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7th March 2018

Commercial Update

Compiled by Piers Harrison and Daniel Dovar, Barristers, Tanfield Chambers.

Business Tenancies

Elliott v Whitney [2018] EWHC 188 (Ch)

In a claim over various agreements made in relation to the occupation of premises used as a nightclub, the Judge found, amongst many issues that turned on findings of fact, that the fact that payment of rent was made by a company was not sufficient to amount to an assignment from the individual who had originally let the premises.

Agricultural Holdings

Smyth-Tyrell v Bowden [2018] EWHC 106 (Ch)

The Claimants failed in their claims to a parcel of land in Cornwall that had been operated as holiday lets through a company owned by them. The Defendant had served a notice to quit and claimed possession.

The Claimant’s first claim was that they held an agricultural tenancy under the Agricultural Holdings Act 1980 and therefore the notice to quit was of no effect; that failed as the land was not farmable and had not been let as such.

The first alternative claim was that it was a business tenancy protected by the Landlord and Tenant Act 1954 and for that reason the notice to quit was of no effect. That also failed as in relation to part of the land, the company had carried on its own business under its own sub-tenancy granted by the Claimants, it was not therefore within the provisions of s.23(1A) of that Act. In relation to the remainder of the land, the notice to quit had also gave notice of opposition under s.30 (1) (g) of the 1954 Act. The facts of that ground had been made out as the Defendant had established an intention to carry out a business on that land itself.

Finally, the Claimants’ claimed promissory proprietary estoppel failed as there was no promise or assurance that the Claimants would be entitled to land.

Exercise of Break Notice

Sackville UK Property Select II (GP) No.1 Ltd v Robertson Taylor Insurance Brokers Ltd [2018] EWHC 122 (Ch)

Prior to registration of its title, an assignee of the term was not entitled to exercise a break notice in a lease as it was not a successor in title in accordance with the provisions of the lease. On the facts of the case, the notice purported to exercise the break had not been served on behalf of both assignor and assignee.

Construction of Lease Terms

China Town Development Company Ltd v Liverpool City Council [2017] EWHC 3347 (Ch)

Barling J reviewed the authorities on lease construction and rectification in the context of an application so restrain the presentation of winding up petition for default of payment of sums due by way of premium for a development lease. It was arguable that on a proper construction of the agreement for lease, the premium was £500,000 and not £2.5m or alternatively that rectification would achieve that result.

Dilapidations – Substitution of Parties

Manorshow Ltd v Boots Opticians Professional Services Ltd [2017] EWHC 2751 (TCC)

This dilapidations case concerned opticians premises at 47, High Street, Ramsgate, Kent. It was common ground that the defendant, Boots Opticians Professional Services Limited (“BOPSL”), was part of the Boots group of companies and was the wrong defendant to the proceedings. It was also common ground that the right defendant was European Vision Limited (“EVL”), which was also part of the Boots group of companies. The landlord sought to substitute BOPSL with EVL. That application was resisted by BOPSL, and BOPSL applied to strike out the proceedings. Coulson J allowed the landlord’s application and dismissed the tenant’s application on the basis that BOPSL were mistakenly made the defendant in these proceedings as a result of their own conduct. The judge also noted that the application to strike out was unnecessary. Either the application to substitute EVL for BOPSL was going to succeed, or it was not. If it failed, then the claim would have been struck out anyway. In those circumstances, there was no need to issue the separate application to strike out. That was an unnecessary waste of costs, and accordingly BOPSL was ordered to pay the costs of that otiose application. BOPSL was also ordered to pay the costs of the application to substitute defendant on the basis that the application was caused by BOPSL’s failure to make the true position plain.

Forfeiture – Service of s. 146 Notice

Toms v Ruberry [2017] EWHC 2970

This case concerned an appeal to the High Court against the decision of a Recorder to dismiss a claim for possession of the Queen’s Arms public house in Falmouth. The lease contained a clause allowing the landlord to re-enter if the tenant committed any other breach of obligation and failed to remedy such breach within 14 days of receiving a default notice. The landlord served a default notice relying on disrepair and a notice under s. 146 LPA 1925 at the same time. Dingemans J upheld the decision of the Recorder that the s. 146 notice was not validly served because as at the date of service the right of re-entry had not arisen. The right to re-enter only arose 14 days after service of the default notice if the works had not been carried out.

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Residential Update

Compiled by Piers Harrison and Daniel Dovar, Barristers, Tanfield Chambers.

