Property 7- Landlords remedies and lease termination

Question 1

Liability

Answer 1

Depends on ‘new’ or ‘old’ lease.

Question 2

Leases granted before 1 January 1996

Answer 2

Old tenant remains liable for full term of lease. Can sue original tenant in privity of contract as well as estate. Intervening tenants under the direct covenant on assignment

Question 3

Leases granted on or after 1 January 1996

Answer 3

LTA 1995 replaces law of privity of contract and privity of estate with statutory rules.
Original tenant released from covenant liability as soon as assigned to another tenant.
Landlord can require an AGA.

Question 4

AGA?

Answer 4

Promise by outgoing tenant that they will be liable for any breaches of the covenants in the lease by the incoming assignee

Question 5

Breach of not paying rent?

Answer 5

Check there is a covenant to perform this obligation first

Question 6

Action in debt

Answer 6

Recovered through the High Court or County Court. Limitation Act 1980 puts a limitation of six years on recovery of rent

Question 7

Commercial Rent Arrears Recovery (CRAR)

Answer 7

Permits landlord to enter the property and seize and sell goods. Only commercial. Seven days notice required, must use enforcement agency.

Question 8

What cant they take?

Answer 8

Items or equipment up to £1350 which are necessary for tenants business.
Only tenants property - not hired or leased.
Landlord may sell the goods at a public auction with at least seven clear days notice of the sale.

Question 9

Exceptions?

Answer 9

Only rent paid for possession. E.g. not insurance rent.

Question 10

Guarantors

Answer 10

In writing, will oblige guarantor to pay the rent and any other sums due.
Done when landlord not secure with new tenant so requires a guarantor.
May be sued the same way as the current tenant.

Question 11

Old vs New

Answer 11

Old - guarantor still pays for duration of lease despite assignment.
New- released from liability on assignment. Landlord may require AGA

Question 12

Procedure pursuing a former tenant or guarantor of former tenant

Answer 12

S17 Tenant (Covenants) Act 1995
- must serve default notice if recovering fixed charge
-served within six months of the breach
-S17 applies to both new and old.
-can only get six months arrears.

Question 13

Overriding lease?

Answer 13

Served default notice on former tenant or guarantor.
- Pay sum claimed, headlease between landlord and former tenant/guarantor slotted in between the landlord and the defaulting tenant, making them immediate tenant.

Question 14

Rent deposits

Answer 14

Landlord reserved about ability to pay.
May require a deposit (generally 6-12 months rent).
Circumstances allowed to withdraw in the rent deposit deed.
If no breach in deed landlord can draw on money if tenant breaches covenant.
Deed may then require tenant to top up deposit.

Question 15

Forfeiture

Answer 15

Brings lease to an end
Lease must contain forfeiture clause.
Not always labelled forfeiture - also ‘provisos’ or ‘re-entry’.

Question 16

Procedure?

Answer 16

Peaceable re-entry or court order
Tenant can apply to court for relief
Landlord can waive right by carrying out an act demonstrating an intention to continue relationship.

Question 17

Breach of covenant to repair

Answer 17

• Check whether breach
  -Check wording of the covenant

Question 18

Specific performance

Answer 18

• Equitable remedy.
  -Only when other remedies are not appropriate.
  Rainbow estates Ltd v Tokenhold Ltd (1999)-
  no forfeiture or self-help clause
  damages not adequate remedy when condition detiorating
  not to harass or pressure tenant
  it was appropriate in the circumstances

Question 19

Damages

Answer 19

Always available for breach.
BUT
S18 LTA 1927 - limits damages to amount by which reversion (usually freehold building) has diminished in value as a result of the disrepair (capital value).
Leasehold Property (Repairs) Act 1938-
Leases more than seven years with more than three years left to run. If applies notice must be served. Tenant can counter within 28 days, if so cannot proceed without leave of the court.

