Mesne Profit – can it protect HMO landlords from a sneaky tenant trick?

by Readers Question

11:17 AM, 21st December 2013
About 7 years ago

Mesne Profit – can it protect HMO landlords from a sneaky tenant trick?

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Mesne Profit – can it protect HMO landlords from a sneaky tenant trick?

Mesne Profit – Pronounced Meen Profit, what the heck does it mean?

As a landlord with a small portfolio of 7 HMO’s and 10 single occupancies, I am always looking to systematise everything I do,
Systematisation saves time, stress and gives structure to your business, so if I have to ask someone else to do the job for me, I try and have pre-designed templates that even my wife can use, so she doesn’t have to worry about fouling up certain critical bits of administration.

With this in mind, I thought it was about time I reviewed my automated Microsoft Word Section 8 creation template(s) as I have a court case looming at some point in the early New Year and so I then started to research in the wording of my section 8 notice and also, more importantly the wording of my County Court Particulars of Claim Template.

Get that last bit of detail wrong and you can find yourself out of pocket and outside a judges chambers crying, whilst the lady from CAB, (Citizens Advice Bureaux), laughs in your face with your ex-tenant grinning from ear to ear.

So, its been a while since I dragged a tenant through the court system, so a few days ago, I placed an article on property118.com in regards to what to do with a wayward tenant and a guarantor in regards to dealing with having joint defendants named on a PCOL (Possession Claim On Line), form, together with their guarantor and applying additional charges to the account.
You can view the article here.http://www.property118.com/case-law-rent-arrears-charges/61529/

I got several responses that gave me guidance in how to proceed and I then set to work acting on the advice given.

So as usual, I carried out a search on Google for completing a County Court Particulars of Claim Section, as case law, CPR, (Civil Procedure Rules), and modifications can arise and its always worth while checking your not going to look an absolute pillock come the day of your repossession hearing..

Whilst doing so, I came across a term called “Mesne Profit” written in the particulars of claim previously submitted by a firm of solicitors to a court for possession and also a fair bit of legal gobbledegook that seemed to go alongside it.

My first thought was that the solicitor who drafted the Particulars of Claim had made a mistake as I couldn’t figure out what it all meant.

So as I was lying in bed with my iPad, I thought I would browse the term “Mesne Profit” to see what it actually meant.

What I discovered got my heart pounding with excitement as the definition was something like this….Damages for trespass.

The principle behind mesne profits is that a trespasser is not allowed to use another person’s land without compensating the landowner.
The landowner does not need to have suffered any loss. The amount of mesne profits for which the trespasser is liable is the amount equivalent to the ordinary letting value of the property.

Liability to pay mesne profits arises when a former tenant holds over after termination or expiry of its tenancy and stops when it gives up possession of the land

In order for a landlord to protect himself from creating an additional tenancy after a repossession order has been granted by a court, a notice, (Letter), should be issued that says that any money received will be accepted on the grounds that it is “Mesne Profit”, if you don’t do so – you are one smart solicitor away from a tenant facing an eviction requiring another repossession hearing to end a tenancy that you didn’t even know was in existence.

My thanks to Google and in particular to Tessa Shepperson.
Source Tessa Shepperson : http://www.landlordlawblog.co.uk/2010/09/25/mesne-profits-what-is-it/

It means monies received from a tenant after a tenancy has ended can be viewed as being taken under the condition that a new tenancy has now not been created by default.

It is only most tenants ignorance of this fact that doesn’t wreak havoc with the repossession system.

Normally, if you take a payment from a tenant and they are living in a house a legal tenancy is suddenly created, it will arise automatically and you will need a surrender of tenancy by a tenant or a court order to end it.

So imagine this scenario:

You have a HMO with a tenant living in a single sized room and you live 40 miles away from it, so you only visit it if there is a fire or new tenancy starts, or in other words you hardly ever go there.

You also have a tenant, in the same HMO, who eventually moves out leaving a double sized room in it vacant, that tenancy ends with signatures etc. and everybody is happy, or so you think.

Behind the scenes, the tenant in the single room has been on favourable terms with the tenant that has left and the single room tenant now knows their door access code.

You are still advertising the room and are blithely unaware of what has happened whilst you are not present.

About two weeks after your double room becomes vacant, you get a phone call from your single sized room tenant asking you to stop advertising the double room, because they have moved into it already about a week ago and have paid you the additional rent difference straight into your bank account, alongside their normal payment.

At this point, you should start panicking, because you have just had a new tenancy created under your nose and you have no documentation, guarantors, signatures or anything else set up to protect you.

Enter stage right your only probable protection – (make sure that you use it and fast!).

You should issue an immediate letter, (Notice), stating that until suitable documentation is completed, you do not accept any payment as acknowledgement of a new tenancy, that the new tenancy does not exist and that any moneys received are “Mesne Profit”.

