The end of auto renewable contracts?

Ofcom (the communications regulator) has started a consultation into a proposal to outlaw contracts which automatically renew at the end of their term and which tie the customer into a minimum repeated contract term.

The idea behind these contracts is that the customer has to "opt out" otherwise renewal takes place automatically.  Once automatic renewal has occurred then there is usually a penalty to terminate the contract early.

BT is the main provider of "rollover contracts" although several other suppliers also use them, and Ofcom estimates that 15% of UK consumers are subject to these contracts at present.

The consultation ends in May this year so with luck we might see the end of these sorts of arrangements shortly after!

Valuer's duties to borrower clarified

Traditionally if your mortgage lender instructs a valuer to value a property you intend to buy, the valuer only owes a duty of care to the lender and not to you.  That is to say, if the valuer gets it wrong then only the lender, and not you, can do anything about it.

However, in the recent case of Scullion -v- Bank of Scotland plc, the courts have decided that in some circumstances the valuer is liable to the borrower too!

In that case, the buyer of a buy-to-let property suffered a significant loss because the bank's valuer had overstated the value of the property and how much rent the borrower could expect to receive.

The judge said that he had taken into account the following factors :-

1.  That the property was a residential property and not a high value house or commercial property where it might be expected that the borrower would have had a separate survey carried out.

2.  The valuer was a professional valuer who should have known that the borrower would have seen the valuation and would have relied on it.

3.  The borrower was not a professional developer and was no different in that respect from the purchaser of a residential property to live in.

The court awarded the borrower the sum of £72,000.00 to compensate him for the fact that he was not able to let the property for an amount sufficient to cover his mortgage payments.

This is good news for the first time or infrequent property investor whose resources may not stretch to having costly surveys and valuations carried out on standard residential properties, but shouldn't be relied on by professional developers or investors whose resources (and experience) are not limited in the same way.

Beware that casual "just go ahead"email!!

The Court of Appeal has just awarded damages of over £10,000.00 to a firm of estate agents due to a breach by the seller of a property of the agent's sole agency agreement.

The unusual feature of this case is that the agency agreement had been entered into by emails between the seller and the agents.

The agent had sent the seller an email with both their multi and sole agency terms and conditions and the email went on to state that after a certain date the seller would market the property through the agents on a sole basis.

The seller replied with an email which basically said "that's fine, look forward to some viewings".

The property was eventually sold by another agent who had previously been marketing the property on a multi agency basis.  The first agents claimed their fee.

The Seller argued that there was no contract - she said that she had not fully read the e-mail or the sole agency terms and conditions and that it had always been her intention to market the property through several agents.

The Court of Appeal decided that there was a contract brought into being by the exchange of emails and that the sale by the other agent had deprived the sole agent of the chance of earning commission on the sale.  The Court therefore awarded the agent the full amount of its lost commission by way of damages.

The seller therefore effectively paid 2 lots of estate agent's fees and was also landed with a fairly hefty legal bill!

The great thing about email is that it makes instant communication astoundingly easy.  The bad thing about email is that it makes instant communication astoundingly easy!  Be wary about landing yourself with an obligation you never intended just with a quick click on the "Send" button!

Celebration time for Estate Agents?

The Department for Business, Innovation and Skills has announced that it is to consult on a proposal to repeal the Property Misdescriptions Act 1991. (

Under the Act it is an offence for an estate agent to make any statement (usually in the sales particulars) which would mislead a potential buyer or which is simply untrue.

 

The Act covers matters such as location, views from the property, measurements and size of rooms and garden and structural matters.

There is therefore a considerable degree of overlap between the Act and the Regulations - and indeed the powers of Trading Standards under both are very similar.

This has lead to calls for the Act to be scrapped and for customers of estate agencies to rely on their rights under the Regulations instead.

However, whilst the two sets of rules do indeed provide similar protection to consumers, it should be stressed that the protection is not identical, and added to which there has been, over the years, a considerable amount of case law flowing from the Act which gives Trading Standards and the Courts a degree of guidance as to the interpretion of the Act which simply is not available under the Regulations, given that they are relatively new.