Landlord & Tenant Act 1987 – Right of First Refusal

Mahmut v Jones [2017] EWCA Civ 2362

In this case the right of first refusal provisions of the Landlord and Tenant Act 1987 had not been complied with and the district judge made an order under s. 19 of that Act requiring the purchaser to comply with a purchase notice which had been served on behalf of the tenants. Section 17 (4) provides that where an application to court has been made but a period of two months beginning with the date of the determination of that application has expired, no binding contract has been entered into between the purchaser and the nominated person, and no other such application to the court or tribunal is pending, the purchaser may serve on the nominated person a notice stating that the purchase notice and anything done in pursuance of any such notice, is to be treated as not having been served or done.

The purchaser failed to comply with the order of the district judge and after two months served a notice under s. 17 (4). He then asserted that the purchase notice served by the tenants was of no effect.

On this second appeal to the Court of Appeal the court upheld the decision of the district judge (DJ Lightman) and circuit judge (HHJ Gerald) dismissing the purchaser’s argument. The mere fact that the court had made an order for specific performance did not deprive the court of its future ability to enforce the contract; and in that sense the dispute between the parties has not been finally determined so time had not started to run under s. 17 (4). Further by disobeying the mandatory order to execute the transfer made under s. 19 the purchaser was in contempt of court. The tenants relied on the broad principle of public policy that unlawful conduct will disentitle a person from relying on an apparently unqualified statutory provision. Lewison LJ accepted that argument. The purpose of the Act would have been frustrated if by refusing to comply with the mandatory order of the court the purchaser could put itself into a position in which they were entitled to give notice under 17 (4) whereas if they had complied with the order that ability would not have arisen.

Possession Proceedings – Agency

Haringey LBC v Ahmed [2017] EWCA Civ 1861

The Court of Appeal overturned the decision of the trial judge to dismiss a claim for possession on the basis that the judge’s factual findings did not justify his decision. In October 1988, two tenancy agreements were signed in relation to 10 Gladstone Avenue, Wood Green (“the Property”). On 10 October 1988, Mr Ahmed signed a pro-forma tenancy agreement (“the first agreement”) which stated that it was a joint tenancy and listed, his wife Ms Ahmed as the other joint tenant. This purported to grant a tenancy of the Property to commence on 31 October 1988. There was a space for signature by Ms Ahmed but she did not sign it. A Council representative signed as having witnessed Mr Ahmed’s signature to the agreement. On 19 October 1988, a second pro forma tenancy agreement (“the second agreement”) was signed by the Council, Mr Ahmed, and his mother, Mrs Ahmed.

The judge at first instance held that Mr Ahmed entered into the first agreement as agent for his wife, and that as his wife did not join in the second agreement, the first agreement had not been surrendered, and was therefore the operative agreement which had never been terminated.

The Court of Appeal held that there was no finding (or evidence) that Mr Ahmed secured the first tenancy in his and Ms Ahmed’s name, nor that he discussed the tenancy terms with her, nor that she had any awareness of such terms. Indeed, the judge’s finding was that he never informed her of any of the accommodation decisions and that she had no involvement in them. The “course of conduct” relied upon by the judge did not support his finding of agency.

Possession Proceedings – Fraud

Mavris v Xylia [2017] EWHC 2949

In a possession trial before a Recorder in the County Court the landlord and tenant had each relied on different tenancy agreements. It was common ground that there had been a first written agreement followed by a second written agreement. At trial, however, each side produced a different version of the first tenancy for which they contended. The landlord relied on a document containing handwritten particulars as to the parties, the date, the term, the property and the rent payable and the deposit (‘Agreement A’), whilst the tenant relied on a document including typed particulars in these respects (‘Agreement B’). It was also common ground at trial that a second tenancy followed the first (the ‘second tenancy’), but, again, the parties relied on different documents. The landlord again relied on a document containing handwritten particulars of the same matters (‘Agreement C’), whilst the tenant relied on a document including typed particulars of these matters, ‘Agreement D’. The Recorder preferred the evidence of the tenant and relied on Agreements B and D.

After the trial the landlord obtained from the City of Westminster a copy of the tenancy agreement which had been supplied to it in order to obtain housing benefit (‘Agreement A1’). Agreement A1 showed broadly the same handwritten details as Agreement A, and broadly the same terms as Agreement A.

The Chancellor held that Agreement A1 did not lead to the incontrovertible conclusion that the tenant deliberately misled the Recorder at trial and procured his judgment by fraud (Noble v Owens [2010] EWCA Civ 224 considered). Agreement A1 did amount to evidence tending to show that the judge at trial had either been deliberately misled by the tenants or that the judgment of the Recorder was obtained by fraud. The case was sent back to the County Court for the question of whether the Recorder’s judgment was procured by the fraud of the respondents to be determined with a direction that if the judge determined that the judgment was, indeed, procured by fraud and/or that the Recorder was deliberately misled at trial, then the judge should go on to hear the retrial alongside the hearing of any new claim for possession that the landlord may wish to bring.

