(Continued
from our issue of (1985) 275 EG 723)
Our two
previous excursions in this area have concerned the meaning of ‘personal
interest’ under section 21 of the Estate Agents Act 1979 and the obligations
which that provision imposes upon any estate agent who has such an interest in
property with which he is dealing. It now remains for us to consider the legal
consequences of a breach of section 21 and to inquire whether there are any
practical steps which an agent may take in order to avert such consequences.
The first
point is a relatively simple one. It is specifically provided by section 21(6)
that the breach by an agent of either his duty of disclosure or his obligation
not to seek or receive a deposit ‘shall not render the estate agent liable to
any criminal penalty nor constitute a ground for any civil claim’. This means
that a person with whom the agent has ‘negotiated’ will have no right to
rescind a sale or to claim compensation on the ground that he was misled as to
the extent of the agent’s personal involvement in the transaction.
It also means
that there is no right to claim back a deposit just because the agent is shown
to have an interest in the property in respect of which it is paid (though it
should not be overlooked that a pre-contract deposit is in any case
returnable on demand).
What, then, are
the consequences which flow from the breach by an estate agent of section
21? The answer is that it is merely one
of the matters which may be relied upon as a ‘trigger’ for the powers of the
Director General of Fair Trading. Now a few months ago this might have been
regarded by the profession with a fair degree of equanimity; surely no agent
would ever be taken to task unless it was fairly apparent that his motives for
not disclosing his personal interest were suspect? However, given the recent issue of warning
orders in respect of breaches of section 18 which were acknowledged by the OFT
to have been misguided rather than dishonest, this assumption begins to look
rather more questionable. It is accordingly important to consider what steps an
estate agent can take to avoid contravening these provisions (remembering, of
course, that the agent may have to take legal responsibility for the actions of
his staff). The following procedure, though complicated and cumbersome, should
bring to light most of the ‘personal interests’ which require to be disclosed.
The first
thing to establish is: who has a direct personal interest in the
property concerned? Remember the
definition of personal interest for this purpose, and remember, too, that,
where the agent is acting for a purchaser, interests which the agent will
acquire are also relevant.
The second
matter for consideration is: who is actually ‘entering into negotiations’ in
respect of this property? Is it a
particular employee or partner, or more than one person?
In this
context it should not be forgotten that the Act treats a firm, no less than an
individual, as an ‘estate agent’ and applies the same rules to it — thus it
must be assumed that the firm ‘negotiates’ or receives a deposit whenever one
of its members or employees does so, and the firm itself should therefore
feature under this heading.
Once these
two lists have been drawn up, it should be possible to work out whether anyone
on the second one (who is subject to the provisions of the Estate Agents Act)
is linked to someone on the first one in such a way as to have a ‘personal
interest’. In effect, one must ask whether any person on the first list is the
employer, employee, principal, agent or ‘associate’ of a person who appears on
the second, or an ‘associate’ of the employer, employee, principal or agent of
a person on the second list!
Even when
these checks have been carried out, complications remain. We now know precisely
who has a disclosable interest under section 21, but it is vital to appreciate
that liability for a breach of that provision may attach not only to the
culprit himself but also to other colleagues (whether or not they have an
‘indirect personal interest’ through him). This further extension comes
courtesy of section 3(3) of the Act, which provides that a person’s misdeeds
may be attributed to his employer (unless the employer has taken all
reasonable steps to prevent this from occurring), his principal
(provided that it fell within his authority), or his business associate
(if done with the latter’s ‘connivance or consent’).
notices
The
fundamental purpose of the Housing Acts is to foster policies in the public
sector to get rid of substandard housing and provide good housing in place of
it. The main agents of this policy are local housing authorities, that is to
say district and London borough councils, subject to general co-ordination by
the Department of the Environment. Its main target is the ‘persons having
control’ of dwellings up and down the land, that is to say owner-occupiers
together with landlords of tenants paying a rack rent (whether subject to the
Rent Acts or not), as stated in the Housing Act 1957, section 39.
Substandard
dwellings may be dealt with either singly or in batches. They may be either
demolished or renovated. The local housing authority makes its choice from
these alternatives, but must of course do so reasonably and in good faith; and
it issues instructions accordingly to the ‘persons having control’ of
substandard dwellings. The test to be applied in identifying such dwellings is
laid down in section 4 of the 1957 Act, as amended.
Guided by
all relevant information, but above all by their health department officers,
local housing authorities have a duty to take decisions without undue delay to
deal with dwellings found, in accordance with the provisions of section 4, to
be ‘unfit for human habitation’. An ‘unfit’ house can be dealt with singly by a
repair notice (section 9), ordering the carrying out of works required to make
it ‘fit’, or by a demolition order (section 16), ordering the removal of the
building.
The local
housing authority for the area must choose whether to serve a repair notice or
a demolition order on the ‘person having control’ of such a house. Appeal lies
to the county court (section 11), which can uphold, quash or vary the notice or
order. An authority must in any case comply with section 9(1) when deciding to
serve a repair notice, and this provides that they should do so only if the
house is ‘capable at a reasonable expense’ of being made fit. There is no
policy element here: if the works of repair entail ‘reasonable expense’ a
repair notice is lawful, otherwise not. An unfit house not capable of being
made fit at reasonable expense must therefore be demolished, or at least closed
to residential use, unless the ‘person having control’ undertakes of his or her
own accord to carry out suitable works of repair irrespective of reasonable
expense.
What is
‘reasonable’? Section 39(1) says that
‘regard shall be had to the estimated cost of works necessary’ to make the
house fit ‘and the value which it is estimated that house shall have when the
works are completed’. The courts have accepted the sensible principle that if
the cost of the required works is appreciably greater than the increase in
market value consequent upon such works being done then normally they are not
capable of being done ‘at reasonable expense’. Thus if it costs £10,000 to
repair a house but the result of doing the repairs will be to increase its
market value by £5,000 the expense would not be reasonable: Hillbank
Properties Ltd v Hackney LBC [1978] 2 EGLR 31.
Section
9(1A) of the 1957 Act, added by the Housing Act 1969 (section 72), authorises
the service of a repair notice where a house is in substantial disrepair even
though not ‘unfit’. Nothing is said about ‘reasonable expense’ in this
connection. But the courts are prepared to apply that test by analogy because
of the general principle that powers must be exercised reasonably and not
arbitrarily.
In Kenny
v Kingston upon Thames Royal LBC (1985) 274 EG 395 the Court of Appeal
dealt with a case of this kind. The respondent authority served a repair notice
on the appellant in respect of a dwelling in a state of substantial disrepair.
The net cost of doing the prescribed works (after deducting a grant) would be
£14,000, but the market value of the premises would rise by only £9,000. On the
face of it this would not be ‘reasonable expense’.
But the
county court judge had inferred from the facts as a whole that the appellant
‘was adopting a policy of inactivity for the express purpose of allowing the
premises to run down’ so that the current tenant would have to leave and vacant
possession would be forthcoming.
Despite the
cost, therefore, the judge upheld the repair notice; and the Court of Appeal
upheld the judge.
