All Legal/Regulatory Flashcards
What is Dilapidations?
Dilapidations refers to breaches of lease obligations by the tenant and usually refers to reinstatement, repair, redecoration, breaches of statute and associated costs.
What is a schedule of dilapidations?
A list of allegations of a breach of contract referring to specific lease covenants.
What is a fixture?
Something which has been affixed to the building and has therefore lost it’s chattel nature but has not become an integral part of the building.
What is a chattel?
Anything which is not an integral part of the building or a fixture. It is a ‘loose’ object.
What does the degree of annexation mean?
The degree of annexation refers to how firmly an object is fixed to the land and relates to the intentions of the party who put the object there for it to be removed or form an integral part of the building.
Can you tell me any dilapidations case law which relates to fixtures and chattels? (What was the outcome of this case?)
Holland Vs Hod
Looms for use in a mill were attached to the stone floor by nails in wooden beams.
Mill repossessed and the court awarded that the looms were fixtures despite that they could be easily removed.
It was held that the object ceased to be a chattel as the looms were installed for the convenience of the land and could not be enjoyed as a chattel.
What conditions must be satisfied for a fixture to be capable of being a tenant’s fixture?
Affixed by or on behalf of tenant
Fall within one of the categories of tenant’s fixtures
Fixed with the intention of removing as and when the tenant wished
What are the categories of tenant’s fixtures?
Trade fixtures – Attached to undertake trade / business
Ornamental and domestic fixtures
Agricultural fixtures
Under what scenarios has the tenant lost the right to remove their chattels and fixtures?
Forfeiture – Where tenancy forefeited, unless relief granted, no right.
Surrender – Tenant vacates without taking C&F, lost the right
Break – Right to remove ends on expiry of notice unless notice period too short. E.g. highly technically data centre needs more than say 4 weeks.
What happens to chattels and fixtures at the end of the tenancy which remain in the property?
The landlord can recover the cost of removing the tenants chattels
The tenant fixtures can either be removed, if in breach of alterations covenant or if left, left in accordance with the repairing covenant. Generally, the cost for either can be recovered from the tenant.
Can you name me some the landlord’s remedies?
Claim for damages post lease expiry/during the term.
Landlord undertakes the works (during the term).
Specific performance (during the term).
Forfeiture (during the term).
What is the purpose of damages?
To put the landlord in a position it would have been had the tenant complied with their lease covenants. It should reflect the landlord’s actual loss in the cost of repairs or the diminution to the landlord’s reversion.
What Act limits recovery of damages and when does it apply?
The Leasehold Property (Repairs) Act 1938
Applies to claims made during the term when the tenancy is over 7 years and there are 3 or more years remaining.
What does the Leasehold Property Repairs Act 1938 do?
The act limits the ability of the landlord to recover damages from a tenant for breach of repairing covenant during all but the last three years of the term of a lease.
It protects the tenant against forfeiture without the permission of the court.
What is a Section 146 Notice and what Act does it fall under?
A Section 146 Notice (breach of repairing covenant) is a notice served by the landlord on a tenant who has breached a repairing covenant in a lease.
It falls under the Law of Property Act 1925
What 5 grounds under the LPA 1938 can leave be given by the court to the landlord?
Immediate remedy to prevent substantial diminution
Immediate remedy to comply with byelaws/legislation
Immediate remedy needed in interest of occupier (third party)
Immediate remedy to prevent substantial cost increase in the works
Court render it just.
What is forfeiture?
When the landlord seeks to reclaim possession of the property.
How can forfeiture be undertaken?
What are the advantages and disadvantages of each method?
Peaceable re-entry (changing the locks or re-letting the building)
Court proceedings (the best way)
Peaceable re-entry has no legal fees but can leave the landlord open to a claim for damages if the forfeiture was unlawful.
Court proceedings are the best method but can be slow
What is the process of forfeiture?
Lease must contain forfeiture clause
Landlord serves valid S.146 Notice
Reasonable period of time passes and tenant does not comply.
If the tenant is protected by the 1938 Act, he can serve a counter notice within 28 days of receipt of landlord’s notice
Landlord cannot forfeit the lease without leave of the courts.
Tell me how the landlord can enter the property to undertake repair work
The lease may contain a right for the landlord to enter the property to undertake work. This is referred to as a Jervis Vs Harris Clause.
What happened in Jervis Vs Harris?
A landlord made a claim against a tenant having entered and carried out the specified work in default of the tenant.
The landlord recovered the cost of the works as a debt on demand and not damages.
It was held that the Leasehold Property Repairs Act 1938 was held not to apply.
What is the process of initiating a Jervis Vs Harris Clause?
Landlord serves notice in compliance with the clause served by a solicitor with a time period of say 2 months. The remedies are basic.
On expiry of notice, landlord can enter the premises and undertake works specified in notice.
