Landlord & Tenant

Question 1

What is the Landlord and Tenant 1954 Act?

Answer 1

Protects business tenancies and provides security of tenure.

Provides 2 elements is security:
1. Statutory continuation - section 24
2. Right to renew - if can’t agree, go to court. Can be opposed or unopposed renewal

Designed to protect business tenant as they stand to lose goodwill they have built if have to leave at lease expiry.

Question 2

What is the Landlord and Tenant Act 1927 (Section 19 (2))?

Answer 2

Related to improvements and alterations.

Section 19 LTA 1927 stipulates that consent for an alteration cannot be unreasonably withheld if it is an improvement.

To withhold such consent, landlord must show that improvement is detrimental to property’s value.

Also relates to licence for alterations - here tenant to submit application with spec and plans.
Landlord has 3 months to reject, if not, the Act can make the landlord lose this right.

Question 3

What is the Landlord and Tenant (Covenants) Act 1995?

Answer 3

Came into force on 1st Jan 1996

The Act abolished privity of contract and privity of estate.

Background of the Act:
Original tenants would be indefinitely liable for the covenants of a lease even after assignment.

The Act aimed to release a tenant of future liability.

Landlords would still have remedies for breach of covenants.

The Act introduced Authorised Guarantee Agreement (AGA) - outgoing tenant can agree to guarantee performance of the covenants of the incoming tenant.

Provides protection for the landlord.

Privity of estate abolishment means that landlords are bounds by the covenants so liability passes into new landlord.

Question 4

What is the Landlord and Tenant Act 1988?

Answer 4

Applies to alienation clause to give consent - assignment, sublet, underletting, charging

Landlord under 3 main duties for consent:
1. give consent (except where it is reasonable to withhold it) and to do so within a reasonable time
2. serve on the tenant written notice of their decision whether or not to give consent. The written notice should detail any conditions that the consent is subject to and if the consent is withheld, the reasons why.
3. pass on applications for consent to others whose consent is also needed (that is, superior landlords or freeholders) within a reasonable period of time.

The Act introduced a procedure to obtain consent.

Applies where the lease contains a qualified prohibition against assignment.

Only applies to applications after 29 September 1988.

Tenant must serve written application for consent to assign, landlord to reply in writing (no stipulated time).

If consent refused, landlord must give reasons.

If landlord doesn’t reply or withholds consent unreasonably, tenant can go to court for damages.

If tenant assigns without consent when required, ground for possession by landlord.

Question 5

What is a tenancy at will?

Answer 5

Does not create a legal interest

Either party can terminate at will

Staying on can result in trespassing

May be difficult to get tenant out if they are operating the same way as a secured tenant.

Question 6

What is a trespasser?

Answer 6

A person entering someone’s land or property without permission

Not consented

Defines their legal rights if injured on the land due to negligence of property owner

Must be intent to trespass in place

Question 7

What is a periodic tenancy?

Answer 7

A rolling tenancy with no fixed end date, ie. an AST

Periodic tenancy does not end until notice is given

The rolling period depends on intervals of when rent is paid

Question 8

What is tenancy at sufferance?

Answer 8

When a tenant wrongfully holds over past the end of the duration of the tenancy - more common in contracted out leases

The lease conditions must still be met including payment of rent.

Question 9

What is a continuation tenancy?

Answer 9

Tenant stays in occupation after lease expiry by virtue of Section 24 LTA 1954

Continuation tenancy - holding over

Section 24(a) allows for interim rent

Section 24 states that a lease continues until lease terminated

Question 10

How to end a business tenancy with security of tenure?

Answer 10

Landlord to serve Section 25 Notice to terminate

Notice must be served between 6 and 12 months before the landlord wants the present tenancy to end.

