‘No-fault’ termination of residential tenancies to end

For years, private landlords and housing associations have been enabled to let residential property on assured shorthold tenancies (’AST’).  The property must be the tenants’ main accommodation and the landlord himself cannot live there.  The rent cannot be more that £100,000 per annum or less that £250 (£1,000 in London).  It is now the most common form of residential tenancy in England.

Granted for a fixed term of six months or more, an AST will continue after the fixed term expires and until the landlord serves notice upon the tenant giving at least two months’ notice in writing thereby bringing the tenancy to an end (pursuant to s21 of the Housing Act, 1988).  The landlord need give no reason for ending the tenancy and it is this aspect of the AST that has proven so popular with private landlords.  However,  the ability of landlords to ‘uproot’ their tenants ‘with little notice, and often little justification’ is considered wrong by Prime Minister Theresa May.  The government therefore wishes to abolish ‘no-fault’ evictions in England.  (The National Assembly for Wales proposes to introduce changes to residential lettings by its Renting Homes (Wales) Act, 2016.  In Scotland, the Housing (Scotland) Act 1988 applies and the Housing Act 1988 was never implemented in Northern Ireland.)

The government is to launch its consultation shortly re its proposals to remove the landlords’ ability to use ‘no-fault’  evictions in England.  In its Press Release dated 15 April, 2019, the Ministry of Housing, Communities & Local Government assures landlords they will have ‘effective means of getting their property back when they genuinely need to do so’.  Thus, says the Ministry, property owners will be able to regain their property should they wish to sell it or move into it.

Despite these assurances, there must be many a private landlord now seriously considering whether they wish to continue to let their property in the future.

The government says it will ‘collaborate with and listen to tenants, landlords and others in the private rented sector’ and develop a new deal for renting residential property.  We await the outcome of the consultation with interest.

Go directly to Jail!

Solicitors and expert witnesses beware!  You face jail sentences if in contempt of court by making or causing to be made, whether deliberately or recklessly, a false statement in a document verified by a statement of truth without an honest belief in its truth (see Civil Procedure Rules (CPR) 32(14) as underlined by the Court of Appeal (Liverpool Victoria Insurance Co. Ltd v Zafar [2019] EWCA Civ 392).

Dr Zafar produced an expert report on the instructions of solicitor, Mr Khan.  He reported he had examined a Mr Iqbal, who had suffered neck injuries due to a road accident, but had fully recovered.  Mr Iqbal complained to Mr Khan that he was still suffering neck pains.  Mr Khan contacted Dr Zafar who produced a second report reporting the on-going pain without any re-examination.  Both reports contained a statement of truth in accordance with the CPR.  The insurers for the defendant driver issued proceedings against Dr Zafar and Mr Khan alleging contempt of court.

In examining previous case law, the judge at first instance found:

“Those who make false claims should expect to go to prison.  Solicitors and expert witnesses who act dishonestly in the evidence they give to the court, whether in support of such claims or otherwise, must expect a similar outcome.  Mr Khan and Dr Zafar, you must understand that the proper functioning of the court system depended on your honesty.  Your conduct in this case amounts to a fundamental betrayal of the trust placed in you by the court.”

He sentenced the solicitor, Mr Khan, to an immediate 15 months’ of imprisonment and Dr Zafar to a 6 month sentence suspended for a period of two years, blaming the solicitor ‘for the whole sorry affair’.  The claimants appealed Dr Zafar’s sentence.  The judge gave leave stating there was no judicial guidance on the appropriate sentence to be passed on an expert witness in such circumstances.  The Court of Appeal gave guidance on the factors a judge should take into consideration but stated “We say at once, however, that the deliberate or reckless making of a false statement in a document verified by a statement of truth will usually be so inherently serious that nothing other than an order for committal to prison will be sufficient.”

Some relief for property owners

Unless another party is liable for the business rates (for instance, a tenant), owners of business premises are liable even if their property stands empty.  Business rate reliefs are available in limited circumstances, including for the period of three months from the time the property becomes unoccupied.  After that, rates are payable in full.

