Be Careful What You Agree
A case involving a dispute over the tenancy under various leases of industrial units in East Sussex, which were used for the preparation of airline meals, illustrates the importance of being careful what you agree to.
Although the circumstances were rather convoluted, the nub of the issue was that due to planning issues surrounding the smell created by the tenant’s business, it was unclear whether the tenant would be able to remain in occupation of the buildings.
Although the tenant wished to remain where it was, it claimed to have sent to the landlord notices to terminate the leases. The landlord claimed not to have received them. The tenant also sought out alternative premises, which it let on a weekly basis, in case the planning decision went against it.
The tenant claimed that the landlord had agreed verbally to grant three-year leases on some of the units. The landlord claimed no such agreement was reached.
Reviewing the contemporaneous evidence, such as correspondence and board minutes, the court was able to conclude that the three-year leases had been created.
In this instance, there was copious supporting documentation, which is by no means always the case. One point that is clear is that if documents are being created on which it may be necessary to rely, it is important to send these to the other party to the negotiation in a form which confirms they have been delivered.
Contact <<CONTACT DETAILS>> for advice on any commercial property or landlord and tenant matter.
Partner Note
Hutchison and Others v B&DF Ltd. [2008] EWHC 2286 (Ch). See
Construction Dispute – Get it in Writing
Attempting to settle a construction dispute by the use of an adjudicator often seems to create more problems than it solves, as a recent case illustrates. It involved a firm which built stairs under contract from another firm which had been contracted to carry out building work. The contract was worth approximately £19,000.
The stairs were built and installed in early 2008, but did not meet the approval of the site architect and the contractor refused to pay for them. The subcontracting stair maker attempted to appoint an adjudicator to decide the issue but this was opposed by the defendant contractor’s solicitors on the ground that the contract was not in writing and therefore the adjudicator did not have the jurisdiction to decide the issue. The Construction Act, on which the adjudication was based, only applies to contracts made in writing.
The adjudicator subsequently made a determination providing that payment (of a lesser sum than claimed) should be made to the subcontractor. The contractor disputed that decision in court on the same ground as before.
In court, the claimant argued that the contract was in writing, although it was accepted that not all of the work was covered by written contract and that parts of the agreement were made orally.
The judge was unable to resolve the issue, concluding that there was an arguable case on each side. He declined to give a summary judgment to the subcontractor. He did, however, order the defendant contractor to pay £10,000 into court pending the decision.
The Construction Act is currently under reconsideration and proposed revisions to it were announced in mid-December. One of the main changes is that oral and partly-oral contracts will be covered by the Act for the first time. However, it is always best to get the principal terms of a contract set out clearly in writing, preferably including a clause which provides how disputes under the contract are to be settled.
Partner Note
Allen Wilson Joinery Ltd. v Privetgrange Construction Ltd. [2008] EWHC 2802 (TCC). See
Note: We will cover the proposed changes to the Construction Act in more depth in the March issue.
Covenant Rights Need Not Continue
A bungalow owner who wished to replace a flat roof with a pitched roof found himself in court recently when his neighbour sought to rely on a fifty-year-old covenant ‘not to make any addition or enlargement or alteration’ to the bungalow without the consent of the vendor. The covenant stipulated that such consent would not be unreasonably withheld. The sale documents also contained a covenant prohibiting the building of anything other than a single bungalow on the property.
In this case, however, the vendor concerned was the original owner of the bungalow and the adjacent property. The adjacent property had been sold to a new owner years previously and the covenant was not stated to extend to successors in title.
The question before the court, therefore, was whether the new owner of the adjacent property could enforce the covenant. He argued that the commercial reality of the covenant was such that the benefit of it must be intended to pass to successors in title. The bungalow owner argued that the covenant had been restricted to the original vendor (who had died in 1977) and thus was not enforceable by the new owner.
Looking at the documents of sale, the court found that these were tightly drafted and there were other references to successors in title where appropriate. The court was not inclined to re-write the contract. The original vendor had created the covenant to protect her own position only. On her death, the covenant ceased to have any effect – otherwise, any future alterations to the bungalow would be rendered impossible because permission could not be given. The court described such a possibility as ‘astounding’.