The tenant will tell you not to worry and that all the paperwork will be filled out and sent back to you by return post.

Don’t fall for it, because it is more than likely that it simply wont happen….

Because this is what will actually happen,
The tenant will never get to sign the paperwork and may at some point start to accrue rent arrears, their guarantor will insist that they are no longer liable under a guarantee as they have not signed for it and you will start to get heart problems and also wrist strain from all the letters between you and the guarantor and their solicitor.

You should get heavy with the tenant and issue a section 8 notice, followed with a summons with something like this…….

CLAIM FOR POSSESSION, BASED ON ARREARS OF RENT OR BREACH OF A TERM OF THE TENANCY AGREEMENT

1. The Claimant is the freehold owner and is entitled to possession of premises comprising a dwelling house situated at and known as (address) (“the premises”).

2. The premises were let as a dwelling by the Claimant to the Defendant by a written agreement dated (date) for a fixed term of not less than six months, namely from (date) to (date), at a rent of £_______ per month (exclusive of water rates) payable monthly in advance/arrears.If the Landlord alleges arrears of rent or breach of any other term of the tenancy –

3. The following are (inter alia) express terms of the said tenancy:
(1) (Details)
(2) (Details)

4. The Defendant is in breach of the terms of the said tenancy set out in paragraph 3 herein and in consequence the Claimant has suffered loss and damage.

Particulars of Breach:
(1) Non-payment of rent from (date) to (date) inclusive.
(or non-payment of mesne profits from (date) to date).
(2) (Details of any other breach of the terms of the tenancy)

Particulars of Loss and Damage:
(1) Rent Arrears of £____
(2) Mesne Profits of £____

5. On (date) the Claimant served on the Defendant a notice in the prescribed form pursuant to Section 8 of the 1988 Act informing the Defendant that the Claimant intends to commence proceedings for recovery of the premises not earlier than (date) [See Section 8(4) of the 1988 Act – below] and not later than 12 months from the date of service of the said notice and on one or more of the following grounds namely Ground __ and/or Ground __ in Schedule 2 of the 1988 Act, which provide that a landlord can recover possession of premises where:
[Here set out the Statutory Ground or Grounds in full – see below]
and the notice gave particulars of the said grounds.

6. The said tenancy was an assured shorthold tenancy. The Defendant wrongfully remains in possession of the premises, and the Claimant is entitled to and claims possession of the premises by virtue of the said Ground.

7. The Claimant is entitled to and claims interest pursuant to Section 69 of the County Courts Act 1984 at the rate of 15 percent per annum on all sums of money awarded to the Claimant for such period as the Court thinks fit.

AND the Claimant claims:
(1) Possession of the premises
(2) Rent arrears of £______ as at the date the notice requiring possession was served
(3) Mesne profits from the date the notice requiring possession was served until (date) being £__
(4) Mesne profits continuing from the last mentioned date until possession is delivered at £__ per week (£__ per day)
(5) Interest as pleaded
(6) Costs

If you think this is a bit severe, it isn’t… your tenant has left you in a near impossible position if they default on their rent

Now then you good people in Property118.com land, what do you think your position actually is, in this scenario?

The reason for this article is that I have been hit twice in this manner in the last 18 months and it isn’t pleasant.

But now I will be investigating my options, by asking my legal boffin’s how to handle the guarantors in a retrospective manner as I am wondering after my research if Xmas came a few days earlier this year!

Now I can guarantee that Mark, founder of Property118.com has probably never been in this situation, because I did a search of “mesne profit” and nothing came back from the websites search engine.

I know of several landlords apart from me who have been hit with this scenario and I have already drafted a new Microsoft Word Template, just in case it ever happens again.

Okay good folk – what do you think – has this little known term shone a light on a particular difficulty that you may have experienced?

GaryMense Profit

Comments

Neil Patterson

11:21 AM, 21st December 2013
About 7 years ago

Hi Gary,

Very interesting and not something I have run across before.

It would be fantastic to get readers views on this especially as we have some keen legal minds in our community.

Robert Mellors

11:47 AM, 21st December 2013
About 7 years ago

Hi Gary, I'm not entirely sure what exactly you are asking, but my understanding is that Mesne Profits are simply an amount due to you for the person's continued occupation of the property that they are no longer entitled to occupy by virtue of the end of the tenancy, and as it is a sum equivelent to the rent, you wok out a daily rate and apply for this continuing daily rate as mesne profits until such time as the resident has actually moved out. You can also claim statutory interest on this, (though I'm not sure you would be able to set your own 15% interest rate as you have done).

