2006 And All That Commercial Landlord and Tenant Update

1
2006 And All That Commercial Landlord and
Tenant Update

• Jon Mowbray
• Andrew Olins
• Real Estate Dispute Resolution

2
2006 And All That Commercial Landlord and
Tenant Update

• Jon Mowbray
• Real Estate Dispute Resolution

3
Forfeiture

• Express provision in lease e.g. rent unpaid for
  21 days or any other breach of tenants covenants
• Section 146 notice must be served in relation
  to any breach other than non-payment of rent
• Right to relief
• - Pay arrears and costs will obtain relief
  (County Courts Act 1984)
• - Other breaches equitable discretion of court
  
• By peaceable re-entry or proceedings

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Forfeiture

• Peaceable re-entry cannot be used for
  residential premises
• Section 2 of the Protection from Eviction Act
  1977 provides
• Where any premises are let as a dwelling on a
  lease which is subject to a right of re-entry or
  forfeiture it shall not be lawful to enforce that
  right otherwise than by proceedings in the court
  while any person is lawfully residing in the
  premises or part of them.

5
Forfeiture

• What about mixed-use premises?
• Pirabakan v- Patel 2006 ECWA Civ 685
• - What does let as a dwelling mean?
• - Court of Appeal decided it meant let wholly
  or partly as a dwelling

6
Forfeiture

• Law Commission Report Termination of Tenancies
• for Tenant Default issued 31 October 2006
• New concept of Tenant Default
• No need for forfeiture clause
• Must serve written notice
• Termination claim resulting in termination
  order or remedial order
• Summary procedure

7
Set-off

• What is set-off?
• Has it been excluded?
• What if landlord assigns its interest?
• - Arrears that pre-date assignment
• (a) Old lease s141 Law of Property Act 1925
• (b) New lease must be express assignment
• - Muscat v Smith 2003 All ER (D) 192

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Set-off

• Arrears that post-date assignment
• - Edlington Properties Limited v- JH Fenner
  Co Ltd 2006 PLSCS 71
• - Personal right
• - Court of Appeal held cannot set-off
• - Include express provision

9
Landlord and Tenant (Covenants) Act 1995

• Section 17(2)
• The former tenant shall not be liable underthe
  covenant to pay any amount in respect of any
  fixed charge payable under the covenant unless,
  within the period of six months beginning with
  the date when the charge becomes due, the
  landlord serves on the former tenant a notice
  informing him
• (a) That the charge is now due and
• (b) That in respect of the charge the landlord
  intends to recover from the former tenant such
  amount as is specified in the notice and (where
  payable) interest calculated on such basis as is
  so specified

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Landlord and Tenant (Covenants) Act 1995

• Section 17(4)
• Where the landlord has duly served a notice
  under subsection (2)the amount (exclusive of
  interest) which the former tenantis liable to
  pay in respect of the fixed charge in question
  shall not exceed the amount specified in the
  notice unless
• His liability in respect of the charge is
  subsequently determined to be for a greater
  amount,
• The notice informed him of the possibility that
  the liability would be so determined, and
• Within the period of three months beginning with
  the date of the determination, the landlord
  serves on him a further notice informing him that
  the landlord intends to recover that greater
  amount from him (plus interest, where payable)

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Landlord and Tenant (Covenants) Act 1995

• What if the rent which is in arrears is subject
  to an
• outstanding rent review?
• Scottish v Newcastle Plc v- Raguz 2006 EWHC
  821
• - Form 1 notice notice must warn of potential
  increase
• - Form 2 notice served within 3 months of new
  rent being fixed
• - Should serve nil Form 1 notice whenever
  delayed rent review

12
Distress

• Entry on to premises
• Seizure of goods
• Impounding of goods
• Sale of goods
• Must be tenancy
• For rent or sums reserved as rent

13
Distress

• LCP Retail Limited -v- Richard Segal 2006 EWHC
• 2087
• Landlord levied distress in respect of 25k
  arrears
• Walking possession agreement
• Tenant paid 18,700 plus landlord held 14k
  rent deposit
• Tenant went into liquidation
• Landlord failed to notify liquidator of
  security
• Court held landlord had abandoned distress