A covenant relating to land is normally written to include successors in title. However, in this case, the covenant was written in terms which clearly distinguished between the vendor and the successors in title to the vendor’s land. Accordingly, the distinction between the rights of the vendor and the vendor’s successors in title was clear.
Says <<CONTACT DETAILS>>, “This case shows that when they are properly drafted, covenants may be able to be used more flexibly than you might think.”
Contact us for advice on all property and planning problems.
Partner Note
Margerison v Bates [2008] EWHC 1211 (Ch).
Extension Blues
Household extensions are a frequent source of dispute, although in most cases the dispute is between the property owner and the builder. It is not often that one sees problems arising because there is an issue with the building itself, rather than the extension.
In a recent case, however, a householder went to see an architect because he wished to add an extension to a property he had owned for three years. The architect noticed that the house itself differed considerably from the plans that had been approved by the local council at the time it was built. That was bad enough, but things got worse. The pre-commencement conditions for the building could not be shown to have been discharged, which meant that the house itself was in breach of planning regulations.
No plans had been provided when the man had subsequently purchased the house and the planning consent granted was not clear. Unsurprisingly, he claimed damages from the conveyancer who acted for him on the purchase of the property.
The moral is that when undertaking a property transaction, make sure you use a reputable firm, which is covered by insurance and has proper complaints and disciplinary procedures. All solicitors are obliged to meet these criteria.
Partner Note
Unreported – see the Solicitors Journal, 7 October 2008, p10.
Flexibility in Compliance with Option Terms
Given the importance of the effect of the exercise of an option, it is not in any way surprising that the courts normally adopt a strict approach to adherence to the precise terms of the option agreement.
In a recent case, a tenant had the benefit of an option which allowed it to renew its lease. Among the conditions attaching to the exercise of the option were that the option was only exercisable as long as the original lease was still in the name of the tenant and that the tenant had to have paid any rent due and adhered to its covenanted obligations.
The tenant in this case was a company that was effectively a ‘shell’. It had almost no assets of its own and was a dormant company. The performance of its obligations under the lease was guaranteed by another company in the same group as the tenant. The guarantor company was about to leave the group of companies, so the tenant sought to switch the lease from its name to that of its parent company. In spite of the fact that the rent had actually been paid by its parent company and the premises had always been wholly occupied by the parent company, the landlord insisted that the lease remain in the name of the original tenant.
The landlord argued that the payment of the rent by the parent company was a breach of the tenant’s obligations under the lease, as was the occupation of the premises by the parent company. Accordingly, it claimed that the tenant could not exercise the option to renew the lease.
The court ruled that the tenant’s option could be validly exercised. The landlord had known from the outset that the parent company would occupy the premises as the licensee of the tenant. The lease contained a clause which prevented the tenant from allowing anyone else to occupy part of the premises, but not, as was the case here, the whole of the premises. Since the parent company had occupied the entirety of the premises, that condition had not been breached. To consider that payment of rent by the parent company (or indeed the tenant achieving compliance with its covenants indirectly) constituted a breach of the terms of the leasewas considered to be excessively legalistic.
The court therefore ruled in favour of the tenant, confirming that although the need to comply with the indispensable conditions of an option is essential, some flexibility is allowed with regard to how the tenant can achieve compliance with such conditions.
Partner Note
William Page & Company Ltd. v BNP Paribas Securities Custody Bank Ltd.
See Property Week, 26 September 2008.
Home Buyer Not Required to House Council Tenants
A Buckinghamshire man has been freed from a restrictive covenant requiring him to make his property available to council tenants, following a recent appeal.
In March 2005, Mr Michael Cantrell bought a house in High Wycombe, at auction, from social landlord Home Group Ltd., which in turn had acquired the property from the Warden Housing Association. The Association had agreed to grant Wycombe District Council nomination rights in relation to six houses, including the one acquired by Mr Cantrell, in return for financial assistance from the Council.
The agreement signed by the Association had made reference to Section 609 of the 1985 Housing Act and stated that the rights granted under the contract to the Council would be enforceable ‘without limit of time’ against any subsequent owners of the properties.
Two years after Mr Cantrell became the new owner of the property, the Council sought to enforce its rights under its contract with the Association by taking him to court. The Council successfully argued that its rights under the agreement should continue to apply despite the change of ownership. Mr Cantrell appealed against the decision.