Landlord can then recover the cost of the works as a debt.
What are the disadvantages of the Jervis Vs Harris Clause?
What happens if access is refused?
The landlord could leave himself open to as claim for breach of trespass and/or breach of quiet enjoyment.
Landlord has to forward front the cost of the works without certainty of recovery.
If access is refused, The Landlord will have to get an injunction from the court
What is specific performance?
Where no Jervis Vs Harris clause, the courts may grant a remedy for specific performance.
Injunction requiring the tenant to comply with the lease obligation
Can you list me some tenant’s remedies?
Damages
Self-help
Set-off
Insolvency
Frustration
How are damages calculated for the tenant?
What sum would put the tenant back into a position it would have been but for the breach of covenant by the landlord.
Allow a notional deduction in rent and a global figure for inconvenience and discomfort
What is self help
Talk me through the process of self-help?
If the landlord has been notified by the tenant about breaches of its repairing obligation but does nothing, the tenant can undertake the works themselves and seek to recover the cost from the landlord.
Process:
Tenant should notify landlord in writing and invite landlord to undertake works or at least inspect.
Tenant should retain photographs and obtain two competitive quotes for the work.
Tenant undertakes works and looks to recover the cost of the works from the landlord.
- What is set-off?
2. When might a tenant use this defence?
1:
Deduction from rent and other sums due to the landlord.
2:
When the tenant has carried out the works in default of the landlord not carrying them out.
The tenant should notify the landlord and state it will exercise right if work not undertaken.
Can you tell me some of the common conditions of a break notice?
Service of a notice
Payment of a premium
Providing vacant possession
Compliance with lease obligations
Paying all rents, service charge and insurance monies.
What is vacant possession?
At the moment that vacant possession is required to be given, the property must be empty of people and chattels and that the landlord is able to assume and enjoy immediate and exclusive possession, occupation and control.
- What are the different levels of compliance often seen in break clauses?
- What is the difference between these terms?
1:
Absolute compliance
Substantial / Material compliance
Reasonable compliance
2:
Absolute compliance can frustrate the break if there is a single breach of covenant, no matter how trivial.
Material or substantial compliance is less than absolute but more than a reasonable level o compliance. E.g. £20k repairs in a £1m scheme (Fitzroy)
Reasonable compliance is less than material compliance and court would look at a tenant’s conduct in carrying out any repairs.
What happened in Bairstow Eves (Securities) Vs. Ripley and what was the effect?
The tenant was required to decorate in the last year of the term.
The tenant had decorated just before the last year.
A condition had not been met and the lease failed to break.
Shows that if the condition was present, it should be complied with otherwise the lease can continue.
1: Can you name the Dowding & Reynolds 5 Part Test?
2: What Case would you associate with required state of repair?
1:
What is the physical subject matter of the covenant?
Is the subject matter in a damaged or deteriorated condition?
Is the nature of the damage or deterioration such as to bring the condition of the subject matter below the standard contemplated by the covenant?
What work is necessary in order to put the subject matter of the covenant into the contemplated condition?
Is the work none the less of such a nature that the parties did not contemplate that it would be the liability of the covenanting party?
2:
Proudfoot vs. Hart
Repair required ‘good and tenantable repair’. The kitchen floor was rotten so landlord argued full replacement
Age, character and location of the house fit for reasonably minded tenants.
If perfectly rotten, new floor. If it can be repaired as expected by a reasonably minded tenant, then this satisfies clause.
With regards to the Dowding & Reynolds 5 Part test, What elements should be considered when ascertaining the level of necessary work required?
The four strands to assessing the appropriate remedy:
1) Physically possible to repair defective item?
2) If it is not possible to effect a repair or repair now obsolete.
3) The effect of statutory improvements over the life of the lease.
4) Flexibility within the method of repair for breach of covenant.
Can you explain the difference between the words repair and condition?
Repair relates to the fundamental physical properties of an element
Condition relates to the appearance and aesthetics.
What does the Landlord and Tenant Act 1954 do?
The 1954 Act broadly gives business tenants security of tenure which is a statutory right to remain in their business premises when their lease ends and seek to agree a new tenancy.
How does the landlord exclude the previsions of the 1954 Act?
Service of a Section 25 Notice.
Landlord to serve tenant with a warning notice not less than 14 days before tenant committed to lease.
Tenant must sign simple declaration that tenant has read the notice.
Notice and declaration often found annexed or written into the lease.
With regard to the Landlord and Tenant Act 1927, what is a Section 18 valuation?
A Section 18 (1) valuation is an assessment of difference between the value of the landlord’s revision had the tenant complied with its lease obligations and the value of it in its actual condition.
Explain Section 18 (1) of the Landlord and Tenant Act 1927
Section 18 (1) provides a statutory cap on the landlord’s claim for damages under the repairing covenant at the end of the term.
