Clarke and Son News

A great deal of publicity has been given by national newspapers recently on ‘house competitions’.  There have been cases where the Gambling Commission have ruled that the scheme in question is, in effect, a lottery, with a house as the prize.   More and more people, unable to sell their homes in a falling market are contemplating using such competitions as an alternative.

Keith Hathaway, Senior Commercial Solicitor at Clarke & Son LLP comments:
“If you are a House Seller or Company Director wishing to set up a promotional prize draw or competition you need to be aware that the law draws a sharp distinction between lotteries, free draws and prize competitions. 

A lottery is essentially any scheme where prizes are allocated randomly to participants who have paid for the chance of winning a prize. Lotteries are illegal unless sanctioned by a specific statute (e.g. the National Lottery) or by a licence from the Gambling Commission under the Gambling Act 2005. The Gambling Commission will not give permission unless the proposed lottery is for a good cause- i.e. they only give permission to charities or community organizations.  So lotteries for private or commercial gain are invariably illegal. 

Prize competitions are legal as long as they are not lotteries in disguise. There must be skill involved. The amount of skill that participants will be expected to exercise will vary from competition to competition. The element of skill must not amount to betting. The law on this topic is complex.

Free draws are familiar from product promotions. They do not fall foul of the Gambling Act 2005 as long as they are not lotteries in disguise- there must be no payment necessary in order to participate. Again, the law about this is complex particularly on the question of what amounts to payment to participate. A (genuine) free prize draw might be an appropriate means of promoting your business products but it would not be a viable solution if you wanted to sell your house for value.

Even if a prize competition or free draw is not in danger of infringing the Gambling Act 2005 there are other legal requirements that must be observed. It is always wise to take legal advice when planning a prize competition or draw whether for product promotion or any other purpose.

In summary, a house sale by a multiple ticket scheme would only be lawful if it is a prize competition, it is accepted as such by the Gambling Commission and does not infringe any other relevant rule. If the scheme is a lottery not a prize competition (or free draw) or the Gambling Commission decide that it is a lottery, then it will be illegal.  A prize competition scheme must not be such that it constitutes betting.  If clients are in any doubt of the legality of a proposed scheme, they should contact us for further advice.”

If you would like legal advice on how to promote your products or  sell your house through a prize competition, please contact Keith Hathaway or  Paul Cowdery or contact them at Tel: 01256 320 555

On 1 October 2008, the Companies (Trading Disclosures) (Insolvency) Regulations 2008 came into effect bringing insolvency law into the Internet age.

The Regulations requires that a UK company that’s in administration, receivership or operating under a debt moratorium to indicate the fact clearly on its website as well as on company documentation such as its letterheads, invoices and so on.

The House of Lords has reversed an earlier Court of Appeal decision that forced Solicitors, and possibly Commercial Agents, from having to serve potential default notices on tenants, and even guarantors and former tenants, in order to protect a Landlord where there was an outstanding rent review just in case a situation arose whereby arrears arose and it became necessary to commence proceedings for recovery as, without service of a notice within six months of sums ‘becoming due’ recovery would fail. So tenants were receiving notices even for ‘nil’ amounts just to protect Landlords in such situations and this will now no longer be necessary.

Below is a summary of the points that arose and the decision of the House of Lords:

• In Scottish & Newcastle plc v Raguz [2008] UKHL 65 the Lords held that, for the purposes of recovering sums from former tenants, the date that the additional rent under a rent review clause “becomes due” is the date when the increase has been agreed or determined, not the ‘Rent Review Date’ in the lease to which payment will be backdated.

• The opposite conclusion reached by the Court of Appeal meant that where a rent review had not been determined by the relevant rent review date, a landlord had, as a precautionary measure, to serve a section 17 notice on former tenant(s) (and any guarantors of those tenants) who remained liable for the payment of fixed charges. The notice had to be served within six months of each rent payment date until the rent review had been determined.

• The House of Lords considered that it was hard to attribute to Parliament the intention that landlords had to serve a section 17 notice within six months after every rent payment date specifying the amount due as “nil” if they wanted to preserve their rights against former tenants pending a rent review. In this case, the original tenant was legally bound to pay the sums demanded to the landlord and the original tenant was entitled to reclaim the amount from its assignee under the implied indemnity given under section 24 of the Land Registration Act 1925.

Landlords will be hugely relieved by this decision. The need to give precautionary notices to former tenants, even where there was no default by the current tenant, was administratively burdensome and imposed an unwelcome additional property management task on landlords. Landlords will no longer have to serve a succession of section 17 notices within six months of each successive quarter day so as to preserve their rights against former tenants.

The decision will also make it easier for sellers of properties subject to tenancies and for buyers carrying out due diligence exercises.