News

Latest Landlord and Tenant Digest from Piers Harrison and Daniel Dovar

• Share

21st April 2020

Legislation

Coronavirus

Possession proceedings: New PD51Z

By way of Practice Direction 51Z, the Master of Rolls has suspended all ongoing possession actions under part 55. This has been put in place for an initial period of 90 days, up to the end of June 2020.

Coronavirus Act 2020, sections 81-82, Schedule 29

Amendments have been made to the various Acts controlling residential tenancies so that notices for possession have longer periods inserted before proceedings can be begun.

A right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, until the end of June 2020.  The date may be extended.

Commercial Update

Forfeiture

Faiz v Burnley BC [2020] EWHC 407 (Ch)

On the facts of the case the landlord of a cafe had not waived the right to forfeit by demanding rent. The rent demanded had fallen due before the landlord had the requisite knowledge of the breach of covenant (subletting).

The case is the first to have come to trial under the Capped Costs List Pilot Scheme. The scheme is governed by the provisions of CPR PD51W and is scheduled to last for two years having commenced on 14th January 2019. The courts within the pilot include the London Circuit Commercial Court and courts now subsumed in the Business and Property Courts in Leeds and Manchester.

Pubs Code

Punch Partnerships (Ptl) Ltd v Highwayman Hotel (Kidlington) Ltd [2020] EWHC 714 (Ch)

This was a challenge against an award on a statutory arbitration under the Small Business, Enterprise and Employment Act 2015 and the Pubs Code Regulations 2016.  That award found the terms proposed by the landlord, in particular lease length, were unreasonable and ordered new leases for minimum periods of 5 years.

The landlord sought to set aside that award on the basis that: the proposed term was not unreasonable; the arbitrator had wrongly used material that came into her possession outside the arbitration; and she had no power to order new lease terms.

The tenant served notice under the 2015 Act and the Pubs Code to release them from their tie and for a new lease on market rent only terms.  The landlord offered a new MRO lease for the same duration as the existing tied lease.  The arbitrator considered that that was unreasonable as it not only failed to meet the minimum requirements set by the Pubs Code, but also was inconsistent with the landlord’s own internal policy of what lease lengths it would offer.

Rosen QC, sitting as a Judge of the Chancery Division also considered it unreasonable.  Firstly, even if it met the minimum requirements under the Code, that did not automatically render the offer reasonable.  Secondly, the arbitrator had been entitled to rely on the landlord’s policy even though it had come into her hands in her capacity as regulator, not adjudicator.  He considered that:

The Pubs Code, as the Landlord acknowledges is based on the principle of fair dealing and this may require proportionate intrusions into the POBs’ business and property rights. If the Landlords were not obliged to disclose relevant information or the arbitrator was precluded from using relevant information (ensuring that both parties knew of it and could make submissions as to its effect), the purposes of the 2015 Act would be subverted.

Further, once that information was to hand, if the landlord departed from its policy, without justification, as it had in this case, then it could be an important factor in determining whether the offer was reasonable.  As this was the approach taken by the adjudicator, then there was no basis to set aside or vary the Award.

The arbitrator had wrongly ordered new, longer, lease terms.  The 2015 Act did not permit that remedy which would amount to expropriation of their property.  Such an outcome required clear wording, which was not found in this legislation.  When an offer was found to be unreasonable the sanction under regulation 33 of the Pubs Code was for the landlord to provide a revised response to the tied pub tenant.

 

Residential Update

Modification or Discharge of Restrictive Covenants

Edgware Road (2015) Ltd v Church Commissioners for England [2020] UKUT 104 (LC)

This was an application for the discharge or modification of a lease clause restricting use under grounds (aa) and (c) of Section 85 (1) of the Law of Property Act 1925.  The applicant wished to change use to enable it to develop a 117-bedroom ‘pod-type’ hotel for which it had planning permission.  The lease prohibited use as a residential premises and the lessee was not to allow permit or suffer any person to sleep in the property.  The application was to permit hotel use, remove the prohibition on sleeping and made ancillary modifications to facilitate that use.

