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Some readers may recall the arguments which raged about original tenant liability.  The Landlord and Tenant (Covenants) Act 1995 was introduced to lessen the burden on original tenants and their guarantors once the leasehold interest has been assigned to a third party.

The Act releases a tenant from covenants in a lease entered in to on or after 1 January 1996 upon assignment but does not preclude him from entering in to an authorised guarantee agreement (an “AGA”) with the landlord with respect to the assignee.  The question that arose in the case of Good Harvest Partnership LLP -v- Centaur Services Limited [2010] EWHC 330 (Ch) was where this left the tenant’s guarantor.

Looking at the wording of the Act, Mr Justice Newey said he concluded that the Act “was meant to ensure that any obligations undertaken by a person as guarantor for a tenant should come to an end on the assignment of the lease”.  However, he did not think it clear whether the Act permits a guarantor to sub-guarantee a tenant’s obligations under an AGA.  He said the Act “is plainly designed to impose restrictions on freedom of contract.  The question is how far those restrictions go.”  Nevertheless, he concluded that if a landlord were able to call on the tenant’s guarantor to give a guarantee for an assignee it would drive “the proverbial “coach and horse” through the legislation”.  Therefore, despite the wording of the lease, which required the tenant and its guarantor to enter into an AGA upon any assignment, he stated that the landlord was unable to pursue the tenant’s guarantor after the tenant’s assignment of its leasehold interest.

Whilst on the question of the 1995 Act, it is worth recalling that in relation to any lease (whether granted before or after 1 January 1996), a landlord can not recover any “fixed” sums due under the tenancy from a former tenant or guarantor unless a notice (a “s17 notice”) has been served within 6 months of the date when the sum fell due.

Wish to hear more?  Why not contact Hatherleigh Training?

Commonly, a tenant fails to yield up property at the lease end in a physical state which accords with its repairing covenant.  This happened in the case of Van Dal Footwear Ltd v Ryman Ltd [2009] EWCA Civ 1478.  The dispute concerned the landlord’s level of damages.

The first instance judge assessed the cost of conducting the works under the tenant’s covenant at £135,606.  He considered whether this was capped by the provisions of s18(1) Landlord and Tenant Act 1927.  The landlord’s damages shall not, said Mr Justice Lewison sitting in the Court of Appeal, “exceed the amount, if any, by which the value of the reversion whether immediate or not, in the premises is diminished, owing to the breach of [the tenant’s] covenant or agreement”.  He held the judge had been correct when he said “The diminiution in value is assessed by assuming an outright sale of landlord’s interests in the property on the term date in the open market, on the basis that the Defendant had done all the work which the tenant ought to have done and on the basis of its actual state and condition.  The difference between these two values is the diminution in value caused by the breaches.”  On the advice of experts, the judge found that the value of the building in repair would have been £1,068,838 and that the value of the building in its actual condition would have been £950,000, a difference of £118,838.

However, the experts also agreed that for the property to sell on the date the lease expired, it would have been necessary to have marketed it for six months.  During that hypothetical marketing period, argued the tenant, it would have offered to take a new lease to the prospective purchaser (as it had in fact unsuccessfully done to the landlord prior to the lease end).  The judge agreed and found that the hypothetical purchaser would have accepted the offer and consequentially would have increased its bid by 7.4% giving a value of £1,020,300 - leaving an assessment of damages of £48,538.  Mr Justice Lewison said the judge was wrong and “what the judge was required to do was to value the bundle of rights that the landlord actually had on the valuation date”.  The judge, he said, had “mis-identified the subject of the valuation”.

If you wish to hear more about dilapidations, why not speak to Hatherleigh Training?

Interpretation of deeds of grant entered in to some time ago can often be problematic.  One’s task, and if necessary, that of the courts, is to establish the intention of the parties to the original documents ascertained from the words used read in the light of the background circumstances which would have been known to the parties.  So held Lord Justice Rimer in the Court of Appeal case Davill v Pull and Sanderson [2009] EWCA Civ 1309.

The case concerned eight cottages previously sold with a coalhouse, earth closet and piece of garden ground.  Additionally, each purchaser, heirs and assigns had the right to use “for all reasonable and usual purposes” such part of a track as was necessary to give access to and from the garden ground.  Mr Davill subsequently obtained planning permission to build a house on three of the garden plots.  In order to access the plots for the necessary construction works, he intended to use the track.  Neighbours objected asserting that if the houses were built, the track could not lawfully be used for access by their occupiers and visitors.

