13 Sep 2019

Enforcing Guarantee Agreements After 1st December 2017

Enforcing Guarantee Agreements After 1st December 2017

We previously blogged about the transfer of jurisdiction from the Sheriff Court to First-tier Tribunal Housing and Property Chamber (‘FTT’).  Almost two years  on from 1st December 2017, it is by now well known to Private Sector Landlords and Letting Agents, that the appropriate forum in which to sue a tenant (or former tenant) for repayment or arrears or other tenancy related debts, is the First-tier Tribunal.

Until recently, however, there remained some dubiety as to the appropriate forum in which to pursue a guarantor.  In mid-2018, the Tribunal rejected such an application. In Ross v Robertson and Robertson CV/181571 the Tribunal took the view that, as the subject matter of the application was the guarantee agreement which was ‘only indirectly linked’ to a tenancy, the FTT had no jurisdiction.

Despite such a determination, the decision of one First-tier Tribunal member does not bind another and so it remained unclear as to where guarantors should be sued.

Helpfully, the matter has been clarified to an extent by the recent Upper Tribunal decision of Anderson v Stark UTS/AP/19/0012. The initial application to the First-tier Tribunal was rejected as being “frivolous” on the basis it was “misconceived and hopeless”. Not only did the Upper Tribunal find the FTT had erred in failing to allow parties the opportunity to make submissions prior to rejecting the case, perhaps more importantly, it held that (in most cases) the FTT will have jurisdiction to hear guarantor claims.

Section 71 of the Private Housing (Tenancies) (Scotland) Act 2016 gives the FTT power to determine ‘civil proceedings arising out of a private residential tenancy’. Criminal prosecutions are explicitly excluded. The UT considered the wording of the Act. It also considered the Model Private Residential Tenancy Agreement and the reference therein to Guarantors. It follows that the UT determined parliamentary intention had been to allow the FTT to deal with ‘all PRT-related events…and not just the core lease.’

That being said, the UT found that what ‘arises from’ a PRT will depend on the circumstances of each case. Whilst a ‘tenuous causal connection” may not be enough, in most cases guarantees will arise out of a lease, whether incorporated in the lease or by separate agreement. Providing there is a clear link between the lease and the guarantee (for example by reference to parties, commencement and rental liability) then it will arise from said lease and the FTT will have jurisdiction.

Although the above case related to a PRT, the same principals will apply in relation to Section 16 of the Housing (Scotland) Act 2014 and the FTT will therefore also handle claims against Guarantors in respect of Assured/Short Assured Tenancies.

If you require any further information or advice, please contact Rory Cowan (https://bkf.co.uk/people/rory-cowan/#more-272).