Question 20

Self Help - Jervis v Harris Clause

Answer 20

Clause allowing landlord to recover cost of repairs as a debt and not a damages claim.
Allows landlord to enter property to check compliance with repair covenant.
Landlord then serves notice specifying the work required to remedy the breach. If not done within specified time or proceeding diligently.
Landlord may enter carry out work and recover that debt.

Question 21

Forfeiture

Answer 21

s146 Law of Property Act 1925 notice-
serve notice-
specifying breach
require breach to be remedied within a reasonable time if capable
require the tenant to pay compensation for the breach
If not complying - forfeit by peaceable re-entry or court order. Tenant can apply for relief.

Question 22

Remember !

Answer 22

Leasehold Property (Repairs) act 1938 still applies. - requires the s146 notice to include a notification of tenants right to serve a counter in 28 days. Then need leave of court.
Longer than 7 years with at least 3 years left unexpired (criteria for lease).

Question 23

S146 notice

Answer 23

Must contain tenants rights.

Question 24

Remedies for breach of other covenants - assigning, not getting planning permission etc…

Answer 24

Forfeiture
Injunction
Specific performance
Damages
Pursuing former tenant or guarantor
Deduction from rent deposit deed (provided deed allows this)

Question 25

Surrender of the lease

Answer 25

Mutual act between tenant and landlord. Deed of surrender or informally.

Question 26

X

Answer 26

Lease Termination and Security of Tenure under a Business Lease

Question 27

Termination of Leases

Question 28

Effluxion of time

Answer 28

Fixed-term. Time runs out. No notice needed

Question 29

Notice to quit

Answer 29

Periodic tenancies determined by the appropriate period’s notice to quit given by the landlord or tenant.
Yearly - at least a half years.
Others - by one full period notice.

Question 30

Surrender

Answer 30

Tenant yields up lease to landlord who accepts the surrender.
To be legal by deed LPA. 1925 s52.

Question 31

Merger

Answer 31

Where tenant acquires the immediate reversion to the lease.
Can be a third party where they acquire both lease and the reversion.

Question 32

Effect of 1954 Act

Answer 32

If comes within - the common law methods above may not apply. Will continue with provisions of the act

Question 33

Application

Answer 33

this Act applies to any tenancy where the property comprised in the tenancy is or
includes premises which are occupied by the tenant and are so occupied for the
purposes of a business carried on by him or for those and other purposes.
-
must be a tenancy (not a license) of a property which is occupied by the tenant for business purposes.

Question 34

Exceptions

Answer 34

-Tenancies at will
-Fixed-term not exceeding six months (renewal clauses and constant renewals are not excepted).
- Agricultural holdings, farm, mining leases.
-Fixed term tenancies that are contracted out of - must give prescribed warning form- tenant must make a declaration on prescribed form.
If notice less than 14 days before grant must be made by statutory declaration.

Question 35

Protection under Act

Answer 35

A tenancy in which this part of the act applies shall not come to an end unless terminated in accordance with the provisions of this act.

Tenancy will continue and tenant has a right to apply to court for a new tenancy which can be opposed by landlord

Question 36

s30 Grounds - seven methods of termination

Answer 36

1) by the service of a landlord’s notice under s 25
2) by the service of a tenant’s request for a new tenancy under s 26
3) forfeiture (see 9.3.4 and 9.4.4)
4) surrender (see 10.2.3 above and 9.6)
5) in the case of a periodic tenancy, by the tenant giving the landlord a notice to quit
6) in the case of a fixed-term lease, by the tenant serving three months’ written notice on
the landlord under s 27, so long as the notice does not expire before the contractual
expiry date
7) in the case of a fixed-term lease, by the tenant ceasing to be in occupation for business
purposes at the end of the lease under s 27(1A).

Question 37

Effect of security of tenure?

Answer 37

Only forfeiture and surrender allowed.
S27 allows effluxion where tenant not occupying.

