Landlord & Tenant Flashcards
Basic difference between lease renewal and rent review?
Lease renewal is a statutory procedure laid down by the LL & T Act 1954, whereas a rent review is a contractual procedure contained within a lease
NOTE: if the lease is contracted out of 1954 Act then there is no statutory procedure
To what tenancies does the 1954 Act apply?
Tenancies occupied for business purposes
When was the LL&T Act 1954 last amended?
1st June 2004
Name the tenancies to which the 1954 Act does not apply
- Agricultural holdings
- Mining Leases
- Residential Tenancies
- Tenancies created as a condition of employment
- Tenancies not exceeding 6 months unless a) there is a provision for extension or b) T has been in occupation for more than 12 months
What is a s25 notice?
A notice served by the Landlord to the Tenant so that they can terminate lease at its contractual expiry
When can a LL serve a s25 notice?
With a minimum of 6 months notice, but not more than 12 months
12 to 6 months before contractual expiry, or any time thereafter (notice has got to be for at least 6 months)
What must a LL s25 notice contain?
- Details of the landlord
- Tenant details
- Date of the notice
- Date of termination of the lease
- If friendly, the terms of the new lease
- If hostile, the grounds why a new lease won’t be granted
What advice would you give a LL in respect of a lease renewal where a property is significantly over rented?
This is dependent on the landlord but you could either:
- Could let the lease expire and allow the tenant to hold over. They could serve a Section 27 notice and vacate within 3 months
- Serve a Section 25 notice giving 6 months notice, this ensures you continue to collect the higher rent for 6 months (unless the tenant approaches the court for interim rent at the market rent under Section 24a)
Why would a LL give 12 months notice when he could give 6 months?
If the T rent is over-rented, you get an extra 6 months of the tenant paying extra rent. Also if you’re confident tenant is going to leave, it gives more time for finding new tenant
What action should LL take if require possession of a property at end of lease?
Serve notice under s25 to terminate tenancy and objecting to tenant having new tenancy under one of more of the grounds listed in s30
What can a LL do if cannot get response from T to friendly s25 notice?
I would advise doing nothing. If the 25 notice expires and the tenant hasn’t replied the landlord can apply to court and they will side with the landlord on the new terms of the lease
What advice would you give a T when a LL s25 notice is due to expire in 2 weeks time and agreement for new lease not yet agreed?
Would advise T that you can approach LL to ask if time extension under Section 29 -
Name grounds under the s30(1) of LL & T Act 1954 under which a LL can obtain possession
T has failed to carry out repairs
T has persistently delayed paying rent
T is in substantial breach of some other covenant
L offers suitable alternative accomodation (LL doesn’t have to own the property, so long as they can secure another space)
Where the tenancy was created by a sub-tenancy and the building let as a whole would produce a higher rent than from separate lettings
L intends to demolish or substantially reconstruct the premises and cannot do so without obtaining possession
L intends to occupy the premises for his own purposes (LL must have been LL for minimum of 5 years - S30(2))
(last 3 grounds are the no-fault grounds)
A lease of a shop property is due to expiry in 12 months time. You are instructed for the first time by the LL to negotiate a new lease with the T. How would you deal with this instruction?
Need copy of lease
agree terms of engagement - only act for client after that
Inspect the property to a) measure, b) carry out rental valuation, c) see if there any breaches of tenants covenants (EG unauthorised alterations, breach of user, unathorised sub-let to another tenant, failure to repair)
then serve s25 notice and state the tenant can stay
How is T compensation assessed under 1954 Act?
If tenant has been in occupation for 14 years or more, then get twice RV and if less they get once RV
Explain the power of the court in ordering a new lease
Under sections 32-35, Court can determine property comprised, length of lease, other terms of the lease, rent and interim rent
What do you understand s34 rent to be?
Market rent disregarding the tenants previous occupation, any good will, certain improvements and any Licence to sell intoxicating liquor if the Licence belongs to the tenant
What do you understand interim rent to be?
