Northwood Solihull Ltd v Fearn & Ors

Facts

The tenants let the property under an assured shorthold tenancy from a landlord company, but they fell into arrears of rent and were subsequently served with a Section 8 Notice for possession, which had been signed by an agent employed by the landlord.

The tenants challenged the validity of the notice – they said it should have been executed in accordance with Section 44 of the Companies Act 2006, which essentially requires that a limited company execute a document by either a company director signing in the presence of a witness, or by any director and the company secretary signing it, instead.

The tenants also argued that the above requirements for executing a document applied to the confirmatory certificate for their deposit, too, which had only been signed (and not witnessed) by one director of the landlord company.

What did the Court need to decide?

• Whether a landlord company must sign a notice under the Housing Act 1988, in accordance with the requirements set out by Section 44 of the Companies Act 2006, in order for that notice to be valid; and
• Should the confirmatory certificate for the tenants’ deposit also be signed in accordance with the requirements set out by Section 44 of the Companies Act 2006?

The Findings and Effects

In the first instance, the Section 8 Notice was found to be valid and an order for possession was made. On the other hand, though, it was decided that the confirmatory certificate did need to be executed in line with Section 44 of the Companies Act 2006 (meaning a company director in the presence of a witness, or any director and the company secretary, needed to have signed it) and so an award was made against the landlord.

This decision caused many panicked landlords to check their own confirmatory certificates, tenancy agreements, prescribed information and anything else that they may have signed or had signed on their behalf. If they had not complied with the execution requirements in Section 44 of the Companies Act, Section 21 evictions would not be possible, it left the door open for the tenant to bring a claim against the landlord for non-compliance, and the tenant could seek to use such a claim to offset rent arrears which could, in turn, defeat a Section 8 claim. The ramifications of this could have been huge. Old tenancies long finished but still within the limitation period having claims made for incorrect protection of deposits. Each of these claims could have been for the deposit to be returned plus a penalty of between 1 to 3 times the deposits amounts potentially for each extension as well. This after the landlord or managing agent having followed commonly accepted practices in signing documentation.

The tenant in this case was granted permission to appeal the order for possession, and took steps to do so. In response, the landlord sought to uphold the findings on the Section 8 Notice but to appeal against the decision made in relation to the confirmatory certificate, in a cross-appeal.

In January 2022, the Court of Appeal heard the case and ruled that both the Section 8 Notice and the tenants’ confirmatory certificate for their deposit, could be signed by any authorised employee of a landlord or a landlord’s agent – the signature of one agent authorised by a landlord to sign the confirmatory certificate would be sufficient. 

Landlords and agents will be relieved with the final outcome in this case, in what seems to be an increasingly rare win for landlords. It is confirmed that a landlord’s employee or agent can sign legal notices such as section 8, section 21 or tenancy deposit confirmatory certificates on behalf of a landlord, rather than the landlord having to ensure that every eviction notice and certificate is signed in accordance with section 44 of the Companies Act 2006. This logically makes sense given the way company’s function and avoids a situation where the floodgates open for historic deposit protection claims.

The hearing is available to watch in two parts here: Part 1 and Part 2. We can also be contacted for specialist advice regarding claims for possession or serving notice.