Leasehold Enfranchisement – Valuation

Mundy v Sloane Stanley Estate Trustees [2018] EWCA Civ 35

The Court of Appeal rejected the use of the Parthenia Model as a means of establishing relativity in leasehold enfranchisement cases. Further, the appeal did not raise any points of law, the Upper Tribunal had decided the matter on the basis of a question of fact. It was entitled to take into account that the traditional use of graphs to establish relativity had influenced market transactions and were therefore relevant to establishing relativity.

First Tier Tribunal (Property Chamber) v Midland Freeholds Ltd [2017] UKUT 463

This case raised three issues in relation to the valuation of premium for lease extensions under the 1993 Act.

Firstly, it was only in exceptional circumstances that the risk of deterioration would justify a change in the normal deferment rate; as that rate included an element to account for deterioration.

Secondly, account should be taken to adjust for Act rights regardless of the region in which the property was situated.

Thirdly, a discount for the risk that a leaseholder may continue occupation at the expiry of the term under an Assured Tenancy would only be appropriate where there was a very short unexpired term. No discount was made in this case where the unexpired term was 46 years.

Sinclair Gardens Investments (Kensington) Ltd’s Appeal, Re [2017] UKUT 494 (LC)

This is another case where the UT has held that the FTT erred in arriving at its premium for a lease extension by relying on market evidence but making no allowance for the benefit of the 1993 Act. They had also erred in not making any adjustment between long leasehold value and virtual freehold. The case concerned flats in Chelmsford. The UT derived relativity from the sale of one of the subject flats in preference to reliance on graphs. The UT derived a relativity of 82% from the evidence in relation to an unexpired term of 68.81 years.

Leasehold Enfranchisement – Rent Review

Proxima GR Properties Ltd v Spencer [2017] UKUT 450 (LC)

The Upper Tribunal (Lands Chamber) found that a tenant was not entitled to serve a notice upon his landlord making ‘time of the essence’ of a rent review, even though the landlord only commenced the rent review 6 years after receipt of the tenant’s notice.

The Upper Tribunal determined that the express wording of the lease had to apply. The lease stated that the landlord could appoint a third party surveyor “at any time” and that wording meant the tenant was unable to make time of the essence.

Legal Costs

Assethold Ltd v Abdelhadi [2018] UKUT 22 (LC)

A landlord did not have to provide an actual invoice for legal costs incurred in contemplation of forfeiture in order to recovery them; it was a question of evidence.

Further in relation to s.20C orders, ‘If the [landlord] is entitled under the terms of the lease to add the costs of the proceedings before the FTT to the service charge, there is no basis on which it would be just and equitable to prevent it from doing so.’

Possession Orders

Teign Housing v Lane [2018] EWHC 40 (QB)

Although a tenant did not consider that he had breached the terms of his tenancy, he had. His genuine belief that he had permission did not mean that there had not been a breach. The trial judge had wrongly approached the issue of breach and therefore the matter was remitted for retrial.

Service Charge Demands

Roberts v Countryside Residential (South West) Ltd [2017] UKUT 386 (LC)

The tenant challenged the validity of service charge demands on a number of failures to adhere to statutory requirements. Those challenges failed.

Minor errors in the summary of the tenant’s rights and obligations (s.21B of the Landlord and Tenant Act 1985) accompanying a service charge demand, did not invalidate that demand. In terms of the font size used, the legislation provides for a font of at least size 10, but the key requirement is that the summary is legible, whatever the actual font size used.

A failure to comply with s.47 of the Landlord and Tenant Act 1987 and provide an address for the landlord is suspensory only in nature and can be remedied by the inclusion of that address in a later service charge demand.

It is not necessary to include a s.48 address in each service charge demand (i.e. an address for service of notices on the landlord). As long as one is provided, that will suffice for subsequent demands.

The tenant also claimed that the landlord had fallen foul of s.20B in that the demands had not been made within 18 months of the costs being incurred. However, that challenge also failed as the landlord had claimed sufficient service charges based on estimated expenditure.

There had been a previous determination by another tribunal in relation to another leaseholder in the same block. That tribunal had made determinations on issues that were before the present tribunal. The Upper Tribunal considered that ‘If the LVT is going to depart from [the previous LVT determination] it must give proper reasons’.

Finally, the Upper Tribunal held that ‘reasonableness has to be considered in the context of the contractual rights and obligations of the Lease. It cannot be reasonable for the landlord to charge on-account service charges for the purpose of providing a surplus to cover the costs of tenants who are in arrears of service charges because the Lease does not authorise the recovery of a service charge for this purpose.’