Occurs when parties extend time period in which either one of them can apply to court
The interim rent is the rent payable between the end of the old lease and the start of the new lease
How is the Interim Rent assessed?
It is the market rent at the start of the interim period (EG if the interim period started 12 months ago, it is the market rent as at 12 months ago)
The interim rent is the rent under the new tenancy, unless there are reasons to state otherwise
It is on the terms of the old tenancy
In what circumstances would you recommend a tenant to serve a S26 notice?
If the T believed the current lease was over-rented, it would be worth serving this notice to get a new lease with a lower rent . Also if the tenant believed the market was going to increase in the future they may want to lock in the rent at a lower amount to be prepared
T may also serve this notice even if rent increases, just to ensure the T still has a lease in place (might be hard to find somewhere else)
Explain when tenant’s improvements are disregarded at lease renewal
If improvements were carried out within the last 21 years, or at any time during the old tenancy
Not all alternations are improvements - an improvement must add value
Note: not disregarded if they were lease obligation
What are the key elements of a rent review clause?
How the rent review is to be instigated (EG only by LL, or by LL or T)
Might say that LL gives notice, T may have chance to give counter-notice
If this can’t be settled, then clause will state how rent should be determined (either by arbitrator or independent expert)
Answer: Machinery, basis of value, and means of settling disputes
What is a trigger notice?
A notice that triggers a pre-determined sequence of events
EG the first notice (served by LL or T depending on what lease states) to trigger the rent review
What is ‘time of the essence’
If time is of the essence, then the time scales in the lease must be strictly adhered to. Generally, time is not of the essence due to case law
What are the two landmark cases in respect of ‘time of the essence’
The Burnley and The Cheapside cases
The essence is that the rent is reviewed from that date
Despite there being clearly defined timetables, you do not have to stick to them - this is not the essence of the contract
In what circumstances is it likely that time is of the essence?
If the lease says so
If T makes time of the essence EG T can write to LL and make time of the essence, by sending a letter saying ‘please organise rent review within 28 days and if I don’t hear from you then the rent review will no longer go ahead’ - see Barclay’s Bank Case
If the rent review clause inter-relates with other clauses (EG break)
If there are deeming provisions
What are deeming provisions?
Where the lease states:
L to give notice proposing a new rent
T to serve counter notice with counter proposal within stated time
If T fails to serve counter notice in time, T is deemend to have agreed LL rent
LL could be deemend to accept T counter proposal if lease states so
Lease needs to be explicit on this (very rare to see this) IE lease would say ‘if tenant does not serve counter notice, then tenant is deemed to have accepted LL rent’
What lease terms affect the rent at review?
The rent review clause itself - definiton of rent, assumptions we need to make, and matters that are disregarded
The frequency of review (the longer the period between reviews, the higher the rent)
Restrictions on user/alienation, insurance provisions, repairing liability etc
Overall, the more flexible a lease is, the higher the rent
Protected tenancies (inside 1954 act) should demand higher rent - T has security at lease expiry
What assumptions are usually made in determining the rent at review?
That premises is fit for immediately occupation/use
Assume market rent payable after rent free
No work carried out by T has reduced rental value
T has complied with terms of existing lease
Could add: if premises have been damaged/destroyed, they have been re-instated
What is the hypothetical term?
Rent review clause will either say, 1) term is equal to unexpired term at review, or 2) assumed hypothetical term
The hypothetical lease is based on the same terms of the existing lease, assuming the property remains in its current state
Assume property is vacant and to let on same terms of existing lease, except the rent
Need to attach the most weight to open market lettings
Is the hypothetical term more advantageous to LL or T?
Depends on length of hypothetical term
Long hypothetical term could be advantageous either party (tenant would want inducement IE lower rent but a longer lease gives the landlord certain income over a longer period)
What are the usual disregards?
