The Contractual Bounds in a Landlord-Tenant Relationship - Assignment Example

Land lord and Tenant The contractual bounds in a landlord tenant relationship. The landlord-tenant relationship draws its definition upon the existence of a leasehold estate. A leasehold interest is usually the right to possession by the tenant. Among the most prominent of real property leases, is the commercial rental agreement between landlord and tenant. A commercial lease agreement can be for a fixed period denoted by the period of the lease. Traditionally since the 18th century, it is the right of the landlord to put the tenant into possession in England and Wales. Moreover, it was the duty of the tenant to pay rent as per the lease independent of the landlord meeting their duties and obligations under the lease agreement for payment of lease was taken as an independent covenant. As such various remedies were accorded to a landlord where the tenant fails to fulfil the obligation of paying rental arrears. The Common Law Right To Distress Distress for rent is a self-help remedy that emanates due to the landlord-tenant relationship, and it sanctions a landlord to put on hold goods of a tenant as a way of security for payment of rent arrears. The qualification, however, is that the goods must be in the leased premises. Additionally, the right arises once a tenant defaults payment of rent. Rent includes any amount described as such in the lease agreement such as service charge and insurance contributions. After a landlord assumes custody of the tenants goods pursuant to the right of distress, a lien in favor of a landlord comes into effect by operation of law. In the case of Commercial Credit Corp Ltd v. Harry D. Shields Ltd. (1980), It was held that the right to distress was not provided by statute but statute places upon various restrictions and limitations. The common law right to distress did not provide for the landlord to sell the held property and as such the right to sell derives from the statute. Rent Distress Act s. 7. (Matauschek2010). The right to distress can apply only in opposition to an occupant with whom the landlord has privity of estate with at common law Gamieson v. London & Canadian Loan & Agency Co. further, Section 3(2) of the RDA provides that a landlord can seize for rent opposing the person of the tenant responsible for the rent. Therefore the definition of tenant in section 3(1) of the RDA is construed to even include a subtenant, who during the period of the lease acquires the consent of the tenant to be actual occupation of the leased premises whether or not he has become the occupant of the landlord’s premise. This was held in the case of Smart Woman Ltd. v. Saleway Estates Ltd. (1987) (Matauschek 2010). In enforcing the right to distress, the landlord or his bailiff is restricted from breaking into the leased premises. Where the landlord goes against this restriction, the distraint becomes illegal as the court held in Beaver Steel Inc. v. Skylark Ventures Ltd. (1983). As such the court established in Tutton v. Darke (1860) that access must be via the recognised ordinary means of entry to the leased premises, that is through authorized means of access such as an unlocked door (Mackenzie & Phillips 2014). The general rule is that the right to distress can only be enforced against goods originating from the leased premises. However, the court has held in Gastown Investment 21 Ltd. v. Purple Onion Cabaret Inc., [2005] that a landlord cannot enforce this right against those goods that have a legal right only such as a liquor license. Moreover, this right is also not available for fixtures that have been annexed to property such as to be considered part of it, including a tenants trade fixture since it is also considered as to have become part of the property. Ontario Ltd. v. Starmark Property Management Ltd. (1998) (Mackenzie & Phillips 2014). A statutory exclusion to the common rule is created by Sections 11 to 15 of the RDA. Section 11 establishes that where a tenant fraudulently removes goods from the leased premises so as to defeat the landlord’s claim of enforcing the right to distress, the landlord is empowered to pursue such goods and seize them wherever they will be found within 30 days. Additionally the court held in the case of Levinson-Viner Ltd. v. Gaudreau (1984) where the fraud is proved then the tenant will be liable to a penalty identical to twice the amount of the removed property (Mackenzie & Phillips 2014). Section 3(2) of the RDA establishes that a landlord can only enforce this right against the goods of the person of the tenant responsible for the rent and not against goods of a third party on the property. Therefore, the landlord is required to ascertain whether the party against whom he seeks to enforce this right falls under the ambit of sec 3 RDA before providing a warrant to seize. BC Rail Ltd. v. Biro, [2001]. However, the court held in the Alliance Marble and Granite Ltd. v. Molti