It only applies to the repairing covenant.
What was the effects of Latimer and Carnery & Ors?
That case concluded that decoration may in some cases fall into the scope of Section 18 (1) owing to the particular wording of the covenant to repair. It referred to ‘decorative repair’
Explain Section 18 (2) of the Landlord and Tenant Act 1927
The effect of Limb II is to reduce the landlord’s claim in damages where the landlord has an intention to substantially alter or demolish the building.
Commonly referred to as supersession.
What was the effect of Sunlife Vs Tiger Aspect Holdings Ltd?
Sunlife Vs Tiger was able to demonstrate that even if the landlord has to carry out substantial upgrade works to a building following lease expiry, the cost of some of those upgrade works are recoverable from the tenant despite an argument of supersession
Sunlife was able to show that had the tenant complied with its lease obligations, only modest upgrade works would have been required to the property.
What is the difference between an interim, terminal and final SoD?
Interim is served during the term.
Terminal schedule is served around expiry.
Final schedule is served after expiry.
With regard to dilapidations, what is the surveyor’s endorsement?
A requirement of the Pre-action Protocol to confirm in that the option of the surveyor:
- All the works which are set out are reasonably required in order to put the premise in a condition as per lease
obligations
- Full account has been taken of the landlord intentions
- Costs are reasonable.
The surveyor should check with the landlord at each time (near end of lease and post expiry) before making endorsement.
What are consequential losses?
Loss of rent income, business rates, insurance premiums, service, income and cost of finance.
Landlord cannot recover more than its loss.
Describe how VAT in dilapidations works
VAT is not applicable on a settlement as no goods or services have been exchanged.
VAT can form part of damages.
If the subject premises are elected for VAT, tenant pays VAT on rent and landlord can recover output VAT, therefore it is not applicable on dilapidations claims.
If the subject premises are not elected for VAT, tenant does not pay VAT on rent and landlord unable to recover output VAT. If the landlord intends to undertake the work, VAT is applicable, if not, no VAT.
What is the law of Property Act 1925?
A statute consolidating the enactments relating to conveyancing and the law of property in England and Wales.
What are the Civil Procedure Rules 1999?
The civil procedure rules seek to reduce time in court and save on costs.
They make up a procedural code whose overriding aims is to enable the courts to deal with cases justly.
The civil procedure rules introduced the pre-action protocols.
With regard to dilapidations, what is the Woolf Report?
A report which led to the creation of the civil procedure rules and the dilapidations protocol in England and Wales. The report identified that the system was too slow, expensive, complex and inaccessible.
What is the dilapidations protocol?
It relates to claims for damages for dilapidations against tenants at the termination of a tenancy.
It applies to commercial property situated in England and Wales.
What are the objectives of the dilapidations protocol?
To encourage the exchange of early and full information about the dispute.
To enable the parties to avoid litigation by agreeing a settlement of the dispute before proceedings are commenced.
To support the efficient management of proceedings where litigation cannot be avoided.
Can you talk me through the dilapidations protocol?
Landlord SoD to Tenant: The schedule of dilapidations should be sent 56 days after termination of the tenancy, but can be sent prior to lease end.
Landlord QD to Tenant: The landlord should issue a quantified demand within 56 days after termination of the tenancy.
Tenant SS Response: The tenant should issue a tenant’s response normally within 56 days after the landlord sending the quantified demand.
Negotiations: Negotiations then take place with a meeting normally occurring between the landlord and tenant or their respective surveyors within 28 days after the tenant issues their response.
Quantification of Loss: During negotiations, the landlord should quantify its loss by providing a formal diminution of value or an account of actual expenditure.
Stocktake: A review of both side respective positions before formalising court proceedings. Both parties should look to narrow issues to their final point.
With regard to dilapidations, What is a quantified demand?
A quantified demand presents an account of the likely loss incurred by the landlord or if the works has been undertaken, the actual loss.
With regard to dilapidations, when should a quantified demand be sent and what should be included?
56 days from lease expiry.
Summary of losses.
Party and lease details.
Supporting documents.
Statement of party willing to attend meetings.
What is the Property Litigation Association?
A body of lawyers specialising in property litigation
What is Part 36 Offer?
A Part 36 Offer enables the landlord and the tenant to make an offer to settle at any time before the claim is issued or during proceedings.
What are the implications of a Part 36 Offer?
If the claim proceeds to trial, then any offer made by either party will be taken into account when it comes to awarding costs.
Why would you use a Part 36 Offer? What are the advantages?
If one of the parties ignores or rejects an offer because they have not assessed the merits and weaknesses of their position, that side can be exposed to greater risks regarding costs if damages are awarded at the level of or better than the Part 36 Offer.
What must be included in a Part 36 offer for it to be valid?