Lord Justice Rimer found (and the other judges agreed) that the conveyances did not restrict use of the plots to garden purposes nor did the easement over the track state it could only be used in connection with the use of the plots as garden land.  Use “for all reasonable and usual purposes” meant what it said and was not linked to nor limited by the use of the plots as gardens.  The easement over the track could therefore be used lawfully for the purposes of building houses and their occupation when built.

If you wish to hear more about easements, do contact Hatherleigh Training.

Whilst considering persons being “on the right track”, Hatherleigh Training is attending MIPIM 2010 to be held in Cannes in March.  If you wish to meet with Vivien King at the event, please do contact her.

Whether one calls them trespassers, squatters or travellers and whether one believes or not that more areas should be identified for their occupation, the problems caused by persons entering property for the purpose of establishing a home which they do not own or have any legal right to occpy remain the same.  They can cause distress, annoyance and unwanted hassle and loss to the person(s) entitled to occupy the premises and can involve either the police or the civil courts in the often long drawn out affair of having the occupiers evicted.

Whilst the scenario is not new, Lady Hale identified two aspects to come before the new Supreme Court: “First can the court grant a possession order in respect of land, no part of which is yet occupied by the defendant, because of the fear that she will do so if ejected from land which she currently does occupy?  Second, should the court grant an injunction against that feared trespass?”  (Secretary of State for Environment, Food an Rural Affairs v Meier and others [2009] UKSC 11.)

The Supreme Court held the courts could not grant an order for possession of land not yet occupied.  However, it could grant an injunction to restrain further occupation.  The Supreme Court shied away from saying how such an injunction could be enforced particularly where trespassers included women with young children.  Lord Rodger, for instance, believed “At the very least, the matter is one for the Master of the Rolls and the Rules Council who have the leisure and facilities to consider the issues.”  As the now Master of the Rolls, Lord Neuberger, was amongst Lord Rodger’s fellow judges, we await what, if anything, he will say of this invitation.

If you wish to hear more, why not contact Hatherleigh Training?

The Carbon Reduction Commitment Energy Efficiency Scheme is due to commence in April 2010.  It aims to improve “large” organisations’ energy efficiency and to reduce carbon dioxide (CO2) emissions.  It is estimated that aound 20,000 public and private sector organisations will be required to participate to some degree or another.  Some will simply be required to disclose their electricity usage. Others (thought to be about 5,000 in number) must record and monitor their CO2 emissions and purchase equivalent allowances from the Government initially at a fixed price of £12 per tonne of CO2. Participating organisations can buy and sell allowances on the secondary market.

Participating organisations will include central Government departments, local authorities, water companies, retailers and banks.  Company groups will be treated as one entity.  An organisation qualifies for full participation if it has at least one half hourly meter (i.e. its total consumption is recorded by the energy supplier every half hour) and  its annual electricity consumption through all of its half hourly meters amounts to at least 6,000 MWh.  (An organisation with one or more half hourly meters but with total consumption of less than 6,000 MWh simply has to disclose its consumption.)  Any organisation which does not comply with its legal obligations will be subject to financial penalties.

The Government will issue an annual performance league table ranking organisations according to their energy efficiency. There is information about energy efficiency available to participating organisations from many sources including, for instance, the British Property Federation and the Department of Energy and Climate Change webside.   Or learn more from Hatherleigh Training.

Property purchase is not straight forward and an overage payment (an agreement that a sum is paid over and above the basic purchase price if and when certain conditons or contingencies are fulfilled) adds to the complications.  Such clauses are often added late in the day and the terms may be negotiated by advisers under pressure to conclude the deal.  A recipe for disaster and sadly, litigation can ensue.

In Walker v Kenley and another [2008] EWHC 370, if the purchaser of a hotel obtained planning permission for a development of “residential flats”, an overage payment was payable to the hotel’s vendor in respect of each flat sold.  The purchaser obtained planning permission for 17 apartments subject to a condition that they be used “for holiday accommodation only”.  Did holiday apartments amount to “residential flats”?  The court held the words, given their natural meaning, meant flats which an occupier would consider his or her residence and there was nothing in the circumstances of this case which led to the conclusion that the words would include a holiday apartment.  Is that what the parties meant?  We will never know.

