The Practical Lawyer

Landlord and tenant – residential

Service charges – failure to consult

The service charge provisions in LTA 1985 require L to consult with T if the costs to be incurred will result in any T contributing more than £250. Under the Consultation Regs, L has to serve a notice on T, setting out at least two of the estimates he has received, and then make all of the estimates available for inspection. L then has to invite observations on those estimates within 30 days. 

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Sale and leaseback – overriding interest?

Can sale and leaseback occupiers claim to be in ‘actual occupation’, and thus be protected from possession proceedings brought by the mortgagees of defaulting borrowers? 

The High Court has recently heard a test case which involved owners who had entered into sale and leaseback arrangements. In return, they had been given tenancies, but difficulties arose when the buyers had defaulted on their mortgages and their lenders had therefore sought possession against the current occupiers (who were the former sellers).

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Enfranchisement – deferment rate

The ‘deferment rate’ is important when valuing the amount to be paid by T on a leasehold enfranchisement claim against L. As part of the valuation process, you need to determine the future value of the freehold once the lease has expired, and to then give a discount for accelerated receipt of the money; that is done by applying an interest rate to the present freehold value, which is referred to as a ‘deferment rate’. In simple terms, the lower the deferment rate, then the higher the price to be paid by T. Thus, there has been much argument about the correct deferment rates that apply on enfranchisement claims. 

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Service charges – ‘on account’

LTA 1985 sets out the rules on residential service charges payable by long lessees. In particular, if L incurs a cost then he must demand payment of that service charge within 18 months of incurring that cost (s20(B)). Alternatively, if that is not possible then he must – within the 18-month period – notify T that the costs had been incurred and that T will subsequently be required to pay a service charge in respect of them. 

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Tenancy deposits – tenancy ended

In Tiensia [2010] the CA favoured a very restrictive interpretation of the Tenancy Deposit rules on L’s liability to lodge T’s deposit within the required timescale. If L fails to lodge the deposit within the required 14-day period, there will be no penalty imposed, and there will only be a penalty if there is a complete failure to protect the deposit at any stage. As we noted in the February 2011 issue (p27), what this means therefore is that L can protect T’s deposit at any stage right up to the steps of the court house, and serve T with the prescribed information at that late stage, and so escape the penalties. Accordingly, L’s deadline for compliance is the court hearing itself – and not even the date by which proceedings are issued. 

The decision has caused much comment, because it does largely emasculate the intention of the Regs. However, one point that was left unclear was the position if the tenancy had already ended (ie whether L can protect the deposit after the end of the tenancy, and still escape liability). We now have a county court decision which decides in favour of T on that point. 

The case involved a 12-month assured shorthold which was renewed for a further 12 months, and then continued on a periodic basis until T vacated (and thus the tenancy came to an end). When L failed to refund the deposit, T then tried to enforce the Regs, with L finally lodging it for protection after proceedings had been commenced. It was held that Tiensia [2010] only applied when the deposit had been protected before the end of the tenancy. This approach is logically correct; as a note from Nearly Legal points out, if L can put the deposit into protection after the tenancy has ended, then it makes a nonsense of the legislation. But this is only a county court decision, although the issue is likely to go before the CA before the next month. Shepley v Majid Yassen, Tameside County Court (13 January 2011). Source: 


Tenancy agreement – in writing?

Why bother to have a written tenancy agreement (as opposed to an oral agreement)? The main reasons are: 

a written contract is better than an oral contract, especially if L wants to prove breach and be able to claim financial compensation;

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Assured shorthold – s21 notice

Can the L of residential premises let on an assured shorthold commence possession proceedings during the currency of the two-month s21 notice, or must they wait until it has expired? The conventional answer is that L must wait until the notice has expired, because of Lower Street Properties [1996]. 

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Assured shortholds – agricultural land

’A tenancy under which agricultural land, exceeding two acres, is let together with the dwelling house’ cannot be an assured tenancy (Para 6, Sched 1, HA 1988). 

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Possession – ‘proportionality’

The Supreme Court delivered what has been described as a ‘bombshell’ in November 2010, by deciding that for possession claims brought by a public body against someone’s home, the tenant/occupier is entitled to raise a defence of ‘proportionality’ under Article 8. 

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Lease – right of first refusal

LTA 1987 gives long lessees the right of first refusal if L intends to dispose of his interest. 

Sometimes L will own a piece of land adjacent to the block of flats and wants to know whether he can deal with that without the provisions of LTA 1987 applying. 

If L can show that the whole of that piece of land does not have service media under it (and never will have) then the block of flats will not normally be ‘affected’ by the disposal of that land, and so the disposal will not need to comply with LTA 1987. On the other hand, if there are service media under it then the block of flats will be ‘affected’. 

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