Before dealing with the grounds, the Upper Tribunal considered whether the burden of proof, which was on the applicant, was different in cases of leasehold to those of freehold.  Following Shaviram Normandy v Basingstoke [2019] UKUT 256 (LC), it was considered that in principle there should be no difference.

Under ground (aa) the applicant has to establish that the continued existence of the restriction must impede some reasonable use of the land and it either: does not secure any practical benefit of substantial value; or advantage or is contrary to the public interest; and money will be adequate compensation for the loss or disadvantage suffered.  Ground (c) was engaged if the modification or discharge would not injure the person entitled to the benefit of the covenant.

The proposed use was tentatively considered reasonable and was obviously impeded by the covenant.  However, the covenant did secure the landlord practical benefits in its control over use of the subject property and the surrounding estate which was also in its ownership.  It had an Office Strategy for its estate and the Upper Tribunal concluded that the relaxation would make the implementation of their strategy more difficult and would undermine their aspirations for the area.  This was not only considered a substantial advantage but one that could not be adequately compensated in monetary terms.  Accordingly the application was refused.

Possession Claim

Pease v Carter [2020] EWCA Civ 175

A notice served under section 8 of the Housing Act 1988 on 7 November 2018 mistakenly stated that the court proceedings would not begin until after “26 November 2017“. The Court of Appeal held that this was an obvious typographical error, and that the reasonable recipient of the Notices would have realised that the intended date was 26 November 2018, consequently the notice was valid – Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] A.C. 749, applied.

Oshin v Greenwich RBC [2020] EWCA Civ 388

In 2001 an applicant to a local housing authority lied in a form in order to obtain accommodation. On the basis of the form she was granted a tenancy of a property in Robert Street. Years later she filled in an amended form and was granted the tenancy of a property in Jessup Close. The Court of Appeal held that whether the original lie was a continuing misrepresentation operative in relation to the second tenancy was a question of fact and the deputy district judge had been entitled to find that the lie made in the 2001 form continued to operate on the local authority’s mind when it came to grant the Jessup Close tenancy.

Luton Community Housing Ltd v Durdana  [2020] EWCA Civ 445

The landlord sought possession under ground 17 of schedule 2 to the Housing Act 1988 as the tenant had obtained her tenancy by misrepresentation.  When the tenant and her husband applied for housing, they lied about their residential status, their income and their savings.  As a result of this deceit, the tenant received a caution, her husband pleaded guilty to a criminal offence and both lost their employment.  When the landlord sought possession, the tenant admitted ground 17 was engaged, but resisted a possession order on the basis that it was not reasonable to make an order because she suffered from PTSD and her daughter from cerebral palsy.  She also contended that the landlord had not complied with s.149 of the Equality Act 2010 in that it had not properly considered the impact of possession on her and her daughter; it had failed to comply with its Public Sector Equality Duty.

The trial judge considered that the landlord was in breach of the PSED and refused to make the possession order.  She considered that it was possible that if they had not been in breach that the proceedings might not have gone ahead.  The Court of Appeal considered that that was a misdirection.  The review process that had been undertaken by the landlord had been a breach of the PSED.  However, the next consideration was whether it was highly likely that had they not been in breach, they would have continued with the proceedings:

“it is now well established that the Court will refuse to dismiss a claim for possession where a breach of s.149 is relied on by way of defence if satisfied that it is highly likely that the outcome would not have been substantially different had no breach of the duty occurred: see Aldwyck Housing Group Ltd v Forward Ltd [2019] EWCA Civ 1334 at [25].”