The date specified in the notice can be the last day of the lease or any day after that

Section 25 cannot be served if tenant has served Section 26

Landlord can serve notice to oppose renewal (on certain grounds) or unoppose renewal

Once served, can only be withdrawn if landlord transfers ownership to new landlord

If tenant does not respond to notice, lease continues on landlord’s proposed new terms if unopposing renewal

If opposing renewal and tenant doesn’t respond, lease will end on date in Section 25 notice

Where tenant does respond to the notice, they can negotiate terms without court

Where the tenant responds and contests the opposing notice, landlord to apply to court to convince on the grounds to oppose new lease

Can settle before reaches court

Tenant can serve a Section 26 Notice to request a new tenancy

The tenant has the right to ask for this

The landlord cannot refuse renewal unless landlord has ground under the 7 stipulated to oppose

Landlord must respond to Section 26 in 2 months of receipt or date stipulated in notice if they wish to oppose new tenancy

Tenant can pre-empt landlords section 25 and propose terms first

Tenant must send section 26 Notice between 6 and 12 months before they want the new tenancy to start with a new tenancy start date

If landlord already send Section 25, tenant cannot serve Section 26 proposing new lease

If both parties happy to renew as per Section 26 terms then lease can renew on date specified in the Notice.

If landlord opposes Section 26 renewal, either party can apply to court

Court will either uphold landlords opposition or grant new tenancy and settle terms

Question 11

What is Section 27 of the Landlord and Tenant 1954 Act?

Answer 11

Allows tenant to end tenancy on or after contractual expiry

By virtue of Section 24, a business tenancy will continue until brought to an end

Tenant to provide 3 months notice as follows:

Scenario 1 - tenancy yet to expire, contractual end date 3 months in future. Under Section 27(1), May serve 3 months notice on landlord to end tenancy on expiry date

Section 27(1a) provides that tenancy will come to end on contractual expiry if tenant has vacated on or before that date

Serving notice is preferable to prevent continuation tenancy arising

If tenant relies on Section 27(1a) must take care to ensure vacates fully and on time

Scenario 2 - tenancy has continued beyond contractual expiry

Under Section 27(2), tenant to serve not less that 3 months notice to bring tenancy to an end.

No prescribed form for Section 27 but must be served in writing and recorded delivery or special delivery recommended. Notice must be served on competent landlord

Question 12

What is section 28 of the Landlord and Tenant Act 1954?

Answer 12

Refers to contracted out lease, states that current tenancy continues to date of expiry but no longer

Does not have security of tenure as not protected by the Act

Question 13

What is Interim Rent?

Question 14

Tell me about a key clause you are aware of

Answer 14

Break clauses:
Allows one or both parties the right to terminate the lease prematurely

Tenant may wish to exercise break in volatile market where business not doing so well

Tenant may want to exercise break where business is doing well and needs larger premises

Landlord may need property back

Break clause likely to be subject to conditions such as rent paid to date, compliance with repair obligations or vacant possession

Break clauses require the service of a notice - lease stipulate notice period

Tenant must ensure conditions of the break clause are met - failure can mean invalidated break clause, tenant u able to break the lease and have to serve out remainder of lease

Rent review clause:
No standard form of rent review or guiding legislation

Rent reviews clause found in commercial leases

Following case of Basingstoke & Deane Borough Council v Host group (1987), rent reviewed for 2 reasons:
1. To obtain market rent
2. To reflect changes in the value of money and the property

Landlords typically seek a higher rent and tenants the opposite

Many rent reviews agreed by negotiation

Where there is a breakdown, the rent review clause will provide a third-party dispute resolution such as arbitration of independent expert

Ultimately lease outlines how a rent is to be reviewed

May also need to scrutinise other documents such as rent review memorandum, deed of variation agreements for lease, licence to alter or assign

Assignment clause:
Allows a tenant to transfer their lease to another party

Likely to need landlord’s consent - see lease

Landlord may enforce restrictions

Once assigned, new tenant is completely responsible

Landlord can request an AGA

Checks by landlord for assignment -
- new tenant’s financial status
- references
- proposed use of the premises
- likelihood of alterations

Question 15

What is alienation?