A recent Court of Appeal case will, therefore, give rise to joy amongst property owners and will be viewed with dismay by local councils (Rossendale Borough Council v Hurstwood Properties (A) Ltd and others [2019] EWCA Civ 364).  To quote Lord Justice David Richards: “These appeals concern two schemes designed to avoid the payment of National Non-Domestic Rates (NDR) on properties which in most instances were unoccupied.  Both schemes involved the grant of leases of the properties to special purpose vehicle companies (SPVs) without assets or liabilities which, as part of the scheme in question, were then placed in voluntary liquidation or were allowed to be struck off the register of companies as dormant companies and thus dissolved.”

The property owners (the defendants) maintained that in fact the SPVs were ‘the owners’ of the properties for the purposes of liability for NDR during the term of the leases.  The local authorities agreed unless the SPVs could be disregarded as a matter of law.  The court said “The appeals raise two issues.  First is it arguable that the doctrine of piercing the corporate veil is applicable to the SPVs?  Second, is it arguable that the leases fall to be disregarded by the application of the principles established by the decisions in W.T. Ramsay Ltd v Inland Revenue Commissions [1982] AC 300 (Ramsey) and later cases?”  The judge at first instance had answered ‘yes’ in relation to the first issue and ‘no’ in relation to the second.  The defendants appealed the first decision and local authorities, the second.

The Court of Appeal held the answer to both issues is ‘no’: “it is not open to the courts to pierce the corporate veil of the SPVs”.  Further, there is no question of the SPVs being shams (the judge so held at first instance and leave to appeal was refused) and hence the relevant SPV alone is liable for the NDR.

Will the decision be appealed?  One can only wait and see.

Legal headlines

Two court judgements have recently hit the legal headlines in the property world.  We reported on the first in our November, 2018 newsletter.  The second concerns an application for an injunction to prevent visitors to a viewing platform at the Tate looking into neighbouring flats.

Re Canary Wharf (BP4) TI Ltd and others v European Medicines Agency [2019] EWHC335 (Ch)

The judge found that, contrary to its submission, the fact that

(a) the EMA could not, after Brexit, legally take an interest in property outside the EU nor

(b) continue to hold a property interest in the UK after Brexit was not relevant.

It had acted within the meaning and effect of the European law when it took its lease.  The UK exiting the EU made no material difference.  Thus, the EMA lease was not frustrated by Brexit.

Re Fearn and others v The Board of Trustees of the Tate Gallery [2019] EWHC 246 (Ch)

Re a potential breach of the residents’ human rights - neither The Tate nor its viewing platform is or is exercising functions of a public nature.  Hence, the human right legislation is irrelevant.

Turning to ‘nuisance’ - the judge considered the case law and concluded that nuisance is capable, in an appropriate case, of protecting the privacy of a home as against another landowner.  However, in looking at whether this was ‘an appropriate case’, he concluded it was not.  The flat owners had chosen to buy flats which “are impressive, and no doubt there are great advantages to be enjoyed in such extensive glassed views, but that in effect comes at a price in terms of privacy”.  Owners could take measures to protect their privacy (e.g. to install net curtains or blinds or ‘privacy film’) but that would reduce their view.  However, said the judge, the claimants were not seeking a legal right to a view - which “is not a right known to the law”.  He continued “They are saying they should not have to obstruct their view to protect themselves from an inwards intrusion by others.”  That is a different point but is the intrusion a nuisance?  The law of nuisance, said the judge, requires ‘give and take’ and looking at the overall balance which has to be achieved, the availability and reasonableness of the measures which the flat owners could take supports his views that the intrusion is not nuisance in this case.

Greater access to the courts

Before civil proceedings in the High Court are commenced or once commenced, in the period before trial, it is possible to make an urgent interim application to a judge.  It might be made, for instance, to protect property from sale (known as a ‘freezing order’), or to obtain or prevent disclosure of confidential information.

The procedure is conducted pursuant to Part 23 and Part 25 of the Civil Procedure Rules and their Practice Directions 23A and 25A.  If really urgent, the court may allow an application to be made without notice being given to another party and in some circumstances, even heard over the telephone.

With thanks to Wilberforce Chambers for drawing this to our attention, the Insolvency and Companies Court has, as with other branches of the High Court, introduced with immediate effect an Interim Applications Court.  Applications will be heard on Thursdays, Fridays and every other Monday and the list will be run in the same way as the High Court Judges’ Interim Applications Court.  The latter remains unaffected by the introduction of the new interim applications court.