Ventures Inc., [2003] that where the landlord has a reasonable belief that the tenant own the goods, and no notice has been given to contradict this, then the landlord will be permitted to go into the premises and enforce this right against such goods. In the Pop NJuice Inc. v. 1203891 Ontario Ltd., [2004] case where a landlord knowingly and intentionally enforced the right of distress against the goods of a third party, the court held the conduct of the landlord as conversion. Additionally, this remedy is statute barred under the Limitation Act to a period of six years from the date that the rent fell due (Mackenzie & Phillips 2014). In addition, where the landlord had entered into an express or implied agreement as to not enforce the right of distress against such goods if the tenant defaults paying rent, he will be estopped from restraining such goods. Wallace v. Fraser (1878). When the tenant tenders the full amount of the rent to the landlord, any subsequent distress will be illegal. A distraint will be taken to be unwarranted if extra goods are seized than is necessary to fulfil the rent due or where a distress is prepared for more rent than is due. Derby Reach Restaurant Ltd. v. Odyssey Holdings Ltd. Where there is rent in arrears, then a distress is lawful. Tancred v. Leyland (1851) (Mackenzie & Phillips 2014). The right to reentry The second remedy that can be exercised by a landlord is the right of re-entry that is also a self-help remedy. The right lets a landlord re-enter and retake possession of the premises before the expiry of the period of the lease. This right is available upon default of a fundamental condition in a lease agreement such as the payment of rent by the tenant. Therefore, the majority of commercial leases are construed to let the landlord terminate the lease agreement and retake possession of the leased premises upon default of such a condition (Garner &Frith2010). In exercising this right, it is important for the landlord to realize that termination of the lease and re-entry of the premises are different steps under the lease. The importance of treating them as different steps has been held to aid a landlord not to overlook any pre-conditions to the rights in the lease. As such, the court held in Francis v. Clarke, [1999] that where the landlord overlooks the pre-conditions in a lease agreement, it will be materially hinder the landlord from enforcing re-entry (Garner &Frith 2010). Notice of default The landlord in an addition must adhere to certain procedural steps in enforcing this right such as the issuing a default notice. The majority of commercial leases have default notice provisions requiring the tenant to cure the default within a stipulated time failure to which the landlord is empowered to exercise the right of re-entry. The Interpretation Act provides guidelines that will assist the landlord in calculating the grace period stipulated in the notice of default. The court has held that where a landlord fails to give the tenant a notice of default, the tenant may be awarded damages for wrongful termination Tsoukalas v. Domgroup Properties Ltd., [1993] (Garner &Frith 2010). Notice of re-entry and termination of lease After lapse of reasonable time upon the landlord serving a default notice to the tenant and the tenant fails to take any affirmative action to remedy the default, the landlord may then serve a notice of termination of the lease and a notice to re-enter to the tenant. Additionally, the landlord may serve the tenant ith a notice as to the aim to claim for damages for the default rent and breach of contract. Highway Properties Ltd. v. Kelly Douglas & Co. Ltd. (1971). The landlord at this stage is no at liberty to retake possession of the premises upon serving a notice of the same. Burlington Northern Railroad Co. v. Baseline Industries Ltd (Matauschek 2010). Re-entry entails taking physical possession of the premises which can be effected by the landlord or an experienced bailiff appointed by the landlord. The use of a bailiff is to reduce chances of conflict likely to arise. However any damage caused to the tenant by the bailiff is the liability of the landlord to bear and as such it is important for the landlord to give the bailiff clear guidelines of enforcing re-entry(Abbey & Richards 2009). The landlord may also opt to take the position that the lease remains in full force and effect and consequently sue the tenant for any rent arrears. The right is available here the landlord wants to preserve the landlord-tenant relationship, and therefore it entails holding the tenant to its duty under the lease agreement. The tenant can raise a defence that the landlord has also failed to fulfil its obligations under the lease in such an action in court. Javins v. First National Realty Corp (Matauschek 2010). Qn2 A break clause is a provision mostly in commercial leases that allow any of the parties to a lease agreement to bring the lease to an early end before the expiry