House of Commons - Explanatory Note
The Housing Bill - continued          House of Commons

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Clause 94: Financial arrangements while order is in force

190.     Clause 94 sets out the framework for financial arrangements. It permits the LHA to spend rent and other payments it receives on "relevant expenditure", which is defined as reasonable expenditure incurred by the LHA in the management of the house (including its administrative costs). It provides that, having deducted relevant expenditure, the LHA must pay any remaining balance to the relevant landlord. If there is more than one such person, it can apportion the payment. The LHA must keep accounts of income and expenditure, and any relevant landlord (and certain other persons) are entitled to inspect those records or take copies of them. If a relevant landlord considers that expenditure shown in the accounts does not constitute reasonable expenditure on the house, he can apply to a county court for a declaration to that effect and for adjustments to be made to reflect the court's decision.

Clause 95: Variation of interim management orders

191.     Clause 95 permits the LHA to vary an IMO. Such a variation cannot take effect until the period for appealing has expired, or (if an appeal is made) until the date the court confirms the variation. A variation can be made by the LHA of its own volition or following an application by a relevant person.

Clause 96: Revocation of interim management orders

192.     Clause 96 permits the LHA to revoke the IMO in certain circumstances. These are: (a) if the house ceases to be licensable; (b) if the LHA grants a licence; (c) if it makes a FMO or (d) in other circumstances where it is appropriate to revoke the order. The revocation does not come into force until the period for appealing has expired, or (if an appeal is made), until the court confirms the order should be revoked. The LHA may revoke the licence of its own volition or following an application by a relevant person.

Clause 97: Making of final management orders

193.     Clause 97 provides that the LHA must make an FMO if the IMO is ending and the house is licensable but the LHA cannot grant a licence. It may make the FMO if the house is a HMO which is not subject to licensing, an IMO is ending and the LHA considers it is necessary to make the FMO for the long-term protection of the health, safety or welfare of the occupants or others in its vicinity. An FMO can be made which is expressed not to apply to part of a house which is occupied by an owner-occupier.

Clause 98: Operation of final management orders

194.     Clause 98 specifies when an FMO comes into force or ends. It does not come into force until the time limit for appealing against making it expires or (if there is an appeal) until the court confirms it. The FMO can be made for a maximum period of five years (although it can continue beyond five years if there is an appeal relating to whatever is to take the place of the order when it expires).

Clause 99: Local housing authority's duties once final management order in force

195.     Clause 99 provides that when an FMO is in force, the LHA must take steps to secure the proper management of the house through the management scheme (see clause 102) and from time to time review the order and scheme and consider whether the order should continue in force.

Clause 100: General effect of final management orders

196.     Clause 100 provides for the LHA to take over many of the rights of the landlord. It has power to manage the property (and to authorise a manager to do so on its behalf) while the FMO is in force, and power to grant certain tenancies. Normally any new tenancy granted (whilst the order is in force) will be an assured shorthold tenancy. The LHA requires the written permission of the landlord to grant any right of occupation which would prevent the landlord from obtaining possession of the house after the expiry of the order. As with the IMO, the LHA does not acquire any legal estate in the house. The order is a local land charge.

Clause 101: General effect of final management orders: immediate landlords, mortgagees etc

197.     Clause 101 makes similar provisions in respect of FMOs as clause 93 does for IMOs.

Clause 102: Management scheme and accounts

198.     Clause 102 provides that an FMO must contain a management scheme. It sets out what must and may be included in the scheme. Part 1 of a management scheme is to contain in particular, matters relating to the financial arrangements between the landlord and the LHA. Part 2 of a management scheme is to contain a description of how the LHA intend to manage the house. The clause provides that the LHA must keep accounts of income and expenditure and the relevant landlord (and certain other persons) are entitled to inspect those records or take copies of them. The landlord has a right to appeal under Schedule 6 against anything contained in a management scheme.

Clause 103: Variation of final management orders

199.     Clause 103 permits the LHA to vary an FMO. Such a variation cannot take effect until the period for appeal has expired or, when an appeal is made, the date the court confirms the variation. A variation can be made by the LHA of its own volition or following an application by a relevant person.

Clause 104: Revocation of final management orders

200.     Clause 104 permits the LHA to revoke the FMO in certain circumstances. These are: (a) if the house ceases to be licensable; (b) if the LHA grants a licence; (c) if it makes a further FMO; or (d) in other circumstances where it is appropriate to revoke the FMO. The revocation does not come into force until the period for appealing has expired or, where an appeal is made, the court confirms the FMO should be revoked. The LHA may revoke the licence of its own volition or following an application by a relevant person.