T’s previous occupation
Any goodwill
Certain improvements
Any Licence to sell intoxicating liquor if it appears that the Licence belongs to the T
How may a rent review be resolved if a LL and T cannot reach agreement?
By a 3rd party, either an arbitrator or an independent expert (depending on what the lease says)
What are the differences between an intendent expert and an arbitrator?
Arbitrator acts on evidence and arguments submitted; Experts has duty of investigation but can request evidence from the parties
Arbitrator makes an award; Expert makes a determination
Arbitrator conduct based on Arbitration Act 1996, but Independent Expert is RICS surveyor so governed by RICS Rules of Conduct
You can sue an independent expert for negligence, but you can’t sue an arbitrator
An arbitrator can award costs (EG the ‘wrong’ party pays all costs); an independent expert can’t usually award costs (these costs get met in equal proportions by LL and T - usually stated in lease)
What is the purpose of a Calderbank letter/offer?
Used to protect against costs liability at arbitration - no point making a calderbank offer if have indepedent expert
What must a Calderbank letter/offer contain?
An unconditional written offer to settle the rent review
A reasonable proposal regarding costs incurred up to the date of the offer
A time within which the other party must accept the offer by (usually 21 days)
A statement that is made ‘without prejudice save as to costs’
This means this offer can’t be used as evidence unless it comes to arbitrator awarding costs
‘without prejudice’ = does not prejudice anything I am subsequently going to say
Both parties can make Calderbank offers - can make as many as they want
Can make Calderbank offer at any time during negotiations (before or after arbitrator gets appointed)
Paper determination - usually evidence is all in writing and no hearing needs to take place
Offer states that everything is agreed EG size of unit etc
Person A believes comparable evidence suggests rent of £80K per year
Person B believes comparable evidence suggests rent of £100K per year
Arbitrator makes an award (£85k) and says ‘before I award costs, does anyone have anything to show me?’
Person A says - I made Calderbank and would have accepted £80K!
All costs made against Person B from date that offer could have been accepted
What is the difference between a lease and a licence?
Lease can be fixed term or periodic, and gives T exclusive right of possession - all other parties can be excluded. Licence gives someone permission to do something on the owner’s land (or in property) that would other constitute a trespass.
What is the leading case in the matter of lease or Licence?
Street and Mountford (1985)
Licence to occupy furnished room in a house, but neither attendance nor services were provided (IE no cleaning or washing or provision of meals etc). Think of staying in hotel - you get exclusive possession but still licence as food etc provided.
Examples of when you could grant a licence?
Car Parking, Scaffolding
How are damages assessed when a LL is in breach of repairing covenant?
Difference in value in repair and out of repair
EG roof is leaking, and T can’t use half the premises - T wants half rent, half rates, half s/c etc.
EG if can’t use 1/4 of the premises, then want 25% discount
What is a Scott Schedule?
Used if the matter is going to court - Schedule of Dilaps is turned into a Scott Schedule as this is the recommended form (recommended by RICS) of which a Schedule of Dilaps should be presented in court. Both LL and T can add their comments
Scott Schedule as there was a judge called High Justice Scott that invented format
What are reasonable grounds for refusing consent to assign?
The character of the proposed assignee (EG poor tenant covenant strength)
The effect on rental or capital values (weaker covenant strength would reduce rental value)
If T accounts don’t match expectations - the incoming T may have difficulty paying rent
What conditions are usually attached to break clauses?
Conditional on T having complied with all terms of lease and break clause terms
Fine or premium can be in the lease
Tenant must pay all arrears up to break date and remove fixtures and fitting as per terms of the lease
Give 2 examples of situations where it was held in court that a break notice was invalid/ineffective?
Osborne Assets Ltd vs Britannia Life Ltd Case
T was due to have painted x3 coats of paint every 5 years
Invoices showed only x2 coats of paint
T couldn’t break
Riverside Park vs NHS Property Services
10 year lease from
Break conditional on ‘vacant posessoin’
T did not remove demountable office partitions
Break notice invalid
What factors affect value in a lease?
