Landlord and Tenant Law UK - Coursework Example

< Landlord and Tenant Law UK> by Introduction Renting is a common practice anywhere in the world whether the premise is taken on rent for commercial or residential use. The Landlord and Tenant Law in UK is different for commercial and residential renting. This essay is focused towards three questions pertaining to the commercial renting. These three scenarios are different in aspects and this essay will try to answer the questions as closely as possible in order to make the readers understand in what scenario the tenant or the landlord should respond. This essay discusses three points – procedures to be followed when the rent is defaulted, the provisions available under the break clause for the tenant and what needs to be done by both landlord and tenant when the agreement is made outside of Part II of the Landlord & Tenant Act 1954. 1 As per the Landlord and Tenant Law UK, there have been proposed new procedures for landlords when there is a default from a commercial tenant. It is necessary for the commercial landlords to review their procedures when there is an instance of commercial tenants default in giving rent. The new rules and regulations for commercial tenants default came into existence from April 2012. The name of the new process is given as Commercial Rent Arrears Recovery or CRAR. The rule is being made in such a way that it is only be available in case of pure rent arrears along with any other components associated with the rent, which is considered to be a part of the rental like VAT and interests on rent. However, service charges and insurance would not come under consideration. The CRAR will replace the common law that offers right to the distress of rent (Martin 2009). As far as the distress is concerned it allows the landlord to sell off the goods of the commercial tenant up to the value of the rent without initiating any legal proceedings. With the new law it is mandatory for the landlord to initiate legal proceedings before selling off the commercial tenant’s goods to recover the rent. In this scenario as the tenant, Spotted Dice Limited, is a defaulter of the rent to the landlord, the landlord has every right to file a case against the commercial tenets under the CRAR Act and proceed accordingly to recover the rent and the associated components that come under the rental of the commercial premises (Pawson & Mullins 2010). According to Justice Minister Helen Grant, the aim of the introduction of the new law is to protect the vulnerable people from aggressive bailiffs. In this scenario if the landlord has a written lease or rental agreement then only he can avail the CRAR against the tenant. The CRAR is not valid of the landlord has let the commercial premises on rent against a license in which case the tenant is a licensee. Upon filing the case against Spotted Dice Limited it is mandatory for the commercial landlord to use a certificate bailiff in order to seize and sell off the goods of the tenant (Jordan 2010). However, it is mandatory for the landlord to give a notice period to the tenant before taking any legal action, which is kind of a time given to the tenant to clear off the arrears1. There are chances that during the notice period the rogue tenants can remove their goods prior to the arrival of bailiff. As mentioned earlier, in this scenario also the landlord can only proceed to sell goods of the tenant to recover only the arrears related to rent and not any other arrears like service charges and insurance (Sealy & Worthington 2013). Since the Lansbury Towers in Edmonton, north London is given in rent under the leased agreement to Spotted Dice Limited the owner of the Lansbury Towers can file a case against the tenant Spotted Dice Limited under the CRAR Act in order to recover the rent, which is due for this quarter that is due on 25th March 2015. The tenant has to follow all the procedural steps mentioned above in order to properly follow the legal aspects of the recovery method. Since CRAR does not cover the service charges and insurance the tenant cannot file for the same under the CRAR Act. It needs to be ensured by the landlord that any part of the property is not being used for residential purpose. In that case the landlord will not be able to use the new remedy even when there is breach in the terms of the lease by the commercial tenant (Megarry et al. 2012). As per the property law expert Siobhan Cross of Pinsent Masons though both previous remedy and the new CRAR procedures are advantageous for the landlords, they can always choose other less attractive remedies that are available for them in case the new regime does not turned out to be as effective as the existing one where the service charges and insurance are not covered in the bailiffs. As far as the service charges and insurance is concerned those components are to be settled out-of-court since these components do not go well with the human rights legislation. Case Law One of the prominent cases is the Graysim Holdings Ltd. v P & O Property Holdings Ltd. [1996] case where the head landlord P & O Property Holdings Ltd. served a notice to the tenant Graysim Holdings Ltd. for not paying the rent and service charges to the landlord. In this case the tenant Graysim Holdings Ltd. fitted out stalls in the entire hall that was rented on lease from P & O Property Holdings Ltd. and entered into an agreement with the stall holders without notifying the head landlord P & O Property Holdings Ltd. This was an illegal act by Graysim Holdings Ltd. for which a notice was served to them by the head landlord P & O Property Holdings Ltd. seeking termination of the lease contract. 