We can only hope, if the Act is repealed, that Trading Standards and the Courts will continue to apply the same standards of enforcement which have been available to consumers under the Act.  If not, the days of "compact and bijou" may make a return!

If you would like to have your say on the consultation, it is open until 5th April 2011

If you'd like to comment on this or any of the other posts in the blog, just type it into the box below the relevant post and click the " Post Comment" button.

Limitation on extent of legal privilege confirmed

Confidentiality between client and lawyers is one of the bedrocks of the way the legal profession works and something that clients have always taken for granted (and indeed should be able to!)

One of the rare instances when that confidentiality does not apply quite as clients might expect is the situation in which their lawyer is acting not only for them but also for the mortgage lender in a property transaction - this happens in about 95% of cases.  If mortgage lenders routinely instructed separate lawyers then the costs of buying property would increase significantly and this is why mortgage lenders are happy for the same lawyers to represent their interests and the interests of the buyer.

What happens, though, where for example the buyer ultimately defaults on the mortgage and the mortgage lender requests the lawyer's file?  Many clients assume that the file cannot be released to the mortgage lender because of the confidentiality rules and that even if some papers can be released, then those released are limited to such documents as directly involve the lender.

However, the High Court has now confirmed that borrowers have waived their right to legal professional privilege over those documents in their mortgage files that may otherwise have benefited from that protection. The reason being that the borrower will have signed a mortgage application form which contains a declaration consenting to the whole file being handed over to the lender on request!

The case is a useful reminder to both lawyers and clients that signing a standard form which is as simple as an application for borrowing can have consequences which last well into the future.

Lyn Brisley looks at the new Supreme Court ruling on pre nuptial agreements

Pre-nuptial agreements allow people to ringfence part of their wealth at the outset of a marriage. They are enforceable in many countries but they have never been binding in England and Wales

However, the Supreme Court has ruled that a pre-nuptial agreement is binding in the case of a German paper company heiress.

Katrin Radmacher's ex-husband Nicolas Granatino went to the Supreme Court after appeal judges slashed his divorce settlement from more than £5m to £1m.

The Supreme Court said it agreed that in the right case pre nuptial agreements can have decisive or compelling weight.

The case was seen by lawyers as a test of whether “pre-nup” agreements were applicable in law in England and Wales.

The judges deciding the case said "it will be natural to infer that parties entering into agreements will intend that effect be given to them".

In effect, therefore, these agreements are now binding unless they are unfair. So if the parties enter into a "pre-nup" freely, are fully informed of all the relevant financial and other information, and the implications of the agreement, then the courts will generally uphold the terms of that agreement.

The president of the Supreme Court made it clear, though, that courts would still have the discretion to waive or vary any pre nuptial (or post nuptial) agreement especially in cases where the terms of such agreement would have an adverse effect on any children of the family.

The ruling has been hailed as a judgement for a modern society, but there are some who believe it will significantly damage the financially weaker party in divorce. If that party, normally the wife, is held to the terms of a pre-nup she may be deprived of a considerable chunk of the couple's wealth.

The Law Commission is due to report in 2012 on whether a change in the law should be made to ensure pre-nuptial agreements are fully enforceable.

If you, or anyone you know, needs advice on any pre nuptial agreement then please give Lyn a call on 01733 888841.

"Squatters" beware!

Anyone who continues to believe that  cheekily taking over a piece of their neighbour's land and simply sitting on it and waiting for it to become theirs should take heed of a new ruling by the High Court which has awarded damages of £428,812.29 plus interest, including exemplary (i.e. "we're going to make an example of you") damages of £60,000, against a someone who took part of his neighbour's property into his own with what the court called "reckless disregard of the interests of the true owner".

The award of exemplary damages was made to deter the "squatter" from repeating the same behaviour, as the court felt that the regular award was not a sufficient deterrent.

It's a slightly different scenario from someone taking over an area of land where there appears to be no owner (the "no man's land" scenario) but even so it's something of a wake up call to those people (and they do exist!) who treat land ownership as something of a movable feast.