The Appeal Court held that it was an established legal principle that the burden of a positive covenant affecting freehold land did not bind subsequent purchasers. Whereas the original trial judge had stated that Section 609 of the 1985 Housing Act altered this general principle of law, the Appeal Court ruled that in the circumstances of this case Section 609 did not apply.
Mr Cantrell’s appeal was upheld and he did not have to make his property available for Council use.
“The law relating to covenants over land can be quite complex, especially where social landlords are concerned,” says <<CONTACT DETAILS>>. “Anyone planning to acquire property from a social landlord would be well advised to seek advice before proceeding.”
Partner Note
Cantrell v Wycombe District Council [2008] EWCA Civ 866. See http://business.timesonline.co.uk/tol/business/law/reports/article4916311.ece
House Cannot Become Retrospectively Suitable
In a recent Court of Appeal case, the judges ruled that a proposed council property could not be deemed retrospectively suitable for a tenant.
Mrs Basra Boreh became homeless when her landlord repossessed the accommodation she was occupying. She applied to her local authority, Ealing London Borough Council, for housing. There was no question that she required urgent housing and was a priority need, especially considering her numerous medical conditions, which included arthritis, diabetes, osteoporosis and possible heart disease. She also used a wheelchair and could not stand unaided for more than two minutes.
The Council had offered her a property but she considered it to be unsuitable for her needs and had therefore declined the offer. It then wrote to Mrs Boreh, on 12 March 2007, restating its position that the house was suitable for her and advising her of her right to request a review within 21 days, which she duly did. The conclusion of the review was given on 13 July 2007. It was that the house would be deemed suitable if necessary alterations were made. Up until this point no mention had been made of alterations to the property.
Mrs Boreh was dissatisfied with this decision and, relying on Section 204 of the Housing Act 1996, exercised her right of appeal to the County Court. The Recorder in the County Court was faced with the decision as to whether or not the conclusion of the review, dated 13July, was lawful in upholding the local authority’s earlier decision of 12 March. The Recorder found that an offer could be found acceptable even if the original offer did not state all the changes that needed to be made to the property. The suitability of accommodation was not to be judged exclusively by reference to its condition at the time of the offer. Mrs Boreh appealed. The Court of Appeal upheld this part of the judgment of the County Court.
However, the Court of Appeal judged that the job of the reviewer was to reach a decision as to whether the offer was suitable taking into account any alterations to the property that had subsequently been proposed up to the time of the review. In simple terms, this is a yes or no answer. So, when the reviewer stated that the house would be suitable following alterations, he was finding the property retrospectively suitable, which was not the correct procedure.
In the opinion of Lord Justice Rimer, both the reviewer and the Recorder had failed to make the distinction between the local authority offering a house and at the same time suggesting acceptable changes (thus the housing being deemed suitable once the adaptations had been made) and the local authority deeming it suitable and the review officer saying it could be, but only if necessary changes were made. An offer to make changes to a house in order to make it suitable for a council tenant must be made prior to the review process.
The Court of Appeal therefore found that the Council had not discharged its duty towards Mrs Boreh as it had yet to find her suitable accommodation.
Partner Note
Boreh v Ealing London Borough Council [2008] EWCA Civ 1176. See http://www.lawreports.co.uk/WLRD/2008/CACiv/oct1.3.htm.
In Brief
EPCs – End of Transitional Provisions
Property owners are reminded that the transitional arrangements governing non-domestic Energy Performance Certificates (EPCs) came to an end on 4 January 2009.
Prior to that date, as long as the seller of a property was able to show that it was being actively marketed on the relevant commencement date (6 April 2008 for buildings of more than 10,000 square metres, 1 July 2008 for buildings of more than 2,500 square metres and 1 October 2008 for all other commercial buildings), then an EPC was not required until a contract for sale/lease was being prepared. From 4 January, that is longer the case.
Partner Note
Guidance on EPCs and other energy saving measures is available on the website of the Department for Communities and Local Government at http://www.communities.gov.uk/planningandbuilding/theenvironment/energyperformance/.
N.B. This article assumes there will not be a last minute change.
In Brief
Lords Provide Rent Review Relief for Landlords
Landlords will breathe a sigh of relief following the recent reversal of the decision in the much-reported case of Scottish and Newcastle v Raguz. It dealt with the requirement on landlords to serve notices on each outstanding payment date during the rent review process in order to have the right to collect the increased rent payable from the original review date.