2 The Part II of the Landlord & Tenant Act 1954 offers a degree of security of tenure to the business tenants. In the given scenario since Pears has taken the ground floor of the premises for rent under the same Act the tenant will be eligible to get all the facilities under this Act (Burn & Cartwright 2011). Though the surveyor has noticed some permanent stains and peeling of internal wall paints the landlord cannot just ask the tenant to vacate premise all of a sudden. Since the agreement of tenancy was made under the Part II of the Landlord & Tenant Act 1954 the landlord must serve a notice to the tenant giving them an opportunity to respond. However, since in the clause there is a provision to end the contract on 13th May 2015, which is in the mid-term of the ten years contract Pears has the opportunity take advantage of this in order to fix the deal under the Break Clause2 (Holt, Eccles & Bennett 2011). As there is break clause Pears can go ahead and terminate the contract on 13th May 2015. This will be termed as termination of lease with the security of tenure. This is termed as Break Clause. Under this clause Pears has the contractual rights to terminate the lease during its terms. This provision is entitled in the Act itself and in this scenario the contract itself has included this clause (Dowden & Humphreys 2013). Hence there will not be any problem for Pears to terminate the contract on the said date mentioned in the contract. Since there is a specific date mentioned in the contract for the mid-term termination it advised to Pears to wait till that date before terminating the contract. It is mentioned in the Break Clause that it may require that the tenant of conditions in break clause to be of strict compliance. It is advised to Pears that under this Act their tenancy is protected and will continue till the time when it is brought to an end in number of various ways that are specified by the Act. It is advised to Pears to take a careful look at the contract if there is any mention about the exclusion of security of tenure in the contract. In case of business tenancies the Part II of the Landlord & Tenant Act 1954 offer provision to exclude the security of tenure in the contract for few specific instances (Crosby, Hughes & Murdoch 2006). Under this Act there are some notices that are issued in accordance with the Act. In that case the notice should be in the form that is set out by this Act. However, there are certain instances where the notice need not to be in any particular form. However, it is necessary to seek legal advice before serving any notice. Pears should also do the same since the premise is leased by them under Part II of the Landlord & Tenant Act 1954 and this will also help them protect their tenancy with the landlord (Dowden 2014). Pears need to keep in mind that if there is any small technical error in the notice can lead to make it invalid, for which the consequences can be very serious. Pears can serve the notice to the landlord under section 26 of the 1954 Act (section 26 request). Under this section Pears can request for new tenancy with fresh clause upon terminating the old contract. As per section 26 there must be a particular date as on which date this contract is to be end. Under section 26 it is mandatory for Pears to set out the outline proposals for the new terms and conditions of lease and it must cover the same points as set out for section 25 notice (Garner & Frith 2010). It is good for Pears to know about section 27 of the Act, which allows only Pears, the tenant, to bring the tenancy to an end either by giving notice to the landlord at least three months prior to the expiry of the contract or when the lease term is already expired but the tenancy is continuing under the 1954 Act. However, it is necessary for Pears to know that if the notice is served under section 27 of the Act they will not have any right to occupy the business premises post the expiry of the notice and also the security of tenure protection will be lost as conferred by the Act. Case Law The famous case of Bassairi Limited v London Borough of Camden is a milestone in the Landlord & Tenant Act 1954 UK. In this case the appeal for adjournment of hearing of an application by Bassairi Ltd. was refused by the judge, which was against London Borough of Camden. The application of Bassairi Ltd. was for the new tenancy of the premise situated at 72 Marchmont Street WC1. This case was fought in the Civil Division of the court and the verdict for the same was given in January 19, 1998. 