Of course, at the possession hearing only the amount owed up to that point can be awarded as a stated figure, but if you then go on to sue the tenant or guarantor, then the mesne profits up to the date the person actually moved out (you re-gained possession), can be included in any claim, but you need to ensure that the guarantor document (Deed) includes the guarantor's liability for mesne profits, and other damages.

Industry Observer

9:41 AM, 23rd December 2013
About 7 years ago

Its actually Mesne Profits and pronounced mean and I am astonished any experienced landlord has never heard of it, can only mean (no pun intended) that you have never had to attend Court or if you did, acted for yourself and so did not ask for "mesne profits" to be added to the Court Order costs etc.

It is standard practice, but only applies in two situations:-

1. On ASTs and far as I am aware no other tenancy type and certainly not on a full Assured Tenancy

2. It only applies i.e. the charge for quite rightly use of premises with no rights and obligations to pay rent, from the day after the Court Order matures.

“At the point the Judge is granting the Order, your advocate leaps to his feet and simply says “and Mesne Profits M’Lud” as it is standard practice. But you do have to ask!!”

Industry Observer

14:22 PM, 5th March 2014
About 7 years ago

Apologies only just seen this again and now know that Mesne profits does not apply to 1988 Act tenancies follwing changes to that Act courtesy of the Housing and Regeneration Act 2008

Romain Garcin

15:39 PM, 5th March 2014
About 7 years ago

Reply to the comment left by "Industry Observer " at "23/12/2013 - 09:41":

1. If tenant serves notice to quit under an Assured Tenancy but does not vacate on expiry, landlord can claim compensation as mesne profit, which as Gary mentioned is essentially compensation for trespass
So I'd think that mesne profit is general and applies to any type of tenancy.

2. Note that an A(S)T does not end until bailiffs execute the court order. As such there is no mesne profit after the court order's deadline expire, just normal rent.

@Gary: "It means monies received from a tenant after a tenancy has ended can be viewed as being taken under the condition that a new tenancy has now not been created by default."

From discussions with qualified persons, my understanding is that the safest option is not to demand any payment while the (ex-)tenant is in occupation, or until a new tenancy is formally agreed. Then to demand payment based on the number of days he remained at the property.

Romain Garcin

15:44 PM, 5th March 2014
About 7 years ago

"At this point, you should start panicking, because you have just had a new tenancy created under your nose and you have no documentation, guarantors, signatures or anything else set up to protect you."

No, I don't think that you have created a new tenancy because you were not aware of anything.
Only if you accept the extra money after you were made aware of the facts could it be deemed that a tenancy has been created.

Assuming that you had created a new tenancy, it does not imply that the other tenancy on the other room as ended.
So your tenant would have 2 tenancies, one for each room, and would be liable for both rents.

Industry Observer

15:47 PM, 5th March 2014
About 7 years ago

Romain

And number (1) above your point is? It is AST and AT tenancies that mesne profits no longer apply to. In effect there is no longer any need to leap up when the Judge grants the Order and say "and mesne profits M'Lud"

Point (2) is how mesne profits used to apply to ASTs until the 2008 Act

Your last para my comments are from Gurus as well, so we'll have to disagree. Depends on the word "demand" I suppose since as long as the tenancy exists rent automatically falls due and one the Order is executed by a bailiff the tenant is no longer there with no liability from that date forward anyway

Romain Garcin

15:53 PM, 5th March 2014
About 7 years ago

Reply to the comment left by "Industry Observer " at "05/03/2014 - 15:47":

Have you got a reference in the Housing and Regeneration Act 2008?

"In effect there is no longer any need to leap up when the Judge grants the Order and say “and mesne profits M’Lud”"

But why would you if the tenancy does not end until bailiffs evict the tenant?
That was perhaps necessary when the tenancy ended at the expiry of the court order.

Industry Observer

18:51 PM, 5th March 2014
About 7 years ago

Exactly so

The Housing and regeneration Act made changes to the Housing Act 1988 in respect of the right to possession.

If you go to

http://www.legislation.gov.uk/

and search for Housing Act 1988 the top line will be the right act. Scroll down to security of tenure, section 5 and click on the link. You will see that the first sub para (1) starts with an [F1. This shows that this text was a later amendmended and if you scroll to the bottom of the page you can read it was an insertion by the Housing and Regeneration Act 2008

Romain Garcin

20:05 PM, 5th March 2014
About 7 years ago

Reply to the comment left by "Industry Observer " at "05/03/2014 - 18:51":

OK, but that does not mean that a landlord cannot claim mesne profit anymore.
As mentioned above it just means that when evicting through the courts the tenancy does not end until bailiffs execute the order. Rent is payable until the tenant is physically evicted and he is therefore never trespassing, which in turn means that there is no need to claim mesne profit.

This is not the scenario described by Gary.

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