It must be in writing and be made clear it is pursuant to Part 36
Be open for acceptance for a period of not less than 21 days
State whether it relates to a part of the claim or the whole of it.
The date on which the offer expires.
What happens if the tenant asks the landlord to clarify the offer within 7 days of receipt?
The landlord can give clarification as requested but,
If nothing forthcoming, the tenant can apply for an order for the Landlord to do so.
When are Part 36 Offers not appropriate?
Where there are multiple defendants
Where the intention is to settle on commercial terms. i.e. by offering future business.
Defendant wants flexibility with payment (Part 36 offer strict)
(All of the above are more suited to Calderbank Offers)
What are the cost consequences of non-acceptance of a Part 36 offer from the landlord claiming on the tenant?
Very onerous on the tenant for not accepting the offer
Ordered to pay:
- The claimant’s (landlord’s) costs on an indemnity basis starting on the date the offer expired;
- Interest of the whole of part of the sum awarded (not exceeding 10%);
- An additional amount, capped at £75k, calculated by applying the prescribed percentage on the amount of
damages/costs awarded.
What are the cost consequences of non-acceptance of a Part 36 Offer from the defendant tenant issued on the Landlord?
The defendant will recover its reasonable costs from the claimant from the date the relevant period expired and;
Interest on those costs.
If the claim is dismissed, or nothing recovered, tenant entitled to its costs.
Explain ‘sunset clauses’ in Part 36 offers?
A clause that states that the offer will automatically expire if not accepted by a certain date provided that date fall outside the relevant period. (21 days).
If no sun-set clause, unless withdrawn, a Part 36 offer can be accepted at any time, even if originally rejected / counter offer made
(A Part 36 offer remains open until withdrawal)
Can a Part 36 offer be inclusive of costs?
No, the scheme of Part 36 and the cost consequences mean that the offer cannot be inclusive of costs.
What is a Calderbank offer?
A letter containing a settlement offer which is made on a “without prejudice save as to costs” basis.
Why would you make a Calderbank Offer?
They offer more flexibility than Part 36 offers and don’t specify clear cost consequences.
When considering costs following trial, the court has discretion to decide how much weight to add to a rejected or ignored Calderbank offer.
When would you use a Calderbank Offer?
Make a settlement offer with different cost consequences than Part 36;
Make an offer with limited time acceptance (less than 21days?)
Where defendant makes an offer, because it does not believe that it will be able to pay full amount within 14 days (Part 36)
What is without prejudice?
A rule that prevents statements made in a genuine attempt to settle an existing dispute, whether made orally or in writing, from being put before the court as evidence of admissions against the interest of the party which made them.
What is ADR and what are the advantages of it?
A collective description of methods of resolving disputes otherwise than through the normal trial process.
It is used for its speed, privacy, informality and cost.
Can you tell me some of the different methods of ADR?
Arbitration
Mediation
Expert Determination
What is Mediation?
Mediation is an alternative method of settling disputes and is a way of resolving differences between parties and is voluntary.
How does the apportionment of costs happen in Mediation?
Each party bear their own costs of mediation
What are the advantages and disadvantages of mediation?
Advantages:
- Quicker than litigation.
- Confidential and avoidance of publicity.
- High degree of party control.
- Assists in clarification of points even if settlement not reached.
Disadvantages
- Is not legally binding.
- Can be used a as a stalling tactic.
- Parties not obliged to continue with negotiations or mediation.
What is arbitration?
Arbitration is an alternative to litigation as a method of resolving disputes.
Why would you advise a client to pursue arbitration?
Decision is binding.
Confidential process.
More flexible than litigation.
Allows parties to choose tribunal.
What are the duties of an arbitrator?
Act fairly and impartially.
Give all parties reasonable opportunity to state their case.
Adopt suitable procedures that avoid unnecessary delay and expense.
How are the costs apportioned in arbitration?
The arbitrator will award the party who has lost the arbitration to pay the costs of the successful party.
If your client was not happy with the outcome of an arbitration award, what options are open to them?
The arbitrator’s decision is final.
The award can only be contested on the grounds of serious irregularity, lack of jurisdiction or on a point of law.
Appeals can happen on a point of law but permission must be granted by the court of appeal.
What is Expert Determination?
The parties ask an independent expert to give a binding decision on a dispute.
When would you use expert determination?
On a technical issue, judges and arbitrators will look to an independent expert for advice. This method goes direct to source on technical issues.
What happens if the parties cannot agree to the identity of the independent expert?
The president of the RICS will appoint an independent expert on their behalf.
The Independent expert will then make sure there is no conflict of interest before making contract with the parties.
What are the advantages of independent expert services?
Privacy.
Finality – If the parties agree to be bound by the expert’s decision, it is very difficult to challenge it.
Expert advice.
