Landlord and Tenant Law - Essay Example

Landlord and Tenant Law LANDLORD AND TENANT LAW Titus Rock Manickam Order No. 283916 29 March 2009 Table of Contents Introduction3 The Questions.4 The Cost of Repairs5 The Initial Repairs..5 The Legal Position.6 The Landlord's Action...8 Conclusion.9 Sources..11 LANDLORD AND TENANT LAW Introduction It is obvious that the 15-years lease of the unit on an industrial and retail park given to Able Trading Ltd by Brentchester Investments Ltd in 1994 is coming to an end. The lease agreement provides a clause which states that the tenant would "put the premises in repair and deliver them up in repair at the end of the term." At the time the lease agreement was made, that is in 1994, the industrial park was a thriving and much sought after location for light commercial and retail use. However, presently, the park has many vacant units and many of the let ones are only used for storage. In the beginning, Able began extensive work on the unit. But the directors of Able soon discovered that the turnover from trading was not going to be as profitable as they had hoped. Hence, the extensive work to the roof was never completed. Although watertight, the roof is unsightly and not up to modern standards. In 2002, Able discovered that the concrete used to form the basis of the floor of the unit was not of the correct type. As a result, the surface had become crumbly and difficult to walk on. The only way to solve this problem would be to excavate the floor and lay a new one at a cost of GBP 250,000. Instead of undertaking any work, when the problem first became acute, Able laid metal sheeting on the floor as a temporary measure. The extractor fans fixed to the walls of the unit have ceased to function and when Able obtained quotes for installing new ones, they discovered that the original manufacture had gone into liquidation and new ones would have to be sourced from a different supplier. The new fans would be larger and require extensive installation work estimated at GBP 20,000. A director of Able has discovered second-hand fans which could be installed at a fraction of this cost. But these are older models than those currently installed and only work at half efficiency. Recently, surveyors instructed by the landlord have inspected the unit. On the basis of their calculations, the landlord claims that the cost to Able of complying fully with the covenant at the end of the term will be GBP 360,000. This includes completion of the work on the roof, laying a new floor, installing new fans as opposed to second-hand ones, and carrying out other miscellaneous works. The directors of Able are furious, especially since they have discovered that the landlord has submitted a planning application to the local planning authority under which the present unit would be demolished. The Questions The rent details, that is the amount of rent payable, and if any deposit had been paid to the landlord, are not provided. Details regarding the manner in which the lease agreement was made are also not provided. Was the agreement made through lawyers Were lawyers engaged by the landlord when the agreement was made Did Able engage lawyers to make the agreement It is important to know the answers to these questions in order to pinpoint the correct answers. It is possible to surmise the consequences in the absence of these answers. The information pertaining to the circumstances that have led Able to seek legal position are there. On the basis of these information provided the solutions to the issues raised will be given. The Cost of Repairs It appears that the premise is not suitable place to work. The premise needs long-term repairs and fixtures for long-term, problem-free use. Nevertheless, Able has gone ahead and made an agreement with the landlord for use of the premise for 15 years. The place was thriving at that time. Therefore, the directors of Able might have felt compelled to take the place on long-term rental basis, even willing to go along with the landlord to carry out repairs to the premises. However, now the park has many vacant units and many of the let ones are only used for storage. In this circumstance, it is not quite understandable why Able wants to stick to this place. They have the legal option to hand over the place back to the landlord, giving him two months' notice. At any rate, Able is staying on. This is probably because Able is still making use of the place. The place is economically useful to them. Able is making use of the premise even after the concrete floor is found wanting in terms of strength and has become crumbly and difficult to work on. Nevertheless, the cost of repairs is preventing them from carrying out repairs. Instead, they make use of the premise using metal sheeting on the floor as temporary measure. The Initial Repairs Able had begun to do extensive work on the unit. However, the directors of Able soon discovered that the turnover from trading was not going to be as profitable as they had hoped, so the extensive work to the roof was never completed. The roof is watertight but unsightly and not up to modern standards. It appears that Able were willing to go along with the landlord's condition to put the premises in repair in view of the long term agreement of 15 years. But they did not count the cost in terms of return on investment. Also, in 2002, Able discovered that the concrete used to form the basis of the floor of the unit was of incorrect type and as a result, the surface had become crumbly and difficult to work on. The only way to solve this problem was to excavate the floor and lay a new one at a cost of GBP 250,000. This repairs involves the flooring which is inside the premises and hence, Able is liable to pay for the repairs. Able will first have to inform the landlord about the repair to the flooring, Able may also request the landlord to pay part of the charges for the repairs. However, if the landlord refuses, there is little that Able can do (The Leaseholders Guide). The Legal Position The lease agreement provides a clause which states that the tenant would "put the premises in repair and deliver them up in repair at the end of the term." This clause does not appear to have any legal merit. Tenants are not counted responsible for carrying out repairs. Repairs have to be carried out by landlords. The