Clause 105: Procedural requirements and appeals

201.     Clause 105 provides that Schedule 6 has effect in relation to procedural requirements and appeals in respect of IMO and FMOs.

Clause 106: Effect of management orders: occupiers

202.     Clause 106 provides that occupiers of a house subject to an IMO or FMO retain the same legal status they had before the management order was made. The clause also provides that a tenant is not to be a secure tenant simply because the LHA are substituted as his landlord under subsection (3).

Clause 107: Effect of management orders: agreements and legal proceedings

203.     Clause 107 provides for agreements relating to the management of the house or the provision of services or facilities to it, in force at the time the order is made and to which the immediate landlord was a party transfer to the LHA if it serves notice to that effect. Certain types of agreements and instruments are excluded. The LHA can also take over certain legal proceedings commenced against the immediate landlord, on the service of notice to that effect.

Clause 108: Effect of management orders: furniture

204.     Clause 108 provides that any right to possession of furniture provided for the use of the occupiers in consideration of periodic payments vests in the LHA whilst the IMO or FMO is in force. The LHA may renounce its right to possession. If more than one person claims an interest in the furniture, the matter can be referred to a county court for resolution.

Clause 109: Management orders: powers to supply furniture

205.     Clause 109 permits an LHA to supply furniture to a house subject to an IMO or FMO, and to recover its expenditure as relevant expenditure.

Clause 110: Termination of management orders: financial arrangements

206.     Clause 110 provides that if, upon termination of an IMO, and having deducted its relevant expenditure, there is a surplus of payments received, the LHA will pay that to the relevant landlord, unless it makes a FMO and the management scheme provides how the surplus is to be treated. If the balance is in deficit, the LHA may recover that from the immediate landlord. Any sum due to either the LHA, or the relevant landlord, on the termination of a FMO, is to be dealt with in accordance with the management scheme. A sum due to the LHA is a land charge until paid. A licence granted after the termination of the order may contain conditions concerning the recovery of sums due to the LHA. Where there is more than one relevant landlord the LHA may apportion payments to be made to, or due from, the relevant landlords, as it considers appropriate.

Clause 111: Termination of management order: leases, agreement and proceedings

207.     Clause 111 provides that after the termination of an order the LHA shall cease to be a party to lease or licence to which it became a party under clause 106 (3) and is to be replaced by the relevant landlord. It also provides that upon giving up notice the LHA cease to have rights and liabilities under any agreement (see clause 107) and legal proceedings may be actioned against the immediate landlord. The clause also enables a relevant landlord to recover damages from the LHA in connection with certain legal proceedings.

Clause 112: Management orders: power of entry to carry out work

208.     Clause 112 provides that the LHA (or any person authorised by it) has power to enter a house subject to an IMO or FMO for certain purposes. If an occupier, having received notice of the intention to carry out those purposes, obstructs the LHA or others in doing so, he commits an offence and is punishable with by a fine not exceeding level 5 (currently £5,000).

Clause 113: Service of overcrowding notices

209.     Clause 113 permits an LHA to serve overcrowding notices in respect of HMOs that are not licensed or subject to an IMO or FMO. It can only serve the notice if it considers, having regard to the number of rooms available, that there are, or are likely, to be, an excessive number of occupants of the house. The LHA must give 7 days notice to all relevant persons and inform occupiers (so far as possible) of its intention to serve the overcrowding notice, and must consider any representations in respect of the proposal. An overcrowding notice becomes operative 21 days after it is served, unless an appeal is made. Contravention of the notice is punishable with a fine not exceeding level 4 (currently £2,500).

Clause 114: Contents of overcrowding notice

210.     Clause 114 provides for the content of an overcrowding notice. It must state the maximum number of persons who may occupy each room or specify that a room is unsuitable for occupation. The notice must also contain the requirements in clause 115 or 116. It provides that a notice containing a requirement under clause 116 may be withdrawn and replaced with a notice containing a requirement under clause 115.

Clause 115: Requirements as to overcrowding generally

211.     Clause 115 requires the relevant person not to allow a room to be occupied as sleeping accommodation, other than in accordance with the notice. It provides that such number of persons as would require persons of the opposite sex, not living together, to sleep in the same room must not occupy the HMO. For this purpose children under the age of 12 are to be disregarded. It is also to be assumed for this purpose that persons only sleep in particular rooms and that the maximum number of persons set for those rooms is not exceeded.

Clause 116: Requirement as to new residents

212.     Clause 116 prevents overcrowding being created by new residents and operates similarly to clause 115. A new resident is a person who was not occupying the HMO when the overcrowding notice was served.

Clause 117: Appeals against overcrowding notices

213.     Clause 117 provides that appeals may be made to a county court within 21 days of the overcrowding notice being served. The court may confirm, quash or vary the notice. A notice does not take effect until the appeal against making it has been disposed of either by confirmation or variation.

