On Wednesday 26 January 2022, the Court of Appeal handed down its decision in the case of Northwood Solihull v Fearn & Others. The Court deciding that where a corporate landlord or agent is completing certain statutory forms including a Section 8 Notice, such documents do not have to be ‘executed’ in accordance with the formalities set out in Section 44 of the Companies Act 2006.
What is Section 44 of the Companies Act?
Section 44 of the Companies Act 2006 requires documents that are executed on behalf of a company to be signed in accordance with one of three prescribed manners: either two directors, or a director and a company secretary, or a director before a witness. However, the original legislation is unclear as to which documents need to be “executed” and which merely need to be signed by an employee or agent of the company.
It’s been heralded as a landmark case after the High Court ruled that Prescribed Information should be served in line with the Companies Act 2006.
The case had two elements:
- First, the tenant defended a claim for possession against them by arguing that the Section 8 Notice was not valid because it had only been signed by a property manager employed by the landlord who was a limited company.
- Second, the tenant also brought a counterclaim for a penalty award on the grounds that the Prescribed Information Certificate for the tenancy deposit had only been signed by one director of the landlord company (Northwood Solihull Limited), without a witness as is required under the Companies Act 2006 if formal execution of the certificate was needed under that legislation.
Court ruling – Section 8
Following an initial appeal to a County Court Circuit Judge, the case made its way from the County Court to the High Court. The High Court determined that the Section 8 Notice was valid – it did not have to be executed as it was one of a class of forms that could be signed by an agent acting on a landlords behalf. Following and earlier Court of Appeal case, execution and the application of Section 44 of the Companies Act should be reserved to those documents where only the company itself could sign them off.
Court ruling – Prescribed Information
The High Court decided however that the Companies Act did apply to the Prescribed Information Certificate. At the time that the certificate was completed, a certificate could only have been signed by the landlord alone. In the eyes of the Court this elevated the status of the document such that it had to be “executed” in accordance with the 2006 legislation. This meant a single signature on the certificate, even from a director of the landlord company, was not sufficient. There was a breach of the deposit registration rules and therefore the tenants were awarded a financial penalty.
The Deregulation Act 2015 changed those rules and now enable an agent to sign more recent certificates, but this was not something the High Court considered.
Court of Appeal
The case went to the Court of Appeal because the landlord appealed against the financial penalty which arose from the Prescribed Information being defective. the tenants appealed against the Section 8 Notice ruling.
In its judgement the Court of Appeal held that where a corporate landlord or agent is completing certain statutory forms including a Section 8 Notice and prescribed information, such documents do not have to be ‘executed’ in accordance with the formalities set out in Section 44 of the Companies Act 2006. It reached this decision on the basis of general principles of agency – who can represent a company – and on rules governing the interpretation of secondary legislation that was introduced under the Housing Act 2004
- The Court held that as the definition of landlord in the 2004 legislation included someone authorised to act for the landlord, the same interpretation had to apply to the deposit registration regulations that followed in 2007. Accordingly despite that what we have all assumed for the best part of 15 years, an agent could always have singed the certificate of truth on Prescribed Information – even before the Deregulation Act of 2105 acknowledged that situation. As a result, the original in this case was valid and “the prescribed information” complied the regulations.
Section 8 Notice
- The judge concluded that the Section 8 Notice was signed by an agent in the manner permitted by both the primary legislation and the relevant regulations as indeed the earlier High Court judge had decreed albeit for slightly different reasons.
This means that these particular forms do not need to be signed by two company directors or witnessed by a third party or even “sealed” by a company landlord or agency. But the judgement goes much wider. The same rational will surely apply to virtually every notice prepared for a corporate landlord, from section 21 notices to rent increase notices and even notices to quit. The decision is a vote for common sense which every member will welcome. I should also draw a long overdue line under a problem that has cause many sleepless nights for those who have to deal with compliance issues.