This is an update on the Northwood Ltd v Fearn & Ors appeal case which was heard last week.
The case concerns two legal questions which will impact how landlords and letting agents who trade through a limited company will sign legal documents:
In the first appeal, the court held that while a section 8 notice did not have to comply with section 44 of the Companies Act, the prescribed information certificate did. This decision was appealed by the landlord.
Section 44 of the Companies Act stipulates that when signing on behalf of a company, documents must be signed either by two directors, or a director and a company secretary, or a director before a witness.
Many landlords and also letting agents operate as a company and the county court decision (if left unappealed) would have invalidated many deposits prescribed information notices and possession notices.
It would also cause practical and logistical problems, for example with bigger agencies who validate hundreds of these documents per day.
Originally, this case concerned a landlord’s section 8 possession claim and a counterclaim by the tenant for the penalty for failure to provide a valid prescribed information certificate.
The tenant argued that both these documents would need to be signed in accordance with section 44 of the Companies Act.
The landlord on the other hand argued that the level of formality required under the companies act did not apply to these documents. A properly authorised individual by the landlord is capable of validating these documents through a signature.
The court agreed with the landlord’s argument that both these documents could be legally signed by a person who is acting as agent for the landlord or letting agent company.
This means that landlords and agents running their business through a company would not have to sign either a section 8 possession order or deposit prescribed information certificate in accordance with section 44 of the companies act.
This will be a relief for many landlords who were worried that they had unintentionally signed key documents without the correct format.
It will also be a relief to letting agents many of whom, it was being predicted, could have gone out of business if tenants had been able to bring claims for the penalty for failing to serve a properly drafted prescribed information notice.
The Court of Appeal Bailii report can be found here