Answer 15

The right for a tenant to transfer or share their interest in the property such as assigning, subletting or charging

This right might be restricted, granted or prohibited depending on the lease

*The Landlord and Tenant Act 1927 restricts provisions in a lease where the landlord requires to give consent to assign or sub-let. The landlord is bound that their consent should not be unreasonably withheld

Question 16

What is the difference between an assignment and a subletting?

Answer 16

Assignment:
All covenants and obligations are handed over

Subletting:
Tenant keeps control of the tenancy and still pays rent under the original lease

Subleases are shorter to make sure the original tenant can end

Sublease would be contracted out to prevent security of tenure

Question 17

Tell me about you understanding of the Code for Leasing Business Premises

Question 18

How would you summarise a lease?

Answer 18

A business lease is a contract between a business tenant and a landlord for commercial or business use

Business lease can be contracted-out or have security of tenure by virtue of LTA 1954

Question 19

Terms to look for in a lease

Answer 19

Parties - landlord and tenant
Premises - description and location of the property
Use - the purpose and activities
Term - duration of the lease, start and end dates
Rent - the amount and frequency of payment

Other terms:
Service charge
Repairing obligations
Alienation
Payment of business rates, utility bills, VAT, etc.
Break clause

Note: implied covenant for landlord is to provide quiet enjoyment

Implied covenant for tenant is to pay rent, rates, tax, not let building fall into disrepair, use property in tenant like manner

Question 20

What is an expert witness?

Answer 20

A surveyor who provides expert evidence to the court

They have a duty to the court rathe than the client or tenant

Their representations must be impartial, based on facts and not influenced by client

*RICS Professional guidance: Surveyors Acting as Expert Witnesses, 4th edition

Question 21

How does the role of an expert witness change from when you are negotiating?

Answer 21

*relate to an actual rent review dispute

Landlord and tenant unable to agree rent
Lease includes clause re. dispute resolution
Now parties can appoint third party such as arbitrator or independent expert
Lease sets out which - 96 Westgate Street stated arbitrator
To appoint third party, must submit DRS1 form to the RICS
Once form submitted, third party appointed - writes to all parties to agree terms of appointment, procedure and fee basis

The role of the surveyor now changes to being an expert witness and has duty of care to the court, not the client or tenant

The Expert witness sets out statement of agreed facts to the appointed third party

Facts can be comparable evidence and lease terms

Each party’s Expert witness submits representations to the third party

These are swapped allowing counter representation

Representations are considered by third party who then issues Final award (arbitrator) or Determination (independent witness)

Question 22

How does an advocate differ from an expert witness?

Answer 22

Advocate - represents and argues for clients interests

Expert witness - has a duty to the court and provides impartial facts to third party

Both roles cannot normally be carried out by the same person however some small tribunals allow this - dual role

Question 23

What is arbitration?

Answer 23

Governed by the Arbitration Act 1996

Arbitrators have the power over all costs - both theirs and other party’s costs regardless of what lease says

Third party receives written or verbal evidence at a hearing from the party’s representatives and makes a legally binding decision

Arbitrator has powers of discovery, ie. disclosure of documents or calling witnesses and power to award ALL costs

Their are very limited ground of appeal against arbitrator’s award

Question 24

Can you challenge an arbitrator’s award, if so, on what grounds?

Answer 24

Yes, can be challenged under Arbitration Act 1996, following grounds:

Section 67 - substantive jurisdiction
Section 68 - serious irregularity affecting tribunal
Section 69 - appeal on a point of law

*I would refer to RICS Professional Guidance: Surveyors Acting as Arbitrators in Commercial Property Rent Reviews, 9th Edition

Question 25

What is an Independent Expert?