The decision that this is not required not only reduces the administrative burden on landlords, but also removes the risk that they may suffer loss through a relatively trivial administrative oversight.
Partner Note
Scottish & Newcastle v Raguz. Reported in the Times, 30 October 2008.
Indirect Loss Not Actionable
When subsidence occurs, it presents homeowners with a dreadful problem and it is relatively common in areas that have a history of mining operations. Accordingly, the Coal Authority has an obligation in some circumstances to pay compensation for subsidence caused to properties affected by past coal mining activity.
In a recent case, an arbitrator ruled that the Authority was liable to the owners of two properties and ordered it to buy them from their owners. The properties were alleged to be unsaleable, not because they themselves suffered from significant subsidence, but because of the effect of subsidence on nearby properties.
The Coal Authority referred the decision to the High Court, arguing that since there was no actionable damage to the claimants’ properties, the arbitrator did not have the power to make an award.
The Court agreed. Under the Coal Mining Subsidence Act 1991, for a claim for compensation to succeed, there had to be physical damage caused by subsidence. A claim for economic loss could not be made.
The arbitrator had erred because he had addressed the wrong problem. The question that should have been asked was whether or not the claimants had suffered an economic loss caused by subsidence to their properties.
Partner Note
Coal Authority v Davidson and Davidson EWHC [2008] 2180 [TCC]. See
Is Arbitration History?
A recent case has called into question the inherent fairness of arbitration clauses used in agreements between businesses and consumers, unless consumers are properly advised on the legal effect of such clauses.
The case concerned (predictably) a dispute between a homeowner and a builder. The builder’s work was undertaken using a standard form contract which included standard arbitration clauses.
Under the contract, in the event of a dispute an arbitrator was to be appointed and the arbitrator’s decision was to be final. However, the impact of this was not explained to the homeowner before she signed the contract, which in any event did not include a mechanism for the appointment of the arbitrator. In such cases, the appointment should be agreed by both parties. Following the dispute, the homeowner refused to participate in arbitration, so the builder alone appointed the arbitrator.
The arbitrator made an award against the homeowner and she went to court to contest it – and won.
The judge ruled that because the arbitration clauses were not fully explained to the homeowner, they were invalid, because this created an imbalance of rights, between the supplier and customer, which breached consumer law, specifically the Unfair Terms in Consumer Contracts Regulations 1999. The appointment of the arbitrator was therefore invalid, as was his decision.
It remains to be seen what impact this decision will have on other similar cases, as the implication is that where such contracts specify the appointment of an arbitrator, the arbitrator’s appointment would appear to be automatically unfair unless appropriate advice has been given to the consumer.
Says <<CONTACT DETAILS>>, “It is good practice in any event to advise members of the public who are offered a contract to take legal advice regarding its implications before signing it and to evidence this advice in writing.”
Partner Note
Mylcrist Builders Ltd. v Mrs G Buck [2008] EWHC 2172 (TCC), 19 September 2008.
Contracts greater than £5,000 – applicable law, the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083. See http://www.opsi.gov.uk/si/si1999/19992083.htm.
Contracts less than £5,000 – applicable law, the Arbitration Act 1996, S91.
Is Demolition Renewal?
The Court of Appeal recently issued a ruling which will come as a relief to property developers seeking to rely on easements in order to redevelop properties.
The case concerned whether or not the owner of a property could rely on a right of entry onto adjoining property which was allowed when the works being done were ‘rebuilding or renewal’.
The right was contained in a transfer dated 1993 and it was reserved in favour of ‘the property’. The court held that this meant that the right was limited to the rebuilding or renewal of the property as it then stood. However, the proposed works involved demolishing the existing buildings (two single storey industrial buildings) and replacing them with a multi-storey mixed development. Accordingly, the court rejected the assertion that the property owner could rely on the right of entry. The property owner appealed.
The Court of Appeal took a different view. It held that it must have been contemplated at the outset that the buildings were of finite life and that there might be changes in circumstances which would make a different sort of property more appropriate for the site. The right to entry belonged to ‘the property’, not the buildings, and this must include the land on which the buildings stood.