It should be remembered that evidence of negotiations is not accepted by the courts.  As Lord Wilberforce explained in Prenn v Simmonds [1971] 1 WLR 1381, this is because the position of the parties change until a final consensus is reached and that consensus is then recorded in the written agreement.

Nevertheless, the House of Lords ordered rectification of the wording of an overage agreement in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38.  Lord Hoffman stated that the wording used by the parties is paramount but there must be some exceptions to this rule if a mistake is made in recording the deal done.  For instance, the words used may be capable of more than one meaning or the parties might have given during their negotiations, a particular meaning to the words used or the wording used does not reflect the agreement reached.  In such cases, the courts might consider rectification and then, said Lord Hoffman “All that is required is that it is clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.”

Contact Hatherleigh Training to hear more re overage payments and mistakes in written agreements.

Generally, a tenant occupying premises for its business purposes, is entited to apply to the courts for a new tenancy (unless its lease states otherwise) pursuant to the Landlord and Tenant Act, 1954.

The landlord can oppose the grant of a new tenancy on one or more grounds specified in s30(1) of the Act.  The landlord must state its ground(s) of opposition either in its own notice terminating the tenant’s tenancy (a s25 notice) or in answer to a tenant’s request for a new tenancy (a s26 request).  Once the landlord has stated any ground(s) of opposition, the tenant may choose to either vacate the property (without making an application for a new tenancy) or continue to make its court application.  If the landlord’s ground(s) of opposition has or have nothing to do with the tenant’s default (e.g. the landlord requires the premises for its own purposes), the tenant is entitled to compensation pursuant to the Act (based on the rateable value of the premises).  Payment is made if the tenant simply vacates the premises or the court refuses to grant a new tenancy.

There is a further little used potential head of compensation payable to the tenant under the Act.  If the tenant accepts a landlord’s ground of opposition and quits the premises, or makes a court application for a new tenancy but then withdraws it, and it later appears that he did so by reason of the landlord’s misrepresentation or concealment of material facts, the tenant can seek compensation for damage or loss sustained as a result of quitting the premises (s37A of the Act).  In Inclusive Technology v Williamson [2009] the landlord stated orally to the tenant and in its written s25 notice that it opposed the grant of a new tenancy because it intended to demolish, reconstruct or carry out substantial works of construction on the premises and could not do so without obtaining possession of the property.  At the time the landlord genuinely intended to refurbish the premises and the tenant, relying on this representation, vacated the property.  The landlord later decided to “hold fire” and leave the proposed works until some time in the future.  The landlord failed to inform the tenant of the changed circumstances and the tenant successfully applied to the courts for compensation.  Hughes LJ made it clear that a landlord, having made a statement of intention, can still change his mind and “he has not promised to redevelop or refurbish the premises - but if he has made the representation which this landlord did, then he must correct it when it becomes, to his knowledge, false.  Fair dealing, and for that matter s37A, require nothing less.”

If you wish to hear more about the Landlord and Tenant Act, 1954, speak to Hatherleigh Training.

Occupying property comes with a duty of care to visitors and trespassers in respect of dangers at the property (Occupiers’ Liability Acts 1957 and 1984).  Danger comes in many forms and whilst a pond, lake, river or sea side might be very attractive to many, there are those, even if warned, who carry on regardless.  Where does that leave the occupier?

In Tomlinson (FC) v Congleton Borourgh Council and others [2003] UKHL 47, a man dived into a lake in a derelict sand quarry on land open to the public and owned and managed by local authorities.  He struck his head, broke his neck and was rendered a tetraplegic.  He had acted despite signs saying “Dangerous Water.  No swimming.”  The judge found there to be no hidden dangers in the lake.  On appeal, the Master of the Rolls said “It seems to me that Mr Tomlinson suffered his injury because he chose to indulge in an activity which had inherent dangers, not because the premises were in a dangerous state.”  However, by a majority, the Court of Appeal found the authorities liable.  The case went to the House of Lords.  Lord Hobhouse of Woodborough recognised that there might be some risks arising from natural features on the land against which the owner should offer some protection (“for example, where there was a very narrow and slippery path with a camber beside the edge of a cliff from which a number of persons had fallen”), but generally, there should be no legal policy to protect the foolhardy or reckless few to the detriment of others.  “The pursuit of an unrestrained culture of blame and compensation has many evil consequences and one is certainly the interference with the liberty of the citizen.”