Clause 118 Revocation and variation of overcrowding notices

214.     Clause 118 permits an LHA, on the application of a relevant person, to revoke or vary an overcrowding notice. If the LHA refuses to revoke or vary the order, or fails to give a written decision within 35 days of the application, the applicant may appeal to a county court.

PART 5 - HOME INFORMATION PACKS

Clause 120: Meaning of "residential property" and "home information pack"

Clause 121: Meaning of "on the market" and related expressions

Clause 122: Acting as estate agent

215.     Clauses 120 and 121 set out the definitions of "residential property", "dwelling house", "home information pack", and "on the market" and related expressions.

216.     Clause 122 sets out the circumstances in which a person is, for the purposes of this Part, regarded as acting as estate agent for the seller. For those purposes, it is not relevant whether the person describes himself as an estate agent, but these notes refer to 'an estate agent' for ease of reference.

218.     The principal duties are those relating to persons responsible for marketing a property ("responsible persons"). These duties are set out in clauses 126 to 129 and commence when the availability, or possible availability, of a residential property for sale is first advertised or otherwise made known to the public or a section of the public.

The expression 'section of the public' is not defined in the Bill but has been used in many other Acts of Parliament. It would not include an individual, or small group of individuals, or a seller's family or friends. In general, the seller would know these people in a private capacity. 220.     Examples of what would amount to making known the availability of a property for sale include placing an advert in a newspaper or shop window, erecting a 'For Sale' sign or placing details of a property on a website indicating that it is for sale.

The home information pack duties apply to the marketing of a freehold or long leasehold interest in a residential property. They also apply to the marketing of an option to acquire such an interest. 222.     A home information pack is required for a residential property that is marketed 'off-plan' (as well as for other residential properties). That is, a property that is not constructed when the marketing of that property takes place but where the buyer will usually expect to purchase a physically complete home.

223.     The effect of these and later provisions is to exclude from the requirements of this Part of the Bill the marketing of:

—     non-residential property;

—     mixed commercial (or industrial) and residential property;

—     a residential property that does not qualify as a 'dwelling-house', e.g. a mobile home;

—     property sold with sitting tenants and not therefore available for owner-occupation;

—     portfolios of properties in circumstances where no offer for a single dwelling would be accepted; and

—     leases of less than 21 years.

224.     The home information pack requirements are thereby targeted on homes being marketed for owner-occupation.

Clause 123: Responsibility for marketing: general

Clause 124: Responsibility of person acting as estate agent

Clause 125: Responsibility of the seller

225.     Clauses 123 to 125 identify who is 'responsible' for carrying out the duties relating to home information packs contained in clauses 126 to 129 and when that responsibility ceases. There are two categories of people who can be considered responsible where a property is on the market - the seller of that property or someone acting as an estate agent for the seller (as defined in Clause 122). Clause 124 sets out the circumstances in which an estate agent will be considered to be responsible for marketing a property.

—     A seller will be considered responsible for marketing a property if:

—     he personally takes the action which makes it known that the property is for sale;

—     a person who is not acting as an estate agent (such as a friend or relative) takes the step which puts the property on the market, on the seller's behalf; or

—     he instructs an estate agent who does not have a place of business in England and Wales and the action that puts the property on the market is taken by that agent.

226.     More than one person can be considered 'responsible' for the marketing of a property.

227.     Once a person has become responsible for the marketing of a property that person remains responsible until they lose that status in one of the following ways.

228.     In clause 124, a person acting as estate agent can cease to be responsible if:

—     the property is sold;

—     the property is taken off the market; or

—     the contract with the seller is terminated and the agent terminates his marketing activities.

229.     In clause 125 a seller can also cease to be responsible if:

—     the property is sold;

—     the property is taken off the market; or

—     the seller instructs someone acting as an estate agent to carry out the marketing of the property and the seller ceases to carry out any marketing activity personally.

230.     A property is sold when a legally binding contract for the sale is agreed. This is usually when contracts are exchanged.

231.     The Bill does not define 'taken off the market' but this is an ordinary expression that should be given its usual meaning. It will include putting up a sign that says 'sold subject to contract' or simply 'sold', provided marketing activity has ceased. It will also include removing an advert from a window, or taking down a 'for sale' sign.

232.     If a person wishes to cease being responsible for the marketing of a property under the second method described in paragraphs 227 and 228 above, the obligation is an active one, namely to cease marketing. So if there is some marketing activity already under way (for example if a 'for sale sign' has been erected or an advert placed in a window), it is necessary to take steps to discontinue that marketing activity (e.g. by taking down the 'for sale sign' or removing the advert from the window).