The Court therefore concluded that the right of rebuilding must include demolition of the existing property and the erection of new buildings which may be different from the existing ones. To restrict the right only to the situation where the work was to rebuild buildings similar to those currently on the site did not make sense and could not have been what was contemplated when the original transfer documents were created. Such an interpretation could also create great uncertainty over whether the right was exercisable or not in some circumstances. The Court considered that the original parties to the transfer would have been surprised were the interpretation construed as narrowly as in the decision of the lower court.
The ruling will give comfort to developers seeking to enforce a right of access over neighbouring land in order to carry out developments as it gives grounds for confidence that easements over land which are similarly worded will be interpreted in a commonsense way and not interpreted narrowly.
Partner Note
Risegold Ltd. v Escala Ltd. [2008] EWCA Civ 1180. See
Landlord Error Means Service Charges Not Payable
Although accomplished in different ways, almost all commercial leases have a clause which requires the tenant to pay a charge for services such as rates, electricity and so on. These clauses almost always require each tenant in the premises to pay a fair proportion of the listed service costs and they provide a mechanism by which such costs are to be calculated.
In a recent dispute between a landlord and tenant over service costs, the lease stated that the landlord would make an assessment of the charge each year and would send a notice to the tenant of the anticipated charges for the following year. The landlord was also required to ‘prepare and send the tenant a statement of the actual Service Costs and Service Charge for each Service Charge Year as soon as practicable after the end of such year’. The tenant was required to make good any shortfall on the previous year’s estimate of charges within 14 days.
Various works were carried out to the building. The landlord considered these to be ‘abnormal’, so that the cost of their completion fell outside the normal service costs. The landlord decided, therefore, to invoice these costs separately, so they were not included in the demand. The tenant did not pay the invoice.
The landlord went to court seeking payment. The judge concluded that since the procedure for claiming service charges had not been complied with, the sum claimed was not due.
The landlord appealed to the Court of Appeal, arguing that not all charges raised on tenants had to be by way of the terms set out in the lease. The Court rejected this approach, ruling that the lease set out the procedure the landlord had to follow and the landlord had not followed it.
The moral of the story for landlords is that it is essential to follow the procedure laid down in the lease and to comply with any other obligations (for example, the obligation to send a summary of rights and obligations to the tenant with the service charge demand). Failure to do so can prove to be very expensive.
Contact us for advice on dealing with all commercial property matters.
Partner Note
Lenora v Mott McDonald [2008] EWCA Civ 857.
There is a good write up of the issues in the New Law Journal, 7 November, pp 1552-3.
Landlord Not Entitled to Hope Value
The House of Lords has denied an appeal by the Earl of Cadogan and others against a well reported ruling in which landlords were denied the right to claim an element of ‘hope value’ when their tenants bought out their leaseholds under the right to buy legislation.
Strictly, the judgment is not all good news for tenants. The Lords did rule that hope value is not payable in claims for the freehold under the Leasehold Reform Act 1967 or in lease extension claims or for participating tenants under the Leasehold Reform, Housing and Urban Development Act 1993.
However, the Lords also decided that hope value is to be taken into account in the valuation in so far as it is attributable to the possibility of non-participating tenants seeking new leases of their own flats. A non-participating tenant is a tenant who is not part of a collective scheme for obtaining enfranchisement of a leasehold (i.e. where the tenants of a block of flats decide collectively to purchase the freehold).
The argument turned on how the ‘marriage value’ (the amount by which the freehold value of the property after purchase by the tenant exceeds the landlord’s value of the property as an investment property plus the tenant’s value of his or her lease) should be dealt with. The problem, as identified by Lord Hope of Craighead, is that ‘there are three distinct elements in the valuation of the freehold interest of premises which are subject to a long lease: the right to receive the ground rent, the right to vacant possession at the term of the lease and the option, or at least the potential, to deal early with the tenant and thus release the marriage value which will be realised at the term before the term arrives. It is the third element which is known colloquially as the hope value.’ This value can differ considerably from the common concept of ‘open market value’, yet ‘none of the statutory provisions that are in issue in this case refers to hope value’.
It remains to be seen to what extent the hope value will be taken into account relating to the renewals of leases by non-participating tenants.
Partner Note
Earl Cadogan and Another v Pitts and Another.
Earl Cadogan and Others v Sportelli and Another.