Answer 25

Is appointed by the parties to give an expert opinion on the dispute

Listens to both sides as a neutral third party

Makes a determination that is final and binding

Costs are dependent on the wording in lease

Both parties pay independent expert’s costs and bear costs for themselves

Can challenge but very difficult

Question 26

Can you challenge an expert’s determination?

Answer 26

Yes, possible but very difficult, following grounds:

1. If show that expert biased
2. If decision is corrupt by fraud or dishonesty
3. Expert materially departed from their instructions

*I would refer to the RICS Professional Guidance: Independent Expert Determination, 1st Edition

Question 27

How much does it cost to submit DRS1 form?

Answer 27

£425.00 plus VAT. It is non-refundable

Question 28

What is the difference between hypothetical lease at a rent review and a lease renewal?

Question 29

What is PACT?

Answer 29

Stands for Professional Arbitration on Court Terms

Was introduced in joint collaboration with RICS, Law Society and Independent Surveyors in 1997

Main advantage, landlord and tenant can choose who determines terms of new lease

Can appoint industry experts with knowledge in subject rather than routine court determination

PACT advantages:
Flexible
Cost-effective
Similar procedure for rent reviews
Parties can control timing
Avoid delays and cost by court

Some however argue that court is predictable

Question 30

How do in and out of court PACT differ?

Answer 30

Out of Court (parties agree with third party):
Parties identify issues on new lease and agree how to resolve

Parties agree on choice of third party

Depending on which is chosen, award or determination made

In Court (if parties can’t agree, court agrees):
Proceedings can be stayed as adopting PACT

Question 31

What are the Jackson Reforms?

Answer 31

This is a review of the civil litigation costs in England and Wales

Conducted by Lord Justice Jackson in 2009, final report presented in Jan 2010

The Reform has put a stop to ‘no win, no fee’ claims

Success fee is no longer recoverable from the losing party

Losing party now liable for only solicitor’s base costs - since 1st Apr 2013

Question 32

What is a calderbank offer?

Answer 32

An offer ‘without prejudice save as to costs

Get Calderbank offer in before start incurring costs in dispute resolution, first cost likely to be DRS1 form (before starting third party)

Background:
Brought about after divorce case in 1976

Judge reached offer that husband did not agree on and persisted on proceedings

Husband got less than the offer made originally so was granted to pay all costs

Since calderbank offer are WPSATC, they can only be drawn to the attention of the third party on matter of costs

Genuine attempt to reach settlement without third party

If accepted, legally binding and rent review is settled

Question 33

Option in Rent Review if Calderbank not accepted?

Answer 33

Arbitration or independent expert depending on wording in lease

Arbitrator has control over all costs regardless of lease wording

Parties could agree cost position or third party to award

Other option is to go to court if calderbank not agreed

Court will see if genuine attempt to settle, if offer was clear, if left open for reasonable period

If tenant rejected calderbank, Omi’s on tenant to prove why not reasonable

Once judgement made and outcome awarded less than calderbank offer, then tenant may have to pay legal costs from the time the offer was rejected

Question 34

What is a calderbank letter?

Answer 34

A formal letter, written offer of settlement to encourage negotiation

Key terms:
- Property address
- both parties
- rent review date
- proposed settlement figure
- cost position before and after expiry of offer - while offer is open, both parties bear own costs and 50% of third party costs. After expiry, all costs fall to other side
- how long the offer is open
- confirmation of WPSATC so offer will be presented to third party on matter of costs only

Question 35

Can you serve calderbank offer at lease renewal,

Answer 35

Yes, where parties cannot agree terms of an unopposed lease

WPSATC basis as well

Question 36

What is a Part 36 offer?

Answer 36

Is a claim to settle a dispute without going to court

An offer used to settle a dispute in civil litigation governed by Part 36 of Civil Procedure Rules (CPR)

Rules to Part 36 offer:
1. Must be in writing and state that it’s a Part 36 offer
2. Must specify 21 days for the offer to remain open
3. State if the offer is for whole or part of the claim
4. Must be a genuine offer to settle

If one party makes an offer which is rejected by other party, other party fails to do better at trial, the first party is able to recover legal costs as well as 10% additional award as compensation

Question 37

What does Section 34 relate to in a lease renewal?