It is intended that the new list will be used to hear applications for, for instance, an injunction to restrain the presentation of a petition to wind up a company or to appoint a provisional liquidator.  The courts have made it clear the “Applications with a time estimate of more than two hours (including pre-reading time, judgement and consequentials) are generally not suitable for the ICC Interim Applications Court.”

Such applications are with the purpose of enabling greater access to the courts and it is hoped this aim will be achieved.

The law has changed

As we reported in October, the property world awaited the Supreme Court decision in the case of S Franses Ltd v The Cavendish Hotel (UKSC 2017/0151) in which the meaning and effect of the word ‘intends’ within ground (f) of s30(1) of the Landlord and Tenant Act, 1954 was to be considered.  The case turned on the landlord’s intention to conduct works sufficient to defeat the tenant’s application for a new tenancy.

The law was long thought to be settled.  The question to be asked of the judge was ‘would the landlord require possession of the demised property in order to do the substantial works it has said it would do’?  Why it was doing the works was irrelevant.  In this case, the landlord gave an undertaking to the court to the effect that it would conduct substantial works but admitted it was doing so to defeat the tenant’s application.  Would the admission be relevant?

Giving judgement, Lord Sumption said

“This appeal does not, it seems to me, turn on the landlord’s motive or purpose, nor on the objective reasonableness of its proposals.  It turns on the nature or quality of the intention that ground (f) requires.”

However, he then continued to say

“The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.”

We cannot help but think that ‘the acid test’ does turn on the landlord’s motive or purpose but who are we to question Lord Sumption’s view?

In future, therefore, the question to be asked of any landlord opposing a tenant’s application for a new tenancy is: ‘would you intend to do the same works if the tenant were to leave the property voluntarily and abandon its application?”  The law has changed.


Whether you itch to hear the latest on Brexit or rush to switch off the news, one has to wonder what differences it will make to our lives.  There has been much written, for instance, about potential changes to the property market but one question has arisen at Canary Wharf which may affect the law.  Lawyers up and down the land await the outcome of the court proceedings.

Canary Wharf granted a 25 year lease commencing in 2014 to the European Medicines Agency of 10 floors of a building in Canary Wharf.  The demised premises were to be used as the Agency’s European headquarters.  Due to Brexit, the Agency is to move its headquarters to Amsterdam.  In consequence, it is claiming that the whole reason behind taking the lease has been undermined, the lease is legally ‘frustrated’ and is of no effect.  Canary Wharf has issued proceedings for unpaid rent, rates and service charges allegedly reaching a sum in excess of £550M.  The landlords claim that Britain withdrawing from the EU was always on the cards and was foreseeable.  The question of frustration does not arise.  The case awaits hearing.

Interestingly, it has never been finally decided whether or not the doctrine of ‘frustration’ - recognized in other contractual relationships - extends to leases.  The point is open for the Supreme Court to decide although it has always been recognized that if the answer should be ‘yes’, the concept will be used rarely.  Lord Hailsham said in National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8 “The point, though one of principle, is a narrow one.  It is the difference immortalised in H.M.S. Pinafore between “never” and “hardly ever”".  He commented that the judges in previous cases “clearly conceded that, though they thought the doctrine applicable in principle to leases the cases in which it could properly be applied must be extremely rare.”

Will the judges in this case sidestep the question of frustration and do as others have done before them and say even if the doctrine of frustration applies to leases, the facts of this case do not amount to an example?  Watch this space.

Awaiting Judgement

One would have thought the law surrounding Part II of the Landlord and Tenant Act, 1954 was settled long ago, but it appears it may not be.

A case surrounding the meaning and effect of the word ‘intends’ within ground (f) of s30(1) of the Act (one of the landlord’s grounds of opposition to the grant of a new tenancy) has hit the headlines for several reasons - one being that it has leapfrogged from the High Court directly to the Supreme Court (S Franses Ltd v The Cavendish Hotel (UKSC 2017/0151).  Heard in that court on 17 October, we await their Lordships’ decisions.

Ground (f) of course states:

“that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding”.

It has always been thought and held that the landlord’s intention is simply a question of fact.  In this case, there is no question that the landlord did intend to do substantial works.  Indeed, it gave  an undertaking to the court that it would do the works.