[2008] UKHL 71. See
Lease Restricts Right to Light
The law regarding the right to light is sometimes complex, but the right is one which can be claimed pursuant to Section 3 of the Prescription Act 1832. This provides that where there has been actual enjoyment of continuous light for 20 years, a right to light can be acquired – even without written consent or agreement. The decision in a recent case, in which the right to light was claimed by a tenant citing the Act, will be greeted with relief by developers.
The case concerned land that had been bought in 2001, having been originally conveyed by the local council, on a 99 year lease, in 1975. The claimant had acquired neighbouring land in 1989.
The lease provided that the landlord retained ‘the full and free right to erect build rebuild and/or alter as they may think fit at any time and from time to time any buildings or bays or projections to buildings on any land adjoining the demised property and/or on the opposite sides of the adjoining streets and access ways…provided always that nothing herein contained shall operate to grant by way of implication or otherwise…any estate right or easement…by the lessor over or in respect of any land retained by or belonging to the lessor…’.
The defendant decided to develop the adjacent land and the tenant claimed that the proposed development would restrict its right to light. It argued that a right to light had been acquired over the adjoining land by prescription, pursuant to Section 3 of the Act, because the tenant had enjoyed continuous light for 20 years without written consent or agreement. The defendant did not contest that fact, but argued that the reservation of the right to build in the lease referred to above prevented the tenant from acquiring the right to light.
The court agreed with the defendant, distinguishing between clauses that deal with the position as it exists at the date of the lease (which would operate to prevent the creation of the right to light and similar easements over the land) and those which deal with future events, which would prevent the creation of easements. The former would need to be specified. With regard to the latter, the exact type of restriction need not be specified, so the failure to specify that the right to light was specifically restricted did not limit the landlord’s right to develop the adjacent land where the right to build on the land was reserved under the lease.
Although the lease did not specifically refer to the enjoyment of light, the other provisions prevented the right from being acquired.
Partner Note
RHJ Ltd. v FT Patten (Holdings) Ltd. (2008) All ER (D) 161 (Mar). See
New Flats in Roof Space Qualified for Zero-Rating
A recent case has confirmed that where a developer creates new self-contained flats out of the empty roof space of an existing residential building, the flats will qualify for zero-rating for VAT purposes.
In the case in point, the developer was a landlord, which owned blocks of flats that were let to residential tenants. The developer converted the roof spaces, which had never been used for a residential purpose,into twelve self-contained flats and applied to register for VAT on the basis of his intention to make (zero-rated) taxable supplies.
HM Revenue and Customs denied the application to register for VAT on the ground that a roof space is part of an existing dwelling and the modifications therefore constituted works to an existing dwelling.
The owner of the building appealed the decision to the VAT and Duties Tribunal, which ruled that a grant of a major interest (i.e. sale of a long lease) by a person who converted the empty roof space of a block of flats into new, self-contained flats qualified for zero-rating for VAT purposes. The roof space was a ‘non-residential’ part of a dwelling meeting the conditions of Item 1(b), Group 5, Schedule 8, Value Added Tax Act 1994.
Accordingly, the landlord was entitled to register for VAT and was therefore able to recover the input VAT incurred when carrying out the conversion work.
Partner Note
Merlewood Estates Ltd. v HMRC [2008] UKVAT V20810.
Property Case Shows Need for Reasonableness
In a recent case, a landlord claimed dilapidations in excess of £1.5 million from its tenant, when what had actually occurred was a major refurbishment of the entire building. Indeed, some of the dilapidations claimed for related to work which had not actually taken place. The tenant refused to meet the claim, so the dispute ended up in court.
Only much later did the landlord accept that the exterior of the building was not in disrepair and that the interior work was largely a conversion of the premises into furnished offices.
In considering the claim, the court concluded that the work done by the landlord did include dilapidations recoverable from the tenant, but only to the value of £1,073. The tenant had made no offer of settlement to the landlord.
The tenant claimed that in spite of it having to make a payment, it was the clear winner in the proceedings and therefore argued that the landlord should pay its costs. Furthermore, it claimed it should receive ‘indemnity costs’ – the term applied where costs are awarded which are greater than those which would normally be payable to the winner. Indemnity costs are awarded only if there has been unreasonable or inappropriate conduct of the proceedings.