Rent, term, other terms, whether it is inside the Act, repairing clause (if tenant does not have to repair, it is more cost for the LL so rent goes up)
What are the various methods of dispute resolution?
Mediation, litigation, PACT, Court
What does PACT do?
Professional Arbitration on Court Terms -
It is cheaper and, less time consuming than going to court, and is run by a property professional rather than a judge
If ran by a mediator, they help parites make a decision - nothing they say is binding
What is the case law for forfeiture relief?
Keshwala V Balsod - Applied to the court after 5 month and did not make the landlord aware of their intentions so was rejected by the court.
What are the 3 different dilapidations schedules that can be served?
- Interim Schedule - Served when there is at least 3 years remaining on the lease but only for leases of 7 years or more
- Terminal Schedule - Served in the last 3 years of the lease
- Final Schedule - Served at or after lease end date (however this may arise) in line with lease terms.
Why might a landlord serve an interim or terminal schedule of dilapidations halfway through a lease?
- If the landlord intends to sell the property they may wish to ensure the tenant repairs any damage now to make the property more marketable
- If the landlord thinks for any reason the tenant won’t be able to afford the costs of a final schedule of dilapidations at the end of their lease and so it is better to hedge your bets and achieve some of the costs ahead of this.
What is the format of a dilapidations schedule?
Prior to creating the schedule a building surveyor would attend the unit and take pictures/produce a report.
- Outline the repairing obligations under the lease/LTA
- State how you remedy the units repairs and the costs to do this
- Outline any loss of rent (if appropriate) for example if the final schedule was served and the tenant left the unit in an unlettable condition.
- Surveyors fees
All negotiations are undertaken on a without prejudice basis and if an agreement can’t be reached either party can take to ADR or court and a Scott Schedule will be produced.
What would you do if you thought a company was going into administration?
- Read the lease and inform your client - is there a RD or Guarantor
- Consider taking legal action before any moratorium is in place
If a rent review clause doesn’t state the hypothetical term, what do you assume this to be?
Under Deane Borough Council v Host Group (1987) this is the remainder of the term under the lease
Four Principles regarding the modernisation of leases (& case law)?
O’May v City of London Real Property Co (1982)
- Landlord must have a valid reason to update the lease
- Change proposed must be compensated by a change in rent
- Change should not materially affect tenant security of tensure
- Must be reasonable
For example, at Bexleyheath we are in negotiations to modernise the M&S lease to include Marketing in the service charge
What is Section 24 of the L & T Act?
An inside the act tenancy shall not come to an end unless terminated in accordance with the provisions of the 1954 L & T Act
What is Section 28 of the L & T Act?
This basically states that an agreement for a new lease has been reached and that the old lease will continue until it expires and then the new lease begins
Under what section is the tenant due compensation from a landlord serving a no fault ground hostile notice?
Section 37
What is the definition of an improvement under the LL & T Act 1927?
An improvement is an alteration to the premises that goes beyond repair
What does the case law Sheerness Steel Co v Medway Ports Authority mean to you?
Makes it clear that a tenant should not have to pay an increased rent for the improvements they have made at their own expense.
When would a torts notice need to be issued?
If the landlord has forfeited a tenants lease and the tenant has left behind goods. Under the Torts Act 1977 you would place a torts notice on the window of the unit giving them 14 days to remove the goods.
What is the difference between a side letter and a deed of variation?
A side letter is personal to that tenant whereas a deed of variation binds successors in title.
What are some lease terms that affect the market value/market rent?
Alienation clauses
Restrictive User clauses
FRI/IRI
How does an independent expert allocate costs in a rent review?
The lease may state the terms, if silent, usually 50/50
What is a CGA?
What does a CVA stand for?
Company Voluntary Agreement
