Construction Law in the United Kingdom: Business Lease and Landlord Breaching Contract - Essay Example

?ADVICE TO LANDLORD Sir, I have been instructed to advice you regarding the industrial unit building that you have let out on rent on the outskirts of Derby city. I understand that you are considering demolition of the building for erecting exclusive houses. You have let out the building for a period of 15 years and four of them are yet to go before the said term ends. Your tenant intends to continue his tenancy for the full term, but you want to terminate it. The tenancy agreement between you and your tenant is Fixed Term tenancy. The time of tenancy is certain and the lease can not be continued indefinitely. In your case, the length is fixed for a period of 15 years. At the end of that term, he would have had to yield up possession of the property to you. The only way that you can take possession of the house from your tenant before expiration of the lease period is by exercising your right of forfeiture. It entitles you to bring the lease to an end for the breach by the tenant of any of the covenants. Forfeiture in your case will be for Breach of Repair covenant by tenant. I am not yet informed whether the lease contained a break clause which would have entitled you and/or the tenant upon service of notice as provided for in the lease. The ‘put and keep’ clause in the lease which is a full repairing and insuring lease is termed a covenant i.e. an undertaking by your tenant to the effect that he will keep the property in good condition and carry out repair if there is some damage to the building. In your case, the external cladding of the building is damaged and it has not remained effective enough to keep the rainwater out, which is causing damage to other parts of the building. REMEDIES FOR LANDLORDS In general the following remedies are available to a landlord for breach of repair covenant by a tenant. He can claim damages for the beach of covenant. In this case, the damages would be equal to diminution in the value of his reversion. He can seek specific performance of the tenant’s obligation to repair as per the covenant. The court allowed specific performance in Rainbow Estates Ltd v Tokenhold [1999] Ch 64. But the tenant can avoid specific performance if he can prove your intention of dismantling the building He can seek forfeiture of the tenancy for breach of covenant to repair. The landlord has to follow the Procedure as under in order to exercise his right of forfeiture. (1) He has to prepare a Schedule of dilapidations in accordance with the following chart. Dilapidations are items of disrepair. These are caused by the tenant not following his covenant of keeping the property in good repair. Preparation of the schedule of dilapidations is necessary as it will be a piece of evidence in the action for possession of property to be filed in the court. In your case, the chart would be as follows Ref Location Defect Remedy Cost in ? 1.00 Roof 1.01 Leaking in some places Water proofing Water stains and mold towards the South Eastern side of the warehouse 2.00 External Cladding Damaged Will have to be replaced Total cost (2) He has to serve an interim schedule on the customer. (3) He has to serve notice under s 146 of the Law of Property Act, 1925. The instructions do not mention whether your lease provides for a period of notice dutring which the tenant can remedy the breach. In such circumstances, the said notice must be in writing and give the tenant reasonable time to repair. After the introduction and coming into effect of the Civil Procedure Rules, however, its requirements are to be observed before the building is inspected and schedule for dilapidation is prepared. The Civil Procedure Rules provide guidelines for the conduct of parties in Part 56 Position of the tenant Before taking any action for breach in case of a tenancy for more than 7 years and more than three years remaining Leasehold Property (Repairs) Act 1938 applies to that tenancy. The landlord has to inform his tenant about his right to serve a counter notice. The minimum period of this notice is 28 days. The tenant has a right to serve a counter notice and if he does serve it, then the proceedings will be stayed. In this notice, tenant can claim relief from forfeiture. You will then have to seek leave of the court to continue action for eviction. It will be granted only if one of the five grounds specified in the Leasehold Property (Repairs) Act 1938 is applicable. S. (1) (5) Leave for the purposes of this section shall not be given unless the lessor proves— (a)that the immediate remedying of the breach in question is requisite for preventing substantial diminution in the value of his reversion, or that the value thereof has been substantially diminished by the breach; (b) that the immediate remedying of the breach is required for giving effect in relation to the premises to the purposes of any legal purposes, (c) in a case in which the lessee is not in occupation of the whole of the premises, that the immediate remedying of the breach is required in the interests of the occupier of the premises (d)that the breach can be immediately remedied at an expense that is relatively small in comparison with the much greater expense that would probably be occasioned by postponement of the necessary work; or (e) special circumstances which in the opinion of the court, render it just and equitable that leave should be given. You will have to prove their existence on the balance of probabilities, as laid down in Associated British Ports v. CH Bailey. In his defence, the tenant can take the stand that you are going to develop the property by dismantling the existing building. In case he can prove that you have decided to pull down the building, then you will not be able to sue for damages in accordance with Section 18 (1) of the Landlord and Tenant Act 1927 which says “…no damage shall be recovered for a breach of any [repairing] covenant …if it is shown that the premises …would at or shortly after the termination of the tenancy …be pulled down or such other structural alterations made therein as would rendered valueless the repairs covered by the covenant…” The standard of repair, unless a schedule is drawn up at the time of entering into contract, would generally be construed to mean a standard which could be expected by a reasonably minded person from the class likely to take the premises on rent, considering the age, character and locality of the premises. In Proudfoot v Hart, the court held that the house “need only be put into such a state of repair as renders it reasonably fit for the occupation of a reasonably minded tenant of the class likely to take it.” The tenant can also claim that the damage to the building had been existent for a substantial period during which you have suffered it even after noticing. In case you have really accepted rent or done some other act which would amount to your consent for continuation of the tenancy, the tenant can claim that you have waived your right to forfeit the tenancy on the ground of breach of repair covenant. The tenancy is covered by Landlord and Tenant Act 1954 which provides in S 23 that any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes is covered by the said Act. The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, SI 2003 No 3096 has introduced reforms in the Landlord and Tenant Act 1954. A significant change now in favour of the tenant is that the landlord can not obtain an agreement to surrender from a tenant unless prior to the signing of the said agreement he gives a notice of 14 days to the tenant in a specific form intimating him that he need not surrender his tenancy. The tenant has a statutory right to continue in tenancy even after expiry of the term of the lease, by surrendering his tenancy, he is waiving that right, hence the notice. The instrument of surrender should contain the endorsement of the tenant that he has received the notice and made a declaration accordingly. References Statute Law Civil Procedure Rules, Part 56, Landlord and Tenant Claims Landlord & Tenant Act 1927, Section 18(1) Law of Property Act, 1925. Leasehold Property (Repairs) Act 1938 The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, SI 2003 No 3096. Legal Precedents Associated British Ports v. CH Bailey.  [1990] 2 AC 704 Proudfoot v Hart [1890] 25 QBD 42. Rainbow Estates Ltd v Tokenhold [1999] Ch 64 Read More