Answer 37

Refers to rent payable - court can decide on rent if parties can’t agree

Gives court the power to determine the level of rent at lease renewal

In the absence of agreement, the rent payable will be open market rent disregarding occupation, goodwill and improvements

*case law - WHP Ltd and another v JD Sports (2021)
- Landlord sought turnover rent on lease renewal (unopposed renewal)
- court considered rent in the open market, by a willing landlord, on the same terms and disregarding tenants goodwill, occupation and improvements
- while the courts can set a turnover rent, in this case it was decided that a turnover rent considers the tenant’s business and goodwill during the previous lease
- judge therefore ordered a fixed rent based on comparable evidence

Question 38

What is compensation for disturbance?

Answer 38

Relates to compulsory purchase order (CPO)

Part or all of a property can be acquired in the public interest, even against wishes of property owner

Compensation is paid to the owner for disturbance

CPO can be used to acquire privately
owned land for new infrastructure

Question 39

Compensation for disturbance under ground e, f, g

Answer 39

Tenant entitled to statutory compensation

Compensation assessed at 1x the rateable value of the property OR or 2x if tenant been in occupation for 14 years or more

Leases can exclude payment of compensation but lease takes precedence if tenant been in occupation for last 5 years up to date of quitting

Question 40

What are the Section 30 grounds under LTA1954?

Answer 40

a - breach of repairing covenants - failure to keep building in repair
b - persistent delay in rent payment
c - other substantial breach
d - suitable alternative accommodation
e - Uneconomic subdivision - tenancy created by subletting
f - landlord intends to redevelop/demolish
g - own occupation

Ground e, f, g tenant entitled to compensation

Ground f - landlord to be able to show redevelopment or demolition through spec, plans, planning application, funds

Question 41

What does Section 18 mean in relation to LTA 1927

Answer 41

To do with dilapidations

Limited the amount a landlord can claim from tenant for breach of repairing covenants

There are 2 limbs:
1. Diminution of value - value of repairing works exceed the value difference between the property in repair and not in repair
Example - property worth £100,000 in disrepair and £150,000 in repair. Claim for repair is capped at the difference so £50,000

2. Supersession - cannot claim for repairs and decorations if intend to demolish

*decorations used to be excluded from Section 18 but case of Latimer v Carney (2006) the repairing covenant of not decorating was breached

Question 42

Tell me about the LTA 1954 in relation to contracting out a lease? How and why?

Answer 42

LTA 1954 gives security of tenure by virtue of section 24-28

Parties can however choose to opt out of protection and contract out of the 1954 Act meaning no statutory right of renewal

Why contract out?
- current economic climate - test the market
- provides flexibility - landlord may need building back
- avoids void costs for landlord
- tenant may move location

How to contract out?
3 main stages:
1. Landlord send tenant a warning notice of the protection they’ll be signing away
2. Tenant makes formal declaration to say they have read and understood the notice and accept the consequences
3. The parties sign the lease which expressly contains the contracting out agreement

Warning notice must be served at least 14 days before the tenant is contractually bound

After 14 days, tenant signs simple declaration stating that notice received and consequences accepted

If parties cannot/do not wait 14 days, can sign statutory declaration but to be signed by independent solicitor as well

Question 43

What is Section 40 of the LTA 1954?

Answer 43

Duty of tenant and landlords of a business premises to give information to each other

Gather information to be able to make a decision on lease renewal

When can a Section 40 Notice be served?

Any time but common to serve before section 25 or 26

Both parties must respond in one month

Have an obligation to tell other side of change of fact for a further 6 months

What information must a Section 40 provide?

Landlord will be seeking information to see if there has been a contracting out of any subletting or if a section 26 has been served

Tenant will be seeking if there is a superior lease in place or if section 25 has been served

Question 44

What tenancies are covered by the LTA1954 (part 2)?