In this case, the landlord’s claim was considered to be so exaggerated that it had prevented meaningful negotiations from taking place. In addition, the failure to provide the tenant with accurate figures relating to the cost of the works done made it impossible for the tenant to evaluate the true position. The court ruled that the tenant was entitled to indemnity costs as yet to be determined.
Says <<CONTACT DETAILS>>, “Keeping a sense of perspective when negotiating with your landlord or tenant is always advisable, especially where claims for dilapidations are concerned.”
Partner Note
Business Environment Bow Lane Ltd. v Deanwater Estates Ltd. [2008] EWHC 2003 (TCC). See http://www.bailii.org/ew/cases/EWHC/TCC/2008/2003.html.
There is a succinct write up in Property Week, 5 September 2008.
Rent Officers Must Not Consider Too Wide an Area
When assessing rent on a property, local authority rent officers should not use an area of reference that is too broad. This ruling, by the House of Lords, will help guide future assessments by local rent officers.
The case concerned a tenant living in private rented accommodation in Sheffield. The property was the subject of two rent assessments, conducted in 2004 and 2005. These assessments compared rents for a mix of property types in ‘the locality’ – defined for the purposes of the assessments as ‘a broad geographical area made up of a number of neighbourhoods’. The rent officers ended up basing their assessments on an area that included the whole of the city of Sheffield and some of its surroundings.
The assessments were challenged, first in the High Court and, more recently, in the House of Lords, following an appeal that reversed the original High Court judgment.
Argument at the various court hearings centred on the question of how terms such as ‘locality’ and ‘neighbourhood’ should be defined for the purposes of the relevant legislation and guidelines. It was decided at the first hearing that the meaning of locality could not be thought to include an area as large as Sheffield. This view was reversed on appeal and was part of the reason for the final appeal to the House of Lords.
The House of Lords concluded that, when comparing rent charged in a locality, rent officers should not normally include an area as large as a city, although there might be situations where such an extensive area might be justified. Once the rent officer had assembled information from enough neighbourhoods to satisfy, in his judgment, the requirements of the legislation, he was required to stop looking for, or including, any further neighbourhoods.
Partner Note
Regina (Heffernan) v Rent Service, House of Lords [2008] WLR (D) 279. See
Social Housing – The New Regime
The Housing and Regeneration Act 2008 received the Royal Assent in July 2008 and will, over time, usher in a new regime in social housing.
For the first time, social housing is defined – it includes low-cost (i.e. below the market rate) rental accommodation and low-cost home ownership accommodation. The latter is accommodation which is made available using shared ownership or equity sharing arrangements or shared ownership trusts.
In both cases, the object must be to make the accommodation available to those whose housing needs are not adequately met by the commercial housing market.
The Act also allows other schemes to be approved by the Secretary of State which do not fall under the definitions above.
The Act creates two sorts of providers of social housing, abolishing the term ‘Registered Social Landlords’. The two sorts will both be called Regulated Providers, but will be differentiated according to whether they are set up on a not-for-profit basis or have profit making aims.
A new standards framework for social tenants is expected to be launched in the autumn of 2009, following an extensive consultation exercise. An impact assessment on the Act was published in December 2008 and is available online.
If you are affected by this legislation, take advice before acting as it is being brought in over time and the practical implications of some of the provisions are not yet clear.
For advice on all social housing matters, contact <<CONTACT DETAILS>>.
Partner Note
The text of the Housing and Regeneration Act 2008 can be found at http://www.opsi.gov.uk/acts/acts2008/ukpga_20080017_en_1.
The impact assessment (333 pages) can be found at http://www.communities.gov.uk/documents/housing/pdf/housingregenactimpactassess.
Time Not of the Essence in Fee Reimbursement
The case concerning a buyer who failed to pay the legal fees of the vendor, as specified in the contract, and was therefore ruled by the court to have failed to complete the purchase has now been heard by the Court of Appeal.
The buyer paid the completion monies on the final completion date. However, the contract specified that the vendor’s legal fees were payable by the purchaser. Because these were not remitted, the vendor considered that the contract had been rescinded and retained the buyer’s deposit. The High Court ruled that the seller had the right to do this under the contract. The buyer appealed to the Court of Appeal.
The Court considered that the contract for sale of the property did