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Managing agents threatening to repossess a leasehold property


Matt63
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Hello, first time posting here!

 

I have a leasehold flat with little equity, if any. I am in mortgage arrears as a result of a bad time for me in 2008, but I have been paying these off at £100 per month since April 2009. The property has been on the market almost continuously since 2007 but I have never received an offer satisfactory to the mortgage company.

 

In June of last year, the mortgage company tried to repossess on the basis of "new information" available to them, but I managed to persuade them that the information, whilst true, was misleading.

 

In 2008, the freeholders sold the freehold to a professional freehold company, and the new freeholders immediately appointed new managing agents whose sole object seem to be to charge extortionate service charges for little actual improvement in the services provided.

 

In September 2010 I received a "major works" demand for approx £14k. I got a surveyor in and he told me that whilst there were items he would question on my behalf, the freeholder was obligated to do these works and that I should prepare myself to pay a sum approaching 10k.

 

So I wrote to the managing agents, pointed out that the work could not start until next spring, and offered them £560 a month pending discussions on the scope of the works being proposed. I enclosed my first cheque for £560 with the letter.

 

They banked the cheque but did not repond to the letter. I seem to recall reading somewhere that if they bank the cheque without stating it is not acceptable, then they are deemed to have accepted the proposal with the cheque?

 

Anyway, after a month, I had not heard from them and so wrote to them stating that as I had not heard from them, I assumed my offer was acceptable and therefore enclosed my second cheque.

 

I got a letter back yesterday stating that my offer was not acceptable, that it was too late to discuss the scope of works, and that as I clearly didn't have any money they intended to take court action against me, and then, having secured judgement against me they would forfeit the lease unless my mortgage company coughed up the whole amount.

 

Now apparently they can do this, but this does seem like bullying to me, and I was wondering if whether the fact that they banked the cheque without objecting to the proposal has any weight in this?

 

Suggestions anyone?

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Hi Matt,

 

I've copied an extract from an article written by a solicitor which covers the relevant case law on this issue:-

 

Where a cheque for an amount lower than that being claimed is sent out under the cover of a letter that explains that the amount is proffered in full and final settlement, does the retention or cashing of that cheque amount to acceptance of the amount in full and final settlement?

The case law does not point to a hard and fast rule, rather each case is decided on its facts, and the party offering the lower figure must prove that there was accord and satisfaction. Authority on this point stems from Day v McLea (2). This was supported by the unanimous decision of the Court of Appeal in Stour Valley Builders v Stuart (3). The decision of the Court of Appeal was followed by a further case reported in 2001 (4) and applied by a further two cases in 2003 (5). The principle therefore looks at least to have been decided, even if it is not one whose application it is easy to predict. Precise issues of timing play a part and you may be required to respond quickly.

In the United States all doubt has been removed from such settlement offers. If the receiving party banks a cheque that is offered in full and final settlement, agreement to the terms of settlement is imputed as an inference of law (6). This approach, whilst straightforward, was criticised in Stour Valley as it ignores the actual intention of the receiving party. If there is to be accord and satisfaction the debtor must prove that there was agreement between the parties as to settlement. This requirement for 'agreement' is overridden somewhat once time has passed. Lloyd LJ stated that , "what matters is not what the creditor himself intends, but what, by his words and conduct, he has led the [debtor] to believe" (7).

In Stour Valley there was some disagreement over the amount outstanding after some building works had been carried out. The customer decided to send a cheque for a lower amount than that claimed by the builders and stated in his letter that the amount was in full and final settlement of all claims. The cheque arrived on day 1. The builders cashed the cheque and it cleared on day 5. On day 7 the builders spoke to the customer and told him that the amount could not be accepted in full and final settlement. This delay of seven days was not considered fatal and it was held that the builders were entitled to treat the cheque as a payment on account.

Lloyd LJ considered that cashing the cheque would always be strong evidence of acceptance, especially where an immediate rejection of the offer is not forthcoming. As far as a creditor is concerned, therefore, the communication of the rejection must occur "within a few days" for it to be valid. In this case a delay of one week fell within this band. In another case a delay of seven weeks (8) was found to be too long and accord and satisfaction was established. It appears, therefore, that the correct question to ask is whether the creditor's conduct caused the debtor to think that the money was accepted in satisfaction. I consider two recent cases below to show the opposite results that can occur.

In The Commissioners of Inland Revenue v Fry, Mrs Fry owed the Inland Revenue over £100,000. She had no assets or other means to pay this amount. Mr Fry wished that his wife avoided bankruptcy proceedings and so in May 1998 offered the Inland Revenue £10,000 in settlement of its claim. This was rejected by the Revenue in September 1998. However, no proceedings were brought and in May 1999 Mr Fry sent a cheque for £10,000 to the Revenue in full and final settlement. At the Inland Revenue, the procedure for dealing with all correspondence was that any enclosed cheques went one way to be banked and the letters went another way to be read. The cheque was therefore banked immediately. The letter was dealt with some four days later at which point the rejection of the offer was communicated to Mr and Mrs Fry. The Inland Revenue were still entitled to claim the full amount from Mrs Fry and treat the amount received as a payment on account.

In Bracken v Billinghurst an employer who had been awarded £45,000 as the result of an adjudication, told the building contractor on the other side that it would accept just £6,000 in settlement of this award. The other side decided to send a cheque to the employer for £5,000 in full and final settlement. However, in this case the covering letter stated that if the offer was not accepted the employer should return the cheque.

Timing was key in this case as two weeks passed before the employer cashed the cheque and wrote to the contractor rejecting the offer in settlement and furthermore stated that it would pursue them for the total award. The court held that this was too long a period for it to have held the cheque and not informed the contractor of its intentions. This delay, combined with the clear terms set out in the contractor's letter, meant that there had been accord and satisfaction (i.e. the debt had been settled at only £5,000).

This last case highlights the dangers present in this area and the importance of acting quickly. One cannot treat a sum received as a payment on account without informing the other party of this intention sufficiently quickly. Where you are the party making the lower offer you should be as clear as possible about the terms on which the cheque may be cashed. Nevertheless as can be seen from the cases mentioned above, the other side may still be able to accept the cheque as a payment on account as long as it responds swiftly. If this treatment of the offered amount is unacceptable to you then it may be prudent not to make the offer in this manner.

Finally, if such an offer is to be made directly by you, the client, rather than through lawyers, it is important to understand the significance of the terms on which the offer is made. In a recent case a dispute arose between a company, and a contractor who regularly provided services to the company. The company ordinarily paid the worker's fees by electronic transfer and subsequently, when advised to send a cheque in offer of full and final settlement, the company transferred the amount direct into the worker's bank account using its ordinary method of electronic transfer. Such a transfer did not require the other party to do anything to accept the money; indeed it would have required them to have actively transferred the funds back out in order to reject it. This would undoubtedly weaken any subsequent claim that the worker had accepted the sum in full and final settlement.

 

1 (1858) 6 HLCas 672

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Thanks for the extremely detailed reply.

 

In my case I made an offer of monthly payments to resolve a long running dispute pending discussions as to the total amount owed and enclosed the first monthly payment. I asked them to confirm if it was acceptable, they banked the cheque but did not respond until after I wrote to them a second time stating that as I had not heard from them I assumed my offer was acceptable and enclosing my second monthly payment. Bracken vs Billingshurst would seem to apply here, in that they banked the cheque but then did not reject my offer until several weeks later.

 

Thank you very much once again!

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