In light of the circumstances of this case, the Court of Appeal considered that it was highly likely that the landlord would have continued even after the PSED.  Patten LJ stated:

35. The question therefore is whether LCH, in paying due regard to this evidence and in considering whether it was still appropriate to seek possession, is highly likely to have made the same decision. My own view is that it would. Housing authorities operate under severe constraints in terms of available accommodation. There is no question that had the respondent and her husband provided honest answers to the questions in the application form they would not have been granted this tenancy. The Premises would have been allocated to other qualifying applicants of whom there were and are many. The respondent could have afforded to have rented accommodation in the private sector and should have done so.
36. In the face of a continuing shortage of public housing, LCH is justified in operating a policy of seeking to remove tenants who have obtained their accommodation by deception. The duties owed to other homeless applicants support and justify that policy. Mr Vanhegan has not sought to contend otherwise on this appeal. The weight to be accorded to these policy considerations as opposed to the position of the respondent and her daughter as disabled persons is, of course, a matter for LCH as the decision-maker but it seems to me to be completely unrealistic to suggest that the balance of reasonableness would in this case have come down in favour of the respondent. This was not a case where the medical evidence suggested that the impact of eviction on the respondent and A as disabled persons would have been either acute or disproportionate. And nothing else could have acted as a sufficient counterbalance to the social objectives which underpinned the policies of LCH. Even after paying due regard to these disabilities LCH could lawfully have decided to continue with the claim for possession and are highly likely to have done so. For these reasons, I would allow the appeal against the judge’s order dismissing the claim.

 

Security for Costs

Vale Court Freehold (London) Ltd v Carey-Morgan [2020] EWHC 840 (Ch)

A company used as the nominee purchaser in a collective enfranchisement claim brought proceedings against a director of the company and others in relation to the grant post enfranchisement of an airspace lease. The defendants sought security for costs. The judge below had refused to order security on the grounds that it would stifle the claim. The decision could not be upheld on that ground, but it was just in the circumstances of the case to uphold the decision. The court gave particular weight to the conduct of the defendant director and the fact that had he acted more prudently the company would have been the defendant.

 

Collective Enfranchisement

LM Homes Ltd v Queen Court Freehold Co Ltd [2020] EWCA Civ 371

Leaseholders exercising the right to collective enfranchisement were entitled to acquire the airspace, basement and subsoil of the building not withstanding that the freeholder had granted leases for the purpose of development.

The Tribunal’s jurisdiction was not ousted by agreement between the freeholder and the leaseholders as to the terms of acquisition of the freehold if contracts were also required for the acquisition of the leasehold interests falling to be acquired i.e. the lease of  the airspace, basement and subsoil.

 

Service Charges

Williams v Aviva Investors Ground Rent [2020] UKUT 111 (LC)

This was a challenge to the service charge apportionment carried out by a landlord.  The leases each provided a fixed percentage that each leaseholder was to pay of total cost (which had been based on a relative square footage basis) and then added ‘or such part as the Landlord may otherwise reasonably determine.’.  The Landlord had so determined and charged each a different share to that contained in the lease.  The Upper Tribunal identified the issues on the appeal, being whether: a.) the Landlord was able to charge a different share, albeit subject to the Tribunal’s jurisdiction under s.27A of the Landlord and Tenant Act 1985; or b.) whether s.27A rendered that discretion entirely void and if so, what was the effect of that.

Following the previous decisions of Windemere Marina Village v. Wild [2014] UKUT 163 (LC) and Gater v Wellington [2019] UKUT 561 (LC), the Upper Tribunal considered that the second consequence was correct;

‘a clause purporting to provide for a determination of apportionment by the landlord or the landlord’s agent is void.  It is void whether or not it provides that the landlord’s decision is ‘final and binding’ or similar, and whether or not the landlord agrees to submit to the jurisdiction of the Tribunal.’

Accordingly, they were deleted, ‘They no longer appear in the lease.’  This was not a case, such as in Windemere or Gater where the apportionment provisions were simply for a fair and reasonable proportion; in which case the Tribunal retained jurisdiction to determine what that proportion was.  In this case there remained a fixed percentage which should be applied.