Answer 44

Section 23 sets out the provisions to satisfy the 1954 Act to apply

A tenancy is in the Act if part or whole is used for business purposes

Following tenancies excluded:
- agricultural tenancies
- service tenancies (employer provides accommodation for a worker)
- licence
- tenancies granted for less than 6 months

Question 45

What is the difference between a lease and a licence?

Answer 45

Leading case is Street v Mountford (1985)
- Here the tenant was granted a fixed term tenancy at a rent with exclusive possession
- landlord argued that licence was in place as agreement stated ‘licence’
- the decision was made that as there was exclusive possession, this created a lease - labels are irrelevant!

What is a lease?
- gives right of exclusive possession
- a lease has a fixed term
- a rent is payable (even if peppercorn)
Key element of lease is that it gives exclusive possession

What is a licence?
- permission to do something on another’s property
- prevents occupier from being a trespasser
- licence still has a rent and fixed term but no exclusive possession

*leases granted for over 7 years will be registered at Land Registry and noted against owners property title

Question 46

What is ‘subject to contract?’

Answer 46

A label which means parties are still negotiating and not yet reached a final, binding agreement

Head of Terms are subject to contract and not legally binding

*Note: if obligations in HoTs are performed before contracts are signed, those terms could become binding regardless of subject to contract

Question 47

What is ‘without prejudice?’

Answer 47

Both verbal and written can be WP

Basically saying that while I am trying to settle this dispute, I am not admitting anything I shouldn’t or waiving any rights that can later be used in court.

WP means that such conversations cannot be shown in court

The point of WP is to encourage settlement without parties weakening their position

WP allows parties to converse openly without fear of what is said being used against them in court or arbitration

*used in rent review negotiations

Question 48

What is ‘without prejudice save as to costs?’

Answer 48

If dispute not settled and judgement given, ie. rent review settled then document can be referred to to consider cost entitlement - also known as calderbank offer

Basically WPSATC can be used to persuade court that one party has acted reasonably in trying to settle the claim before a decision (or another party has been unreasonable in refusing the settlement)

Question 49

Difference between without prejudice and without prejudice save as to costs

Answer 49

Without prejudice:
Won’t be able to show letter to the courts after final decision unless either side gives consent (unlikely)

Without prejudice save as to costs:
Will be able to show letter in court of aiming to settle dispute at the stage of costs consideration without getting other side’s consent

Question 50

What does time of the essence mean?

Answer 50

Time is of the essence means a performance by one party to another to exercise a right

Failure to exercise within time limit means that right is lost

Generally, rent reviews not time of the essence unless specified

Time is of the essence in the following:
- Break clauses - time is always implies of the essence unless stated not to be
- serving notices at lease renewal

*AWG Group limited v HCP II Properties Ltd - rent review case, time not of the essence, landlord initiated rent review over a year after the rent review date. This is because time was not of the essence so landlord did not waive its right.

Question 51

When do rent review notices need to be served?

Answer 51

Rent review initiated by landlord - 90 day notice

Although no specific timing, depends on wording in lease

Trigger notice - landlord will give notice to tenant with regards to increase in rental rates and the date rent change will take effect

After trigger notice, lease may contain requirement for a counter notice by tenant

If can’t agree lease will give options for calderbank or third party

Question 52

What is the valuation date at lease renewal?

Answer 52

Valuation date is the commencement date of new lease

If the matter goes to court then valuation date is date of hearing

If goes to court, rent and commencement dates are at least 3 months after the hearing date

Question 53

What are the different types of rent review?

