Sales – Northwood Solihull v. Fearns clause

Landlords! Agents! Do you trade through a limited company?

If so - are you signing your tenancy deposit prescribed information forms correctly?

There has been a recent High Court decision in the case of Northwood Solihull Ltd v Fearn which held that if landlords or their agents, who trade through a limited company, fail to comply with the provisions of section 44 of the Companies Act 2006 – the Prescribed Information notices will be invalid.

Which would mean:

The landlord is unable to serve a valid section 21 notice, and
The tenant can apply to Court for an order that the landlord (and also the letting agent, if it is the agent who has served the defective form) pay them up to three times the deposit sum as a penalty.

Not something you will want to happen!

So what does section 44 of the companies act require you to do?

It says that documents ‘executed on behalf of a company’ must be signed, either by

Two directors of the company, or
A director of the company and the company secretary, or
A director of the company in the presence of a witness who attests the signature.

However, this is not always convenient. And if one of your staff is unaware of this rule and just signs the form and sends it out – it will be invalid.

Do you want to risk this happening?

A new clause to the rescue

To help landlords and letting agents deal with this, solicitor David Smith of JMW Solicitors has drafted a special clause which you can put in:

Your agency agreement with your landlords – if you are an agent, or
In your tenancy agreement if you are a corporate landlord

Which should protect you from this problem. Note that the clause is drafted specifically for tenancy deposit prescribed information clauses. It will not apply to other documents.

You can buy this clause to use in your documents here.

What you need to do:

The cost of the clause is £48 (ie £40 + VAT). To get it you need to

Click the orange button below
Pay the fee online (you can pay by credit/debt card or by pay pal)
Note that if you are a Landlord Law member you will get an automatic discount of 50% – provided you are logged in at the time of purchase
Make sure when completing the online information, that you input your email address correctly (or you may not get the email)
You will then be sent a receipt by our system for the fee paid, and
An email with the two clauses (one for corporate agents and one for corporate landlords) with instructions on their use.

Answering your questions:

Q: Will this give me absolute protection?

A: No, nothing can do that, other than compliance with s44 of the Companies Act. However, we see no reason why this clause would not be accepted by the Court, if it were ever challenged.

Q; Can I have a refund if I consider the clause is not suitable for me?

A: We cannot make refunds after the email with the clause has been sent to you, as being a digital product, it cannot be returned. So refunds will only be paid at our discretion.

Q: What happens if the case is appealed and the law changes?

A: The clause may no longer be necessary but having it in your documentation will not prejudice you in any way.

Q: Can I discuss this with someone?

A: We have a (paid) telephone advice service here – if you want to discuss this issue, select JMW Solicitors when booking your call.

Q: What should I do if I don’t get the email after purchase?

A: Check your spam folder. If it is not there contact us via our green button support service.