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Contracting out - problems |
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The new provisions on contracting out (in force since June 2004) require L
to serve a ‘health warning’ notice on T before T is contractually
bound to take the lease. T then has to sign a declaration that he has received
the notice, and that he knows what rights he is giving up.
If T is to be ‘contractually
bound’ less than 14 days after service of L’s notice, then the declaration
has to be sworn before an independent solicitor as a statutory declaration.
This procedure replaces the previous joint application for a court order (which,
in practice, would be rubberstamped).With hindsight, many are arguing that
the certainty of that more formalised procedure is to be preferred to the uncertainties
created by the Regulatory Reform Order that introduced the new procedure.
Uncertainties with the new procedure include: uncertainty as to whether the
warning notice has to be served personally on T (or can it be served on his
solicitor); whether the warning notice can be served at the outset of the transaction
or whether the terms of the lease must have been finally agreed; the need for
a separate notice to be served on each T; the complications of going through
an independent solicitor for the statutory declaration (which is almost always
the procedure used); the problems of the lease changing slightly before completion
(in practice, requiring L to serve a new warning notice, and all Ts to make
new declarations); problems when there is a change of T between the exchange
of the warning notice prior to the agreement for lease and the actual grant
of the lease (meaning the new T has to receive a fresh notice); lack of any
provisions relating to options to take contracted-out leases; the fact that
the new procedure has to be undergone before T enters into an agreement for
lease, rather than the lease itself; the need for separate notices on all Ts
and all guarantors.
One simple alternative is being promoted; if T is legally represented, then
why not simply have the health warning and acknowledgment appear on the signature
page of the lease? For more on these criticisms see [2005] 145 Property
Law Journal 13.
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April 2005 |