3 There are possibilities that the lease contract is made outside of Part II of the Landlord & Tenant Act 1954. However, in that case it is necessary to follow strict procedures (Heffron & Haynes 2012). The first and foremost thing that both landlord and the tenant, Spotted Dice Limited or Pears need to keep in mind that the lease contract should not have any clauses that come under either of the sections 25, 26 and 27. This is the first rule. Prior to the grant of the lease it is necessary that the landlord must give a notice to the tenant that the lease agreement will not be made and protected by the 1954 Act. To make it a full proof and avoid any confusion in the future the tenant also needs to agree with the clause before finalizing the lease contract and other terms (Pawlowski 2013). Unless there is an agreement between both parties about the exclusion of statutory protection it is not possible to carry out the agreement that is not protected by the 1954 Act. In case of landlord’s notice is served less than 14 days prior to the grant of the lease it is mandatory that the agreement of the tenant must be in the form of statutory declaration that too it needs to be sworn in front of an independent solicitor. Whether it is statutory or otherwise, landlord’s notice and the tenant’s declaration must follow a prescribed form. It is necessary to record in the agreement that it is the relevant sections of the 1954 Act have been excluded in the agreement3. The main concern with the Act is the notices served by both the parties. As far as section 25 is concerned the landlord will not want to be a situation where the wrong notice is served to the tenant without knowing if the tenant is protected under the 1954 Act (Crosby, Devaney & Law 2012). Hence in order to protect him by serving a section 25 notice “without prejudice” to his contention that there is no applicability of Part II of the Act in the agreement. However, this should also be agreed upon by the tenant and should be given in the form of declaration. In the same way in order to waive out the security of tenure from the tenant’s end the agreement should not have the section 26 and 27 where the right to dissolve the agreement and making a fresh agreement by the tenant is curbed. This should again be agreed upon by the landlord so that it is a win-win situation for both landlord and tenant as far as the making of agreement outside of Part II of the Landlord & Tenant Act 1954 is concerned. In order to make the contract outside of Part II of the Landlord & Tenant Act 1954 it is necessary to do so either with an agreement for surrender or prior to the agreement was made. In 2004 the new procedure for the same was set out and it is mandatory for every landlord and tenant if they want their agreement to be made outside of Part II of the Landlord & Tenant Act 1954. Case Law The case between Chiltern Railway Co Ltd v Bella Patel is the right example as far as the contractual agreement made outside of Part II of the Landlord & Tenant Act 1954. Along with other questions in the case one question was to answer whether or not Part II of the 1954 Act effectively excluded from the contractual agreement. If it was not then why was not all the procedure followed properly and if it was excluded then why the case is being registered under the security of tenancy and statutory protection by the tenant. The case was held in the situation when the agreement was made whether the statutory declaration was sufficed or not and was there a need for the tenant to make a simple declaration. Conclusion In the essay we have discussed three questions and tried to find answers for the same with the help and support of three case studies relevant to the scenarios or situations. Three scenarios were different from each other and the implications of the 1954 Act upon each situation were different. The importance of the 1954 Act will always be there as far as the tenancy of business premises is concerned. However, it is up to the consent and concern of both landlord and the tenant how they want to make the most effective use of the Act in order to safeguard their own self from being in any uncanny situation. References Arden, A & Dymond, A. 2012, Manual of housing law, Sweet & Maxwell, London. Burn, EH & Cartwright, J 2011, Cheshire and Burns Modern law of real property, Oxford University Press, Oxford. Crosby, N, Devaney, S & Law, V 2012, ‘Rental depreciation and capital expenditure in the UK commercial real estate market, 1993–2009’, Journal of Property Research, vol. 29, no. 3, pp. 227 – 246. Crosby, N, Hughes, C & Murdoch, S 2006, ‘Exit strategies for business tenants’, Journal of Property Research, vol. 23, no. 3, pp. 215 – 235. Dowden, M 2014, ‘Rent review 2014’, Journal of Property Investment & Finance, vol. 32, no. 5, pp. 530 – 533. Dowden, M & Humphreys, E 2013, ‘Landlord and tenant update-hard times, strict compliance’, Journal of Property Investment & Finance, vol. 31, no. 1, pp. 101 – 105. Garner, S & Frith, A 2010, A practical approach to landlord and tenant, Oxford University Press, Oxford. Heffron, RJ & Haynes, P 2012, ‘Striking a statutory balance: constant change in residential leases versus static change in commercial leases,’ The Conveyancer and Property Lawyer Journal, vol. 76, no. 3, pp. 195 – 206. Holt, A, Eccles, T & Bennett, K 2011, ‘Accounting for service charges in the UK commercial sector: Barriers to change and the quest for best practice’, Property Management, vol. 29, no. 1, pp. 7 – 33. Jordan, J 2010, ‘Recent developments in the Foreign Corrupt Practices Act and the New UK Bribery Act: A global trend towards greater accountability in the prevention of foreign bribery’, New York University Journal of Law & Business, vol. 7, p. 845. Martin, EA 2009, A dictionary of law, Oxford University Press, Oxford. Megarry, R, Wade, W, Harpum, C, Bridge, S & Dixon, MJ 2012, The law of real property, Sweet & Maxwell, London. Pawlowski, M 2013, ‘Business tenancy renewals-waiver by election and estoppel’, Landlord and Tenant Review, vol. 17, no. 6, pp. 210 – 215. Pawson, H & Mullins, D 2010, After council housing: Britains new social landlords, Palgrave Macmillan: United Kingdom. Sealy, L & Worthington, S 2013, Sealy & Worthingtons Cases and Materials in Company Law, Oxford University Press, Oxford. Read More