Answer 53

• Open market rent (rack rent - best rent obtained on the open market):

Rent is reviewed based on comparable evidence on the open market. Commonly upward only to protect landlord from downturn in the market then rent would remain unchanged

• Index linked to track inflation:
  Retail Price Index (RPI) - looks at average changes for the price of goods and services that are purchased

RPI means fluctuating rent but usually upward

RPI calculations are prone to mistakes, for example:
Say rent review year 5 and year 10
Annual rent is £10000
To calculate year 5 take RPI from commencement of lease
To calculate year 10 take RPI from year 5
Common mistake is to take from commencement date again for year 10!

Consumer Price Index (CPI) - looks at the rate at which prices of goods and services rise or fall

Used to measure governments rate of inflation

Index linked rent reviews are not preferred option for landlords as they track inflation and UK has not seen high inflation until recent times

• Geared rent:
  Usually in a lease between a superior landlord and a tenant such as developer or investor with multiple under tenants

Tenant pays basis ground rent to superior landlord based on percentage of open market

• Turnover rents:
  Becoming more popular since covid

North warehouse (Level 3):
I monitor and review the turnover accounts for this building
The lease states that turnover rent is 80% of the profit
Profit calculated as gross turnover less direct costs and overheads
I review P&L statement and advise my client if figure looks correct on quarterly basis
I check against previous statements to understand variances
Audited accounts are provided to ensure confidence and trust
I refer matter to accounts team if unsure

• Fixed increases:
  Set at commencement of lease as a set figure or percentage increase

Question 54

What is a hypothetical lease?

Answer 54

At rent review (or lease renewal) the review takes place by pretending a new hypothetical lease will be entered into

Hypothetical lease is based on exactly the same terms as existing lease but with assumptions and disregards

Rent is reviewed to match the rent of the hypothetical lease at the date of review

Assumptions and disregards are for fairness, ie. if tenant let property fall into disrepair, rent would be low (benefit to tenant), if tenant made improvements, rent would be higher (benefit to landlord)

Question 55

What is a rent review assumption/disregard?

Answer 55

Assumption that certain fact is assumed to exist such as:
- tenant has net repairing obligations
- covenants have been fully observed
- interior decoration taken place as agreed
- property is in fit and immediate occupation for use

Disregard that certain facts are not to be taken into account such as:
- tenant’s goodwill (can increase value)
- improvements by tenant

Question 56

Case Law for rent review

Answer 56

Mono solar IQ v Woden park Ltd (2021)

RPI rent review
25 year lease for a solar farm
Under formula review, rent would have increased to £76m! compared to initial £15000 p.a
The courts agreed with the landlord re. wording in lease but accepted that calculation was incorrect
Court corrected the error
Lesson to double check index linked rent

Question 57

Case Law for break clause

Answer 57

Capitol Park Leeds plc v Global Radio Services (2021)

Question 58

Case law for lease renewal

Answer 58

WHSmith Retail Holdings Ltd v Commerz Real Investments (2021)

Essentially went to court of a few things specifically rent suspension clause trigger, rent payable and interim rent

Since WHSmith was allowed to stay open during lockdown as they had a post office, they argued that the trigger for the rent suspension should be the closure of non-essential retailers because the closure of the Westfield centre meant that footfall was substantially reduced.

The landlord argued that the trigger should be only if ALL retailers have to close including essential retailers.

The court found in the tenants favour as it was set in a shopping centre but did argue that may have been different on the high street.

Poundland has a similar situation re. Pandemic suspension clause where they felt that it should be included at rent renewal. Since the tenant was asking for the variation, the tenant had to provide the burden of proof. Poundland failed in doing this and the clause was not included in the rent renewal.

Question 59

Tell me about your understanding of the RICS guidance on dilapidations.