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Distress

• Tribunals, Courts and Enforcement Bill
• Introduced in House of Lords on 16 November
  2006
• Commercial Rent Arrears Recovery (CRAR)
• CRAR only available for commercial premises
• Only for pure rent
• Landlord have to serve notice and satisfy
  criteria
• Tenant will be able to challenge in court
• Unable to override CRAR system or extend

15
2006 And All That Commercial Landlord and
Tenant Update

• Andrew Olins
• Real Estate Dispute Resolution

16
Management agreements

• What is a management agreement?
• e.g. tenant hands over management of his
  restaurant
• Tenants intention
• Part of sale arrangement to release capital
• Circumvent alienation provisions
• Beware manager does not get exclusive possession

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Alienation

• Typical alienation covenant prohibits sharing or
  parting with possession
• Is sharing or parting with occupation
  different?
• Akici v- LR Butlin 2005 EWCA Civ 1296
• T allowed X Ltd to trade from his premises
  although T was about the company

18
Break clauses material compliance

• Usual precondition to exercising a break clause
• Tenant must materially comply with its
  obligations including repairing covenants
• What happens if the tenant is met by a
  deliberately uncooperative landlord?
• Fitzroy House -v- Financial Times 2005 EWHC
  2391
• No obligation on the landlord to assist

19
Rent arrears - bankruptcy

• What effect does a tenants bankruptcy have on a
  landlords ability to recover possession for
  arrears of rent?
• Harlow DC -v- Hall 2006 EWCA Civ 156
• Tenant unsuccessfully argued that his bankruptcy
  wiped out the rent arrears and with it the
  landlords right to recover possession

20
Service charges set off for landlords delay

• Usual service charge regime
• Landlord carries out repairs and recovers the
  cost of the works from his tenants
• But what happens if the landlord delays carrying
  out repairs which increases the cost of the
  works?
• Tenants have the potential cross-claim
  (potentially) deductible from the service charge
  demand
• Continental Property -v- White 2006 Lands
  Tribunal case although decided in the context
  of a residential tenancy, no reason in principle
  why it should not apply to a commercial tenancy

21
Repair - inherent defects

• Often a landlords repairing covenant does not
  include an obligation to repair inherent
  defects
• Limited to maintaining, repairing and renewing
  the structure
• Janet Reger -v- Tiree 2006
• The basement of retail premises suffered from
  damp because the damp proof in the floor was not
  properly linked to the damp proof on the walls.
  The tenant had no claim against the landlord
• Solution widely drafted covenant, insurance or
  collateral warranties from any builders

22
LTA 1954 - compensation ploy

• Landlords improper use of the new section
  29(2)
• Allows a landlord to apply for an order
  terminating the tenancy
• Felber Jucker -v- Sabreleague 2005 PLSCS 162
• Landlord issued application opposing a renewal on
  ground (f)
• After the tenant secured alternative premises,
  the landlord withdrew his opposition and offered
  a new lease
• If the tenant vacated would he lose the right to
  statutory compensation?
• No, an abuse of process

23
LTA 1954 occupation and renewal

• A tenant can only claim a renewal lease if he
  occupies the premises for the purposes of the
  business carried on by him
• Problems can arise where tenant sublets and
  sub-tenant vacates a few days before the end of
  the tenants own lease
• Pointon York -v- Poulton 2006 EWCA Civ 1001

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Fire

• Regulatory Reform (Fire Safety) Order 2005
• Replaces over 70 existing fire safety
  requirements including Fire Precautions Act 1971
• Old regime of Fire certificates is abolished and
  replaced by a system of self-assessment
• New regulations came into force on 1 October

25
PLA new dilapidations protocol

• New version has been introduced with the approval
  of the RICS
• Main changes
• Covers all aspects of the physical state of the
  property at the end of the lease and not just
  repairs
• Surveyors must certify accuracy of the schedule
  of dilapidations including costings
• Landlord need not serve section 18(1) report at
  the outset

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Questions?