of the lease. Once contained in the lease, the break clause may set out the form of serving notice must be served and the procedures thereto. A failure to adhere to such procedures invalidates the notice. Therefore in drafting the break clause, the landlord and the tenant must ensure to the highest degree that it is not ambiguous as to the break date and the required period for the notice (Abbey & Richards 2009). Particular conditions that are contained in the tenant’s break clause are usually attached to the break clause, and it is mandatory that they are performed. Typical pre-conditions found in majority of break clauses are such as: The tenant must have clear all the rent arrears under the lease The court has been clear on the numerous of the court cases that have come as a result of this condition that where the contrary is not proven, the tenant must pay the full rent where the break clause falls between quarter days and not apportion the rent to the break date. In instances where there is no provision to the contrary, the tenant may fail to get a refund for any rent prepayments paid after the break date (Bevans 2009). The tenant must give up vacant possession Vacant possession entails a little more than giving up occupation in that the tenant is required to remove all chattels and goods from the premises. Tenant’s fixtures that have been affixed to the premises are only removed where the lease agreement provides for such. On the break date, no persons of the tenant such as employees or subtenant are to be in occupation of the premises. Therefore, the tenant is required not to do any act that may portray his continuing enjoyment to use the property or materially impedes with the landlord’s right of enjoyment of the property (Bevans2009). The tenant must have complied with the tenant’s covenant The tenant is required to have substantially complied with its obligations under the lease. Such obligations entail the duty of the tenant to keep the premises clean and in a reasonable state of repair that is tenantable. Therefore, where a tenant tampers with the condition of the premises, it will be in breach of a tenant agreement under the lease (Bevans 2009). Settlement This is whereby the parties to a lease agreement agree to come to a financial settlement pertaining to any preconditions in the lease agreement in advance of the break date. The aim of the settlement is to cover any dilapidation and consequently release the tenant from the break preconditions. The landlord can thereby use the settlement to remedy any dilapidation in the premises. The 2007 Lease Code sets out the preconditions contained in a break clause that may be settled (Mcqueen2013). Qn3 Part II of the Landlord and Tenant Act 1954 establishes the security of tenure of business tenants. Security of tenure is the right to stay in the business premises when the lease ends. Therefore a lease that is granted outside of part II of the Landlord and Tenant Act 1954 means that the tenant will have no legal rights to stay in the premises when the lease ends. In the place where a the lease comes to an end, the tenant will have no option to renew for another lease unless the landlord so chooses. Where the landlord so chooses to renew the lease, the tenant will not be able to go to court to fix the rent for this new lease. Moreover, the tenant will be unable to lay a claim for compensation in case of a loss of the business premises (Garner &Frith2010). Therefore the first step required of a tenant who intends to take a lease outside part II of the Landlord and Tenant Act is getting professional advice from a lawyer or a qualified surveyor before giving up the rights to Part II of the Act. The tenant will then be provided with a notice declaring that they have received professional advice as to the consequences of the lease. Upon lapse of 14 days from the receipt of the notice, the tenant is required to sign a declaration of acceptance of the lease and its consequences within. If the tenant does not receive a notice of at least 14 days, they will need to sign a statutory declaration that is administered by an independent solicitor (Card & Murdoch 2011). References: GARNER, S., & FRITH, A. (2010). A practical approach to landlord and tenant. Oxford [England], Oxford University Press. CARD, R., MURDOCH, J. R., MURDOCH, S., & CARD, R. (2011). Real estate management law. Oxford, Oxford University Press. MCQUEEN, J. (2013). An Emerald guide to landlord and tenant law. MACKENZIE, J.-A., & PHILLIPS, M. (2014). Textbook on land law. ABBEY, R., & RICHARDS, M. (2009). A Practical Approach to Commercial Conveyancing and Property. Oxford, OUP Oxford. http://public.eblib.com/choice/publicfullrecord.aspx?p=665469. BEVANS, N. R. (2009). Real estate and property law for paralegals. New York, Aspen Publishers. MATAUSCHEK, J. (2010). Rent adjustment and tenant default in English and German commercial property leases. [Place of publication not identified], Peter Lang. Read More