tenants can pay rent, electricity bills, telephone bills, council tax, water and sewerage charges and other such bills that they are liable to pay due to their usage by the tenants. All the repair work subsequently carried out by Able must be accounted for with the landlord. The work to the roof and the work on the floor were incomplete. However, the charges for the work done to the roof can be drawn from the landlord. The cost of the extractor fans, whether brand new or second-hand fans in working condition can also be drawn from the landlord (Landlord and tenant obligations). Tenants occupy space for the time duration of the agreement. They pay rent for the time and use of this space. They do not have long term interests in the property they use. Once the term of agreement is over, they vacate the premises and hand over the property to its lawful owners, or they may seek to extend the term for another agreed upon period. However, the landlord has control over the premises and its long term usage. He can ask the tenants to take good care of the property while they occupy and use it. He gets compensated by way of the payment of rent by the tenant. However, in case of any damage to the property due to the tenants' actions, the landlord can seek compensation from the tenants. Recently, surveyors instructed by the landlord have inspected the unit. On the basis of their calculations, the landlord claims that the cost to Able of complying fully with the covenant at the end of the term will be GBP 360,000. This includes completion of the work on the roof, laying a new floor, installing new fans as opposed to second-hand ones, and carrying out other miscellaneous works. It is the responsibility of the landlord to carry out repairs to the structure and exterior of the property, heating and hot water installations, basins, sinks, baths and other sanitary installations. Further, the landlord is responsible for the safety of gas and electrical appliances, the fire safety of furniture and furnishings provided under the tenancy, and ensuring that the property is fit for habitation (Landlord and tenant obligations). The landlord's claim does not have legal support. He cannot expect Able to pay up GBP 360,000 for the various repairs and installations. The roof work and installation of new fans are the landlord's responsibility due to the fresh nature of this work. It is only in the case of the flooring that Able has to bear the cost because it is inside the premises. Able can charge the landlord for having done a shoddy work of the flooring. But this is legally difficult to prove because the landlord can say that the flooring gave way due to the heavy nature of work Able is performing within the premises. Nonetheless, Able has certain rights as tenants and the landlord has to honor these. The Leasehold Reform, Housing & Urban Development Act 1993, enables tenants of flats (units) to protect what would otherwise be considered a depreciating asset by providing for the enforced sale of the freehold of a building to the tenants. The 1993 Act gives tenants rights which they may exercise regardless of the landlord/developer's intentions or actions. It is not clearly stated what are these rights. But the tenant has certain rights and he may exercise them under the 1993 Act (Anthony Radevsky et al). The Landlord's Action The surveyors instructed by the landlords have recently inspected the unit. On the basis of their calculations, the landlord claims that the cost to Able of complying fully with the covenant at the end of the term will be GBP 360,000. Able is not legally bound to pay the entire amount of GBP 360,000. This cost has to be borne by the landlord. There may be some instances like the flooring repairs that must be paid for by Able. However, if the landlord is talking about demolishing the premises, the question of paying for the flooring repairs does not arise. Able then has the option to leave the premises, giving two months' notice. The landlord has also submitted a planning application to the local planning authority under which the present unit would be demolished. So it is not quite clear on what basis he expects Able to pay GBP 360,000 for the repairs and installations. On the contrary, he is making himself liable for legal action for wrongfully asking Able to pay GBP 360,000. Conclusion The entire episode is unseemly and there is little ground for mutually acceptable terms and conditions. The agreement is flawed from the very beginning. The landlord has taken advantage of Able's acquiescence. Able has faced inconvenience as a result of having agreed to a deal that appeared to be innocuous in the beginning but has turned out to be problematic later on. A good approach to the problem is to sit with the landlord and have a good talk about the future of the deal. The present agreement is drawing to an end. The landlord has already decided to demolish the structure. There is no mention of how many will be affected as a result of the demolition. At any rate, it will be good to talk to the landlord and have the matters settled outside the court. In the event Able decides to go ahead and file a suit, there is the chance that Able will be compensated under the Leasehold Reform, Housing & Urban Development Act 1993 (Anthony Radevsky et al). If there is talk of a new agreement, it must be done in consultation with some good property lawyers. The benefit of taking property lawyers in confidence is that the legal implications become clear. There is less likelihood for problems or unpleasantness to arise in the future. Sources: Anthony Radevsky, Peta Dollar and Sarah Thompson-Copsey, Developers beware, http://www.propertylawuk.net/longleasepart1developersbeware.html Landlord and Tenant (Covenants) Act 1995, 1995 Chapter 30, http://www.opsi.gov.uk/ACTS/acts1995/ukpga_19950030_en_1 Landlord & Tenant Law: A Guide for Landlords, http://www.sp-law.co.uk/Landlord_and_Tenant Landlord and tenant obligations, http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/LettingYourHome/DG_4001391 The Leaseholders Guide, West Mercia Housing Group, http://www.kemblehousing.co.uk/files/ART612_Leaseholders Booklet.pdf UK Law is pro-landlord, United Kingdom: Landlord and Tenant, Updated 25 May 2006, http://www.globalpropertyguide.com/Europe/United-Kingdom/Landlord-and-Tenant Read More