Landlord and Tenant Digest Volume 20 (2)

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Commercial Update

Business Lease Renewal

Gulf Agencies Ltd v Ahmed [2016] EWCA Civ 44

The landlord relied on ground 30(1)(g) to resist his tenant’s claim for a new business lease as he intended to occupy the premises himself.  The Judge at first instance found that the landlord had not made out the requisite intention and ordered a new lease.  The landlord appealed on three grounds: apparent bias; the subjective element of intention and the objective element of intention.

In terms of the subjective element, the Judge had failed to state clearly whether he believed the landlord when he said he wanted to use the premises.  Whilst it was implicit that he did not believe him, that was not good enough.  If the Judge formed the view that he was not telling the truth, a clear finding or statement to that effect needed to be made with clear reasons. 

In terms of the objective element, the permitted planning use of the premises would have enabled the landlord to occupy with his business for up to two years; beyond that period, it was uncertain whether such use could continue.  However, the Judge considered that as there was no evidence of what the landlord would do after the initial two year period, he had failed to make out his case on intention.  The Court of Appeal considered that a period of up to two years could be sufficient of itself and that ‘whether or not that might be commercially sensible for the landlord is not a matter for the court, save where that is relevant to the genuineness of his subjective intention.’  

Forfeiture

Sang Kook Suh v Mace (UK) Ltd [2016] EWCA Civ 4

A Judge had been wrong to take into account without prejudice discussions when arriving at a conclusion as to whether forfeiture had been justified on the basis of non payment of rent.  Admissions made in the course of settlement discussion were without prejudice and inadmissible.  Further, the tenant had not, on an objective assessment of their conduct, waived the right to the privilege that attached to the admissions. 

Residential Update

Leasehold Enfranchisement

Sinclair Gardens Investments (Kensington) Ltd v Ray [2015] EWCA Civ 1247

The Court of Appeal held that decisions of the Upper Tribunal that had not been designated as “guideline” cases were admissible in other cases as evidence of what had been decided and that it was a matter of what weight ought to be attached to the decision.

Registered Rent

T Hilling & Co Ltd, Re [2016] UKUT 60 (LC)

This matter concerned the registration of a fair rent under the Rent (Agriculture) Act 1976.  The tenant objected to the rent set by the Rent Officer on the grounds that the officer had misapplied scarcity.  The UT considered that the FtT was not limited to dealing with only the ground of objection raised (i.e. it was not limited to dealing just with the issue of scarcity), but that on a referral, the FtT’s task was to arrive at its own conclusion as to what a fair rent was.  Further, given the nature of these type of proceedings, the informal case management procedures adopted by the FtT were appropriate; both parties knew the cases each other were putting. 

Right to manage

Avon Ground Rents Limited v 51 Earls Court Square RTM Company Limited [2016] UKUT 022 (LC)

A freeholder challenged the exercise of the right to manage under the Commonhold and Leasehold Reform Act 2002 on the grounds that the articles of association of the RTM Company only referred to the flats and not the entire building as required by section 72.  The challenge failed.  As a matter of construction the description of premises as ‘Flat 1-13, 51 Earls Court Square’, when contained in the articles of association of a RTM company, meant the whole of the building at 51 Earls Court Square.  This followed from the fact that: there were only 13 flats on those premises; and that it was intended to exercise the right to manage and only the building as a whole was capable of being subject to such an application.   

Triplerose Limited [2016] UKUT 0077

This case concerned an appeal against an assessment by the FtT of a landlord’s costs in a failed RTM claim. The FtT had correctly applied the indemnity principle, but the UT held that the FtT had lost sight of the elementary principle that solicitors, as officers of the court, are to be trusted not to mislead or allow the tribunal to be misled as to the amount of their costs and the terms upon which they were incurred.

Service charge

Southwark LBC v Clark

Where a lease of a flat had been assigned after the service of an interim demand for service charges but before the demand to pay the final account the assignor was liable to pay the sum demanded in the final account.

 

Costs under the service charge

Geyfords v O’Sullivan [2015] UKUT 683

In construing whether costs were recoverable through the service charge, each lease had to be taken on its own terms.  Further, the approach to interpretation is no different from the approach to the interpretation of other contractual terms.  In respect of the recovery of costs, clear and unambiguous terms were required to permit recovery of onerous and unusual payment obligations. 

In this case the clause relied upon to recover the costs of service charge proceedings was ‘All other expenses (if any) incurred by the Lessors or their managing agents in and about the maintenance and proper and convenient management and running of the development.’  The UT did not consider that this provision was sufficient to permit recovery.   A number of reasons were put forward for arriving at a construction which prevented recovery. 

‘An absence of clarity can … be treated as an orthodox aid to identifying the boundaries of payment obligations generally, including service charge obligations’ and there was no express wording to the effect of legal costs being payable.  However, there was a useful comparison to the wording of a provision allowing cost recovery in the event of an attempt to forfeit a lease.  In that provision, there was a clear reference to ‘costs, charges and expenses (including solicitors’ costs and surveyors’ fees).’

Further, it was ‘improbable that they would have intended the costs incurred to be signified by inclusion in a residual ‘all other (if any)’ category’.  Another contra indication was that the leases had been granted at a time when service charge recovery would have taken place in the county court, with its ancillary cost jurisdiction.  There would therefore have been no need to rely on the service charge provisions to recover costs. 

Insurance

Fresca-Judd v Golovina (QBD, 5th February 2016)

The landlord let a cottage under a short lease. Under the lease the landlord was obliged to take out insurance against inter alia water leaks. There was a water leak. Holgate J held that the insurance company having paid out under the insurance policy could not bring a subrogated claim against the tenant in the name of the landlord as the insurance was effected for the benefit of both the landlord and the tenant.

S. 84 LPA – release of leasehold restrictive covenants

Stevens v Ismail [2016] UKUT 43 LC

Section 84(1) Law of Property Act 1925 gives the Tribunal jurisdiction to discharge or modify restrictions on the use of freehold land arising under covenant. Section 84(12) extends that jurisdiction to covenants affecting leasehold land, but only where the term created by the lease was for more than 40 years and 25 years of that term have expired. The first issue in this appeal was whether a deed of variation amounted to a surrender and regrant with the effect that fewer than 25 years of the term had expired. That issue was resolved in favour of the tenant. The second issue was whether a covenant “to use and occupy the demised premises solely and exclusively as a self-contained flat” was positive in nature. The tribunal held that it was not. It only had to be used as a self-contained flat if the premises were used and occupied at all.

HMO

Herefordshire Council v Rohde [2016] UKUT 39 LC

The UT held that the FtT had erred by revoking an HMO Declaration without first confirming or reversing the local authority’s decision. More fundamentally, it had erred by making a decision solely on the basis of the physical state of the property in February 2015 when the FtT had inspected it, rather than taking into account all the evidence available to the local authority in addition to its own later inspection.

Legislation

Renting Homes (Wales) Act 2016

Following the Law Commission recommendations, this act replaces all residential tenancies with either a ‘secure contract’ (social housing) or a ‘standard contract’ (private housing). 

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.