Question 38

Or - Termination by Landlord s25 Notice

Answer 38

Must serve s25 Notice
- must indicate proposal of the new lease or if opposes renewal one of the grounds in s30.
- must state date - must not be less than common law grounds (before fixed period)
-no less than six months and no more than twelve months before the termination date specified in notice.
-cannot be sooner than when lease would end.
-if not served in time, continuation possible (past contractual expiry date)

Question 39

Application t court following service of a s25 notice

Answer 39

Tenant must apply before expiry of s25 of they will lose their rights (unless application to renew lease has been made).
- Time can be extended by agreement of parties - say if they were to negotiate new lease.

Question 40

Renewal lease by the tenant - s26 request

Answer 40

Tenant who wants to terminate lease on contractual date simply needs to vacate or giving s27 three months notice.
After - s27 notice (3 months) or surrender.

Question 41

S26 request

Answer 41

Tenant after lease expired could do nothing until served s25.
Or s26 bringing tenancy to end and requesting a new one - must contain tenants proposals and same time limits as s25.

Question 42

Opposing S26 request

Answer 42

Counter-notice within two months stating s30 grounds for opposition
Tenant must ensure they apply to court for new lease of will lose their rights.
Application must be made before commencement date of the new tenancy specified in s26 request.
- If application not made (safeguarding position) landlord can pre-emptively apply to court on s30 grounds.

Question 43

s30 Grounds

Answer 43

(a) Tenant’s failure to repair
(b) Tenant’s persistent delay in paying rent
(c) Tenant’s substantial breach of other obligations
(d) Landlord has offered alternative accommodation (which must be suitable to the tenant’s
needs and on reasonable terms)
(e) Tenancy is an underletting of part (rarely used)
(f) Landlord intends to demolish or reconstruct and could not reasonably do so without
obtaining possession
(g) Landlord intends to occupy the holding for its own business or as a residence

Question 44

Discretionary?

Answer 44

a-e are all discretionary. Has to show tenant ought not be granted new tenancy in view of these facts

Question 45

Mandatory?

Answer 45

(d) (f) (g).
Landlord simply have to prove they have been done

Question 46

Ground (f)

Answer 46

Landlord must show -
i) it has a firm and settled intention to carry out the relevant work (eg that it has obtained
the necessary planning permission and the financial arrangements are in place); and
ii) it intends to demolish or reconstruct the premises (or a substantial part of them), or to
carry out substantial works of construction on the holding or a part of it; and
iii) it cannot reasonably carry out the work without obtaining possession (ie the landlord will
not succeed if the tenant agrees to allow the landlord access to carry out the work, which
can then be reasonably carried out without obtaining possession and without substantially
interfering with the tenant’s use).

Question 47

Ground (g)

Answer 47

• Landlord have to have owned interest for at least 5 years before ending of current tenancy.
• must show settled intention and must demonstrate practical steps taken.
• reasonable prospect of achieving its intention.

Question 48

Terms of the new lease

Answer 48

Tenancy of ‘holding’ - part compromised in original tenancy. Landlord may alter to whole.
- term will be reasonable as to the circumstances but not longer than 15 years.
-term will not commence until three months after proceedings are disposed of (and four weeks after the order).

Question 49

Rent?

Answer 49

Open market rent
Court must disregard-
fact tenant has been in occupation
any goodwill
effect of any rent of any improvements voluntarily carried out
any addition to value if they are licensed premises.

Court may insert rent review clause

Question 50

Other terms of lease?

Answer 50

Fixed by court, usually sane as the old.
Tenant may apply for order to revoke deemed unacceptable terms. Landlord only right is to appeal.

Question 51

Compensation

Answer 51

Landlord successfully opposes no fault grounds - e,f or g.
Tenant not granted new lease but entitled to compensation.
Equivalent to rateable value of the holding unless in occupation for 14 years (where it will be twice rateable value).

Question 52

Clauses contracting out of compensation?

Answer 52

Only enforceable where tenant been in occupation for fewer than five years.