233.     It is possible that no person is responsible for the marketing of a property that is on the market. But as soon as any person takes a step which advertises to the public or a section of the public that the property is available for sale, that person will be considered responsible and will have an obligation to comply with the home information pack duties.

Clause 126: Application of Sections 127 to 129

234.     Clause 126 provides that the duties set out in clauses 127 to 129 apply to any person responsible for marketing. The duties apply from the time the person becomes responsible until that responsibility ceases.

Clause 127: Duty to have home information pack

Clause 128: Duty to provide copy of home information pack on request

Clause 129: Duty to ensure authenticity of documents in other situations

235.     Clauses 127 to 129 set out the duties to have a home information pack and to make it available to potential buyers.

236.     Clause 127 provides that the person responsible must have a copy of the home information pack available at the time that a property is put on the market (and for so long as the property remains on the market and the person remains a responsible person). In this respect, Clause 144(4) provides that any part of the pack held in electronic form must be capable of being properly viewed and capable of being copied, using readily available equipment.

237.     Clause 128 provides that while a property is on the market, anyone responsible for marketing must provide to a potential buyer who requests it, a copy of the home information pack (or any part of it) within fourteen days of receiving a request and payment of any reasonable fee charged to cover postage and copying costs. Copies can be provided in electronic form where that suits a potential buyer.

238.     Clause 128 contains exceptions to the duty referred to above. These are:

—     ???Subsection (4), which provides that the duty does not apply if the responsible person believed that the person requesting the pack could not afford, was not genuinely interested or was not the sort of person to whom the seller intended or was prepared to sell the property. (Subsection (5) provides that these exemptions do not apply if the responsible person knows or suspects that the potential buyer is an enforcement officer.)

—     ???Subsection (6), which provides that the duty does not apply if the seller is relying on possession of a pack by an estate agent instructed by them; and they have reasonable grounds for believing that an estate agent has the pack, and they inform the potential buyer that requests for copies should be made to the estate agent.

239.     The circumstances set out in clause 128(4) do not authorise a person to do anything that constitutes unlawful discrimination.

241.     Clause 129 provides that where a responsible person provides a potential buyer with a copy of the home information pack it must be an "authentic copy" as defined in clause 129(2).

Clause 130: Other duties of person acting as estate agent

242.     Clause 130 provides that where an estate agent accepts an instruction from the seller to market the property, they must have a copy of the pack before taking any action (with a view to marketing the property), to communicate to a possible buyer information that the property is, or may become, available. The person acting as estate agent is under a duty to ensure authenticity of any copy inspected or supplied.

Clause 131: Residential properties not available with vacant possession

243.     Clause 131 sets out circumstances where the duties in clauses 127 to 130 will not apply. A property that is being sold subject to a tenancy does not have to be marketed with a home information pack. Any property marketed will be assumed to be vacant, and therefore subject to the duties, unless the manner in which the property is marketed makes it clear that it is not being sold with vacant possession.

Clause 132: Power to provide for further exceptions

244.     Clause 132 allows the Secretary of State to make regulations to specify other circumstances in which the duty to provide a home information pack will not apply. This power would, for example, allow the Secretary of State to make different arrangements with regard to the sale of low value properties in areas of low demand.

Clause 133: Contents of home information packs

245.     Clause 133 sets out provisions relating to the contents of a home information pack. It gives the Secretary of State the power to prescribe the documents to be included in the home information pack and the information to be included in those documents. The power extends to prescribing the form and detail of documents in the home information pack, how they should be provided and by whom and who may rely on them.

246.     The power also extends to allowing the contents of the pack to vary according to circumstances. An example of the use of this power could be the exclusion of a home condition report from the home information pack where a new home was marketed for sale 'off plan' before construction had commenced or been completed. In addition, different documentation will generally be required depending on whether the interest in a property is leasehold or freehold.

247.     The prescribed documents and information must relate to matters connected with the property, or its sale, which would be of interest to potential buyers.

248.     Clause 133(5) and (6) provide an indicative list of contents of a home information pack. The documents and information listed are of a type currently normally obtained by or on behalf of the seller or buyer during the course of a normal home sale. An item which, under current arrangements, is not normally available but which is intended to be included in the home condition report is information about the energy efficiency of the property. This will contribute towards the implementation of EU Directive 2002/91/EC (Energy Performance of Buildings Directive) which requires member states to introduce requirements for energy performance certificates and to ensure that these are made available by the owner to prospective buyers when properties are sold.

249.     Clause 133(8) enables the Secretary of State to ensure that buyers, potential buyers, lenders and any other person involved in the sale of the property have a right to rely on the home condition report and other documents in the home information pack.

 
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Prepared: 8 December 2003