Property Law 10 - Pro / Con

Question 1

Choice of remedy – non-payment of rent

Answer 1

Debt action

· Advantages – reasonably simple, amount of debt is clear if rent has not been paid, can separate debt from ongoing landlord/tenant relationship

· Disadvantages – court action which is potentially costly and time consuming

· Use/limitations – any sum owed under the lease, whether principal rent or, eg, service charge

Commercial Rent Arrears Recovery (CRAR)

· Advantages – quick and efficient, no need to involve court

· Disadvantages – care must be taken to observe proper procedure

· Use/limitations – limited to principal rent, not other sums treated as rent

Forfeiture (specifically for non-payment of rent)

· Advantages – quick and efficient, no need to involve court. Threat of forfeiture might be sufficient.

· Disadvantages – risk that tenant will not comply and may lose tenant (whether this is a problem will depend on the market)

· Use/limitations – depending on the lease, may extend to other sums treated as rent

Question 2

Choice of remedy – all other breaches

Answer 2

Damages

· Advantages – may be helpful in separating issue whilst preserving landlord/tenant relationship

· Disadvantages – may be protracted and costly, no guarantee of recovering costs

· Use/limitations – any breach that can be compensated in financial terms

Forfeiture

· Advantages – may be effective in persuading tenant to comply with obligations

· Disadvantages – section 146 notice required, risk of losing tenant

· Use/limitations – probably not appropriate for minor breaches

Specific performance

· Advantages – not limited to financial, eg, obliged tenant to comply with obligation

· Disadvantages – discretionary remedy, difficulty to persuade court to grant it

· Use/limitations – cannot be used for continuing obligations (eg, an obligation to keep shop premises open each day)

Injunction

· Advantages – not limited to financial, ie, may stop tenant from proposed breach

· Disadvantages – discretionary remedy – difficult to persuade court to grant it

· Use/limitations – might be used for an intended breach of user clause, or an intended assignment or underletting

Example – choice of remedy – other breaches

A tenant has applied for consent to assign to a tenant of poor covenant strength who is offering no guarantor or rent deposit. The landlord has reasonably withheld consent, but has found out that the tenant intends to proceed with the assignment in any case.

The landlord cannot seek damages nor start the process of forfeiture, as nothing has yet happened. If the landlord wants to act, then it may however apply for an injunction to prevent the tenant from proceeding with the unlawful assignment.

Question 3

Remedies involving security arrangements

Answer 3

Guarantor

· Advantages – guarantor may have better means to comply with obligations

· Disadvantages – may end up in certain instances with guarantor taking overriding lease and becoming tenant (may be a disadvantage or advantage depending on circumstances)

· Use/limitations – there must be a guarantor!

Former tenant

· Advantages – former tenant may be in better position to comply with obligations

· Disadvantages – as with guarantor

· Use/limitations – there must be a former tenant with an old lease or a new lease and authorised guarantee agreement

Rent deposit deed

· Advantages – quick and efficient. Can help ride over tenant cash flow problems

· Disadvantages – limited to certain number of months’ rent. Relies on tenant topping up rent deposit once used

· Use/limitations – generally only covers rent

Question 4

When is the contractual expiry date of a term of 10 years from and including 29 September 2010?

Answer 4

28 September 2020

Question 5

When is the contractual expiry date of a term of 6 months from and including 31 December 2010

Answer 5

30 June 2010 (there are only 30 days in June - so runs to end of the month).

Question 6

When is the contractual expiry date of a term of 1 month from 30 January 2021 (not a leap year)

Answer 6

28 February (goes to the end of the following month)

Question 7

What are the tenants options if served with a s.146 notice for a breach of repair covenant and the lease is protected?

Answer 7

IF (the lease is covered by Leasehold Property (Repairs) Act1938 act if the following applies)

• the lease is for a term of seven years or more; and
• there are at least three years of the term left to run;

the tenant has 28 days to serve a counter-notice. This means that the landlord must get leave from the court before proceeding.

The landlord must advise the tenant of these rights in the section 146 notice.