Landlord and Tenant Digest Volume 21 (4)

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Commercial Update

Insolvency Act 1986

Abdulla v Whelan et al [2017] EWHC 605 (Ch)

Where the legal estate in a joint lease of business premises was held on trust by a bankrupt and her co-tenant on behalf of themselves it was “property held on trust for any other person” within the Insolvency Act 1986 s.283(3) and so was excluded from the bankrupt’s estate. A disclaimer served by the trustee in bankruptcy therefore did not end the legal estate in the lease or the bankrupt’s liability to pay rent.

Residential Update

Service charges

Southwark LBC v Akhtar[2017] UKUT 150 (LC)

Southwark LBC appealed a decision of the FTT that service charge was not payable. The UT held that a notice demanding a payment on account was valid. The notice had been served late but the tenant had agreed a payment plan in relation to the sums demanded and had thereby waived any invalidity. Separate notices were served under s. 20B LTA 1985. On the proper construction of the lease s. 196 LPA 1925 applied to the service of such notices. The landlord had shown that on the balance of probabilities the notices were pre-paid and posted and the landlord could therefore rely on the presumption of service in s. 7 Interpretation Act 1978.

Enfranchisement

Chung v Towey [2017] UKUT 157 (LC)

A landlord can recover the statutory costs recoverable on a house enfranchisement claim including the cost of a valuation notwithstanding that the valuation was carried out after the tenant applied to the FTT.

Contactreal Ltd v. Smith [2017] UKUT 178 (LC)

In a lease extension claim for a flat in the West Midlands, whilst the Tribunal had correctly adjusted sales particulars to arrive at an appropriate value for the lease and had made adjustments to the deferment rate on the basis of Zuckerman and their own specialist knowledge of the region, they had made errors in other parts of their calculation of the premium. 

They had failed to adjust to take into account Act rights on the basis that purchasers in the West Midlands were not sufficiently aware of their rights under the Act so that had no impact on value. The UT stated that having Act rights is in itself a valuable benefit which would increase as the term diminished. This was a factor that applied throughout the regions. 

Further a lesser deduction should have been made to the value of the freehold with vacant possession to reflect the fact that with 67 years of the term remaining, it was unlikely that the hypothetical purchaser would have made a significant reduction for the risk that the tenant would hold over at the end of the lease under the Local Government and Housing Act 1989. 

Finally, the Tribunal should have made some adjustment to the freehold possession value to differentiate it from the long leasehold value. At the very least the long leasehold should be 99% of the freehold value as there is a qualitative difference between the two interests, however long the leasehold.  

Appointment of a manager

Octagon Overseas Limited, Canary Riverside Estates Management Limited, Palace Church 3 Limited v Mr Alan Coates [2017] UKUT 190 (LC)

A management order made by the FTT made the manager responsible for managing the Canary Riverside Estate which includes both commercial and residential buildings. The UT held that the decision of the FTT was flawed as it did not pay sufficient attention to the question whether that order would put the Appellants in breach of their obligations owed to Santander Corporate Banking. On that and other grounds the UT held that the FTT had exercised its discretion on a flawed basis. The appeal was allowed and the matter remitted to the FTT.

Octagon Overseas Limited v Coates [2017] EWHC 877 (Ch)

A landlord appealed against an injunction made by the county court in favour of a service charge manager appointed by the FTT. The High Court held that the manager was entitled to apply to the County Court to enforce the management order made by the FTT, but in this case the County Court had granted an injunction backed with a penal notice providing the manager with new rights not provided by the management order. That went further than enforcement and the injunction had to be quashed.

HMOs

Nottingham City Council v Parr [2017] EWCA Civ 188

An HMO licence granted by Nottingham CC prohibited the use of attic bedrooms for sleeping due to room size. On appeal to the FTT the tribunal allowed the appeal but inserted a condition that the attic bedrooms could only be used for sleeping accommodation by a full-time student living in the property for a maximum period of 10 months per year. The council appealed to the UT. The UT upheld the condition. The council appealed that decision to the Court of Appeal. The Court of Appeal upheld the decision of the UT. The condition was lawfully imposed under the HMO regime.

Succession to Agricultural holdings

Kingsbridge Pension Fund Trust v Downs  [2017] UKUT 237 (LC)

This was a claim to succession from father to son in respect of a tenancy governed by the Agricultural Holdings Act 1986. In 2011 a retirement notice was served under s.49(1)(b) of the Act by the father requesting his son succeed him as tenant. The landlord resisted that request and the son applied to the First-tier Tribunal under s.53 for a direction entitling him to a tenancy. 

One issue in contention was whether the ‘livelihood condition’ in s.50(2)(a) of the Act had to be met both at the date of the retirement notice and at the date of the determination of the application. Beatson J had held in Shirely v. Crabtree [2008] 1 WLR 18 that it only need to be satisfied at the date of the notice. The First-tier Tribunal followed that authority and struck out the landlord’s case relying on the more onerous interpretation. The Upper Tribunal agreed with the ratio in Shirley and dismissed the appeal against the FtT’s striking out decision.

The decision also touches on issues of conduct, abuse of process and the impact of decisions of the High Court on the Upper Tribunal – ‘they follow a decision given in the High Court on the same point, unless "convinced" or "satisfied" (there being no difference between these two tests) that the earlier decision was wrong.’

Fair rent reasons

Ljepojevic v University of Cambridge Accommodation Service  [2017] UKUT 213 (LC);

In an application for the determination of a fair rent under the Rent Act 1977, the First-tier Tribunal had given insufficient reasons for its decision. “As a minimum the reasons given by any tribunal must engage with and respond to the main arguments presented to it. They must explain to the unsuccessful party why they have been unsuccessful.” In this case the Tribunal had failed to properly engage with or set out how it had approached Article 2 (7) of the Rent Acts (Maximum Fair Rent) Order 1999 as to whether there had been a sufficient change in the condition of the dwelling house as a result of repairs or improvements so as to dis-apply the rent cap.

Implied Terms

Wild Duck v. Smith [2017] EWHC 1252 (Ch)

A management company in a tri-partite lease had an obligation to build outstanding parts of a development when the developer had gone into liquidation and not completed all the works. That gave rise to an implied term that the landlord would not do anything to hinder or frustrate the performance of that obligation; on the established principle that a term is necessarily implied in a contract that neither party will prevent the other party from performing it. However, it did not give rise to any positive obligation to assist. As it was found that the landlord had not prevented the works, there was no breach. 

Service of notices

Grimes v. Essex Farmers and Union Hunt Trustees [2017] EWCA Civ 361

A tenancy agreement provided that ‘either party may serve any notice (including any notice in proceedings) on the other at the address given in the Particulars or such other address as has been previously been notified in writing.’ The tenant subsequently notified the landlord in writing of an alternative address. The landlord served a notice to quit at the original address. The Court of Appeal overturned the first instance decision and found that the proper construction of that clause was where a new address had been given, that was in substitution, not in addition to the original address provided in the particulars. Accordingly the notice to quit was of no effect. 

This material was first published by Thomson Reuters Professional (UK) Limited in the Landlord and Tenant Review and is reproduced by agreement with the Publishers.