Answer 59

RICS Guidance: Dilapidations in England and Wales, 7th Edition

Guidance advises surveyors on:
- producing schedule of dilapidations
- quantified demands
- responses
- Scott schedules
- diminution values

Best practice measures as could be called as expert witness

Documentations required:
- head lease and sublease
- sealed plans
- licence for alteration with plans
- reinstatement notices
- assignment and licences to assign
- side letter or other agreements
- schedule of condition
- any notices under LTA 1954
- statement of landlord’s intention (supersession)

Inspection:
- Surveyor should check with landlord re. forfeiture or break clause - could
Invalidate both
- location when lease was granted
- standard of properties locally, boarded up, vacant, etc (diminution of value of landlord’s reversion)
- thorough inspection to identify breaches

Schedule of dilapidations and Scott schedule
- SofD records alleged breaches
- contains details of breach from lease
- itemised number reference
- relevant clause of breach from lease
- remedy required
- cost of remedy

Costed if remedy is damages.

Scott schedule is a table format and extended version of SofD. Includes a column for landlord and tenant comments for negotiation. Useful tool for resolving dispute.

Quantified demand
Sets out the sum sought by the landlord - totals the cost of works, loss of rent and service charge. Also includes fees for prep of SofD and negotiation fees.

Question 60

When to serve schedule of dilapidations and Remedies of Dilapidations

Answer 60

Dilapidations during the lease:
- Interim schedule
- served anytime from commencement until 2 years before expiry

Remedies available:
- damages (capped to diminution of value)
- forfeiture
- specific performance
- entry to carry out the work (Jervis & Harris)

Dilapidations at the end of the lease term:
- terminal schedule of dilapidations
- typically served within the last 12 months of the lease

Remedies available:
Only remedy available is damages to compensate landlord for losses - capped at diminution of value (LTA 1927, section 18).

Dilapidations after lease expiry:
- final schedule of dilapidations

Question 61

What is dilapidations protocol?

Answer 61

• Published by Ministry of Justice
• Sets out courts expectations of landlord and tenant regarding lease end dilapidations
• sets conduct to be met before court proceedings
• sets out standards and content for the quality of schedules, quantified demand, negotiations

Response to dilapidations claim
- protocol suggest parties meet within 28 days of tenant’s first response
- meetings should be without prejudice with aim to agree on items in dispute

Alternative Dispute Resolution
- protocol suggests ADR before litigation such as Independent Expert, RICS dilapidated resolution scheme, mediation, arbitration

Question 62

5 stages of dilapidations

Answer 62

1. Preparation (obtain all info)
2. Inspection (including location, character, standard of repair, original condition)
3. Preparation of schedule
4. Quantified demand
5. Response and negotiation (should meet within 28 days of service)

Question 63

What timings apply to dilapidation claim?

Answer 63

Protocol states serve dilapidated schedule within 56 days of lease termination as a minimum

Tenant to respond to quantified demand within 56 days of receipt

Use Scott schedule to express views on each item

Question 64

When would you consider ADR or litigation re. dilapidations?

Answer 64

Consider ADR in the first instance

If negotiations breakdown, consider litigation

Surveyor can be called on to be expert witness - duty then to the court

Question 65

What is an offer to settle re. dilapidations?

Answer 65

It is a settlement agreement whereby a full and final release is agreed of tenant’s dilapidations liability

I have been involved an various full and final agreements.

Talk about office block and carpet replacement. Landlord wanted like for like, tenant argued that it couldn’t be sourced.

The appropriate carpet was laid.

Settlement agreement should be:
- in writing
- names of parties
- the relevant lease
- the schedule of dilaps and quantified demands details
- be open and marked ‘without prejudice’
- state full and final settlement
- date for inspection and sign off as appropriate
- be dated
- signed by both parties

Question 66

Can you use a Part 36 offer in a dilapidations claim?

Answer 66

Yes, a tenant can make a Part 36 offer against dilaps claim plus the landlord’s costs to the time the offer is accepted as long as it is accepted in 21 days of the offer being made.

If landlord doesn’t accept in 21 days and does worse at trial, it will be ordered to pay tenants costs from 21 days after the offer was made.

Part 36 to be made WPSATC so that not disclosed to court until after judgement.
Costs with part 36 are received on a standard basis unlike calderbank which is at courts discretion.