 

Rent Repayment Orders

Opara v Olasemo [2020] UKUT 96 (LC)

Section 40 of the Housing and Planning Act 2016 enables the First-tier Tribunal to make a Rent Repayment Order where a landlord has been committed a specified offence, this includes eviction or harassment of the tenant and being in control of an unlicensed HMO.  Both these offences were alleged in this case as the basis for an HMO.  Both were reluctantly rejected by the First-tier Tribunal on the basis that the required standard of proof, beyond reasonable doubt, had not been made out.

The Upper Tribunal reviewed the evidence and considered that the First-tier Tribunal had set the bar too high, it allowed the appeal and remitted the matter for a determination as to whether to make an order and if so for what amount.  In a parting note of guidance, Judge Cooke stated

“For a matter to be proved to the criminal standard it must be proved “beyond reasonable doubt”; it does not have to be proved “beyond any doubt at all”. At the start of a criminal trial the judge warns the jury not to speculate about evidence that they have not heard, but also tells them that it is permissible for them to draw inferences from the evidence that they accept. In this case there were obvious inferences to be drawn from the evidence, both about the eviction and about the circumstances of the other tenants. It may be that the FTT lost sight of those inferences and set the bar of proof too high. I say that in the hope that it is of assistance for the future.”

 

Financial Penalties

Sutton v Norwich City Council [2020] UKUT 90 (LC)

The First-tier Tribunal imposed £236,600 of financial penalties on both a landlord and its director under the Housing Act 2004 for failure to comply with HMO licensing requirements and improvement notices.  The landlord and its director appealed on a number of grounds, both as to liability and quantum.

In terms of liability, the following were amongst the challenges:

• There was no requirement to licence the property as an HMO, as it was not one, it was an apart-hotel. However, on an analysis of the evidence, given that for the relevant dates, the property was occupied as a residence by a number of people, it was potentially an HMO within the meaning of s.257 of the 2004.
• It was argued that this was not an HMO as the conversion of this property from offices to apartments complied with the appropriate building standards. Again on analysis of the evidence, this was not made out.  There was non compliance with fire precautions and other matters, which meant that the Upper Tribunal were in no doubt that this was an HMO.
• It was said that in serving 8 improvement notices, rather than one, with the result that the potential financial penalty was increased, there was an improper motive, rendering the notices invalid. This was dismissed.  It was considered improbably that a local authority would anticipate non-compliance and therefore serve multiple notices to maximise income.  Further, in the event of default, the penalty arising from each notice would take into account the fact that other notices had been served.
• The landlord’s director contended that the penalties could not be imposed on him under s.251 of the 2004 Act. This was dismissed on the basis that all that was required to impose liability on him was that: a.) the company had committed the offence; and b.) that it was committed with the consent of the director.  Both had been made out.

All of the appeal on liability was dismissed,

On quantum, Mr Sutton fared a little better in that it was reduced.  Some general points were made, being:

• Appeals against 2004 Act financial penalties involved a re-hearing, rather than a review
• Guidance on the level of financial penalties is set out by the Secretary of State which the local authority must have regard to. Part of that guidance required each local authority to adopt its own policy, which Norwich had done and had created a penalty matrix.  Some variance between authorities is to be expected, but they should be applied by each authority.
• In imposing a financial penalty against a landlord company and its director, there was a danger of imposing a double penalty where the director is also a shareholder. There was also a danger that in respect of an individual item, a penalty in excess of the maximum could be awarded.
• Ability to pay is a relevant consideration, but evidence must be produced in support.

The Upper Tribunal then went onto consider the individual breaches taking into account the local authorities penalty matrix and commenting when it was departed from.  The approach taken appears to have been more moderate and holistic to that of the First-tier Tribunal in that overall the financial penalties were reduced to £99,000 for the director and £75,000 for the landlord company.

By Piers Harrison and Daniel Dovar

• Share