Service Charges

Pressfab Engineering Ltd Re Grange Point [2017] UKUT 448 (LC)

This was an appeal from a decision of the First-Tier Tribunal (Property Chamber) by which it determined that the cost of maintaining a car park adjacent to a supermarket at Zone D, Grange Park, Northampton was included in the Residential Headlease Service Charge which was payable by the tenant of Flats 2 and 3 Grange Point. HHJ Hodge held that whether the cost of maintaining parts of an estate falls within service charge provisions depends on the wording of the relevant lease, and not on whether the lessee benefits from those parts of the estate. The judge interpreted “designed contracted or adapted so as to be the subject of a separate letting or occupation” to mean that the subject land must be capable of being separately let or occupied, rather than the more onerous requirement that it actually be separately let or occupied. The FTT fell into error in construing that clause as requiring the car park to be actually demised in order for it to constitute a “Lettable Unit”. The FTT’s decision was set aside.

Westmark (Lettings) Ltd v Peddle [2017] UKUT 449 (LC)

For the purposes of Section 20B(1) of the Landlord and Tenant Act 1985 (“the 1985 Act”) a relevant cost is incurred by an intermediate landlord when that intermediate landlord receives a demand from its own landlord in respect of services provided by it or a superior landlord. A residential tenant’s 18-month limitation period begins to run only when his or her immediate landlord receives a demand incurring the cost, not when the superior landlord providing the service originally incurs its own cost.

Ryan v Villarosa [2017] UKUT 466 (LC)

A poorly drafted lease created uncertainty as to whether a tenant was liable to pay 50% or 75% of the cost of repairs to the roof. HHJ Behrens held, overturning the decision of the FTT, that as a matter of construction of the lease in question, in a conflict between a clear scheme of covenants and complimentary service charge machinery, and an inconsistent declaration that the roof was a party matter to be maintained and repaired at joint expense, the scheme takes precedence and is binding on the parties. The coherent logical scheme was to be preferred to the poorly drafted declaration.

Service Charges Insurance

Atherton v MB Freeholds Ltd [2017] UKUT 497 (LC)

An insurance provision in a lease provided that the leaseholder was to insure their flat and the structural parts that enclosed them, in the joint names of themselves and the landlord; in default of which the landlord could insure. Although the leaseholders had taken out insurance to cover those parts, they had not done so in joint names. The landlord was therefore entitled to insure the same parts and recover the costs of doing so from the leaseholders. However, the landlord obtained insurance that did not correspond with that prescribed by the lease, accordingly, it was not able to recover the cost of doing so.

Housing – Anti-social Behaviour

Ahern v Southern Housing Group Ltd [2017] EWCA Civ 1934

A tenant appealed the decision of the county court judge making an order for possession against him on the grounds that the landlord had acted in breach of its own policies when deciding to issue a notice under s. 21 Housing Act 1988 seeking possession. Interestingly the lead judgment was given by the President of the Family Division. It was common ground that not every departure from the strict wording of a policy will involve an error of law, because, in accordance with R (Das) v Secretary of State for the Home Department [2014] EWCA Civ 45, policies must be subjected to a “purposive and pragmatic construction.” He held that the case raised no point of principle it turned on the facts. On the facts the landlord was not in material breach of its policies.

Huts – Chattels?

Gilpin v Legg

In this case the defendant landowner served a notice to determine what were alleged to be licences to use five beach huts at Portland Bill in Dorset. The claimants claimed to have tenancies of the huts and claimed that the notice was invalid. The judge accepted evidence that the huts could be dismantled for removal and reassembly, or even removed whole. He found that they were chattels belonging to the tenant and there was no question of the huts constituting dwellings Elitestone Ltd v Morris [1997] 1 WLR 687 and Mew v Tristmire Ltd [2012] 1 WLR 852 CA considered. Each claimant had a periodic tenancy of the land on which their huts stood from year to year which had been determined by notice to quit. The facts did not give rise to any proprietary estoppel.

Enforcement of Tribunal Orders

Coates v Marathon Estates Ltd [2018] UKUT 31 (LC)

A manager appointed by the tribunal sought to enforce a management order against the outgoing managing agent by transferring the matter to the Upper Tribunal under rule 8(5) of the Tribunal Procedure Rules 2013. Whilst the Upper Tribunal could enforce case management orders under that rule, the proper route to enforce a final order of the First-tier Tribunal was to have the tribunal endorse the order with a penal notice and in default of compliance an application should be made to the County Court under s.176C of the Commonhold and Leasehold Reform Act 2002.

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