However, the question asked by the Appellant is whether it would make a difference if the landlord only intended to do the works in order to defeat the tenant’s application for a new tenancy?  Has the landlord the requisite intention for the purposes of ground (f)?  The judge at first instance (County Court) and the judge on appeal (High Court) both held that the landlord’s motive for doing the works was separate from the question of its intention and was not relevant.  The question did not go to the Court of Appeal (as the law was settled) but was allowed, as we say above, to go directly to the Supreme Court.

A definite case of ‘watch this space’.

At Your Service

The much anticipated RICS Professional Statement re Service Charges in Commercial Property was launched this month and the management of service charges will never be the same again!  Acknowledging the very positive impact the service charge code has had on the property industry over the 22 years since its inception, it takes matters forward by introducing mandatory requirements which must be followed by those administering service charges.  It comes into effect in April 2019.

Whilst this new Professional Statement cannot and does not over-ride the terms of any lease of commercial property, it dictates how a lease should be interpreted and how the charges are calculated and managed.  Its aim is to reduce the number of disputes which commonly arise in the service charge arena and to improve standards in the administration and management of the charges made.  It underlines the timely issuing of budgets, with an explanatory commentary, and year end accounts as required by most commercial leases which have in the past been woefully ignored.

Aimed at those managing and administering the charges, it does, for instance, require practitioners acting for tenants in dispute with their landlords over the charges made, to advise their clients that any retention of monies made from the charge allegedly due should reflect only the actual sum in dispute.  Landlords and their managing agents should, on the other hand, make sure all expenditure charged accurately reflects the meaning and effect of the lease terms and the expenditure made.  Service charge monies (including any reserve and sinking funds) must be held in discrete bank accounts and any interest earned should be credited to the appropriate service charge account.

Turning to the accounts, all costs should be transparent and management fees should be a fixed price with no hidden mark-ups.  Apportionment between the tenants of the sums expended should be demonstrably fair and reasonable reflecting the availability, benefit and use of the srvices provided - draftsmen of leases will need to take note and it will be interesting to see how this part of the Professional Statement is interpreted.  Those certifying accounts should recognise they have a duty of care to both owners and occupiers.  In fact, anyone with the commercial property field should be aware of this important Professional Statement.

Prepare or Fail

With thanks to Wilberforce Chambers, which brought this case to our attention (Jonathan Seitler QC and Emer Murphy acting for the successful party), Clutterbuck & Paton v Cleghorn [2018] EWHC 2125 (Ch) is a stark reminder to parties that failure to fully prepare one’s case opens the door to failure.

The case concerned the redevelopment of a dilapidated residential property being part of a claim revolving around a property joint venture agreement.  The claimant alleged, inter alia, that wrongful delay, caused by another partner to the scheme (who had since died), led to the redeveloped property coming to the market later than originally envisaged.  It was further alleged that the delay and a lack of quality in workmanship had led to the property selling for a sum less than that at which it would have sold if the property had come to the market at an earlier date and in the physical state required by the agreement.

The judge said “Where a claimant’s case depends on an allegedly actionable wrong that is alleged to have caused a loss the nexus between alleged cause and alleged effect must be pleaded in an intelligible form.  Where loss is alleged to have been caused by allegedly actionable delay, it will usually be necessary for a claimant to plead the period of delay relied on, plead why it is alleged to be actionable as against the defendant, what the result of the delay was and what loss is alleged to have been caused thereby.”  However, the necessary evidence to support the claim, the quality of work and the assertion of loss had not been called.  The claimant had sought, at an earlier directions hearing, that the trial be split between liability and quantum, an application which had been refused.  No appeal had been lodged and the trial judge would not hear of the matter being raised again - in any event: “Making such an Order would not address the absence of expert evidence relating to the quality of the work carried out to the Property, which is relevant to liability in respect of the Defects Claim.”

The claimant finally attempted to rely on general comments made about quality of work and finishes and about valuation in estate agents’ reports before the court.   The judge held the key point was that there was no evidence directed at valuation or quality of work and he could not “simply pull a figure from the air as to what price might have been achieved”.  Hence the claim failed.

The moral of this story is that a party must fully prepare its case before trial or risk failure.

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