had given up possession of the flat.

Merton Council argued that despite the fact that "normal" trespassers do not remain liable to pay mesne profits after they have given up possession of a property, tolerated trespassers should be treated differently.

Merton Council argued that for reasons of public policy, tolerated trespassers should be required to give notice to their former landlord that they have given up possession of a property. This would have the effect of limiting revival of the former tenancy and permitting the Landlord to proceed with the re-letting of the property.

After consideration, the Court ruled that there was nothing in law, which treated the liability of a tolerated trespasser for the payment of mesne profits any differently from that of other former tenants or trespassers. A former tenant who wrongfully remained in possession of a property once their ordinary tenancy had come to an end, would no longer be liable for mesne profits once they had given up possession. There was no requirement to give notice to the former landlord.

The Court of Appeal was also required to resolve the dispute as to when exactly Mr Jones gave up possession of the flat.

On this issue of possession the Court of Appeal applied the case of J A Pye (Oxford) Ltd and Others v Graham. In this case the House of Lords ruled that to demonstrate legal possession of a property two elements must be present:

• Factual possession – a sufficient degree of custody and control over the premises.
• Intention to possess – an intention to use that custody and control for the tenants own purpose and benefit.

The House of Lords ruled that it was not sufficient to simply physically possess a property – there had to also be the requisite intention, without that there can be no possession. However, the House of Lords did recognise that one usually leads to the other as an intention of a person to have possession of a property is usually deduced from the person's physical acts themselves.

This was applied to Mr Jones showing that he had given up possession of his flat. It was not sufficient for him to simply have the intention of giving up possession if his actions demonstrated otherwise.

Using this analysis the Court ruled that in October 2005 Mr Jones had shown that he no longer had the intention to reside in his flat. However, until he removed his belongings in November 2005 he could not show that he no longer intended to possess the flat. By leaving belongings in the property until November 2005, Mr Jones' physical actions and factual possession contradicted his intention to give up possession.

The Court of Appeal therefore allowed the appeal and ruled that Mr Jones intended to remain in possession of the flat until November 2005 and that intention ended once he removed all belongings from the property albeit he did not return the keys to the Landlord at that stage. Mr Jones was ordered to pay Merton Council mesne profits for the period from October 2005 until November 2005 to the total sum of £343.36.

Change to the law proposed
A tenant becoming a tolerated trespasser can cause problems for both the former tenant and the landlord. Most people do not realise when their tenancy comes to an end or how their rights are affected. These difficulties have led the Department for Communities and Local Government to issue a consultation paper on tolerated trespassers and how best to deal with the issues that arise from such status.

The consultation closed on 7 November 2007. As a result of the responses received, the Government has decided to use the Housing and Regeneration Bill to amend housing legislation and abolish the status of tolerated trespassers. The amendments to housing legislation, once the Bill becomes law, will prevent future tolerated trespassers being created. Their secure tenancy will not end until the person has been evicted. This will restore tenancy status to all "tenants" who currently exist as tolerated trespassers.

Hopefully such changes will make the rights of both tenants and landlords clearer in situations where an order for possession has been issued but there is still a gap between that order being granted and it being enforced.

Even though this case mainly effects public sector housing the application of the case of J A Pye (Oxford) Ltd and Others v Graham is of wider interest to the property sector as a whole. It gives an example of how the Courts will apply the decision from that case to identify when a person gives up possession.

See: The Jones v London Borough of Merton [2008] EWCA Civ 660  judgment 

See: The Housing and Regeneration Bill (182-page PDF)

See also previous E-Bulletin articles discussing the House of Lords case of J A Pye (Oxford) Limited v Graham [2002] UKHL30, [2003] 1A.C.419

• A Different Way to Slice the Pye
• Now the Courts are Serving a Slice of the Pye 
  

30 July 2008