The law has recently been considered again (Marsden v Bourne Leisure Ltd (t/a British Holidays) [2009] EWCA Civ 671).  A 2 year old boy, on holiday with his family, drowned in a pond in a holiday park.  A judge allowed his father’s claim that the owner had breached its duty of care.  However, the Court of Appeal found that liability is not attributed on the basis that someone was to be blamed for the accident.  An occupier, exercising reasonable care, does not have to underline or emphasis an obvious peril to any conscientious parent.

Want to hear more?  Why not contact Hatherleigh Training?

Landlords commonly seek a guarantor for a tenant, be it from a major shareholder of a small company, the parent company for a subsidiary or from the out-going tenant on an assigment, in an attempt to protect themselves particularly against the tenant’s insolvency.

Liquidators and trustees in bankruptcy are enabled to disclaim onerous contracts.  It was once thought that a disclaimer of the tenant’s interest in a lease, which brings it to an end so far as the insolvent tenant is concerned, would also automatically release the tenant’s guarantor’s liability.  However, the House of Lords confirmed that a disclaimer only terminates the interest between the landlord and the insolvent tenant - it affects no other party including a guarantor (Hindcastle Ltd v Barbara Attenborough Associated Ltd [1996]).

This decision does not, of course, prevent the guarantor from attempting other arguments (not always successful) in an attempt to find a way out of its liabilities when called upon to meet them by the landlord.  In Unicomp Inc v Durodis Electron plc [2004], the landlord had the option of forfeiting the lease when the tenant’s related company went in to occupation in breach of the lease but failed to act thereby (claimed the guarantor) materially altering the guarantor’s liability (an argument which had been successful in the 1878 case of Holme v Brunskill).  However, the guarantee was stated to be unaffected by “any neglect or forbearance of the Landlord” and the argument failed.  The guarantor’s argument failed too in Doleman v Shaw [2009].  The guarantee lasted for “the period during which the Assignee is bound by the tenant covenants”.  Upon a disclaimer of the assignee tenant’s interest the guarantor claimed release despite the Hindcastle case - the Court of Appeal did not agree.  However, the guarantor was successful in arguing that the wording of a subsequent deed (to which the guarantor was not a party) varied the contract and thereby released the guarantor under the original guarantee in The Prudential Assurane Co Ltd v Ayres and another [2008].

If you wish to hear more, contact Hatherleigh Training - Vivien King would be pleased to help you.

A tenant, in breaching a covenant in its lease, runs the risk that the landlord will forfeit the term.  Forfeiture is at the option of the landlord but once it is indicated to the tenant that the lease is to continue, the landlord may waive its right to forfeit.

There have long been legal arguments about waiver but it appears clear that acceptance of rent by a landlord after knowledge of circumstances founding a right to forfeit is regarded as evidence of an intention to allow the tenancy to continue.  Arguments abound about, for instance, when the landlord has, or is deemed to have, the requisite knowledge of the breach and whether the breach is a once and for all breach or a continuing breach.  However, the recent Court of Appeal case of Seahive Investments Ltd v Osibanjo and another [2008] EWCA 1282 highlighted other difficulties i.e. whether it mattered that the rent accepted fell due before or after the landlord’s knowledge of the breach relied upon to ground the forfeiture and what amounted to acceptance of rent.

In the Seahive case, the landlord presented a bankruptcy petition against the tenant for unpaid rent.  The landlord subsequently became aware of other breaches of covenant.  The tenant submitted a cheque in settlement of both the petition sum and a smaller amount for other rental payments.  The landlord accepted the cheque but returned a sum equating to the other rental payments.  The tenant claimed waiver.  The judge found the monies retained by the landlord were not in payment of rent (but in settlement of the bankruptcy debt) and in consequence the Court of Appeal agreed there had been no waiver.  Practitioners will regret that their Lordships failed to agree upon whether or not the landlord could have accepted rent which fell due prior to becoming aware of the other breaches of covenant and not waive the right to forfeit.

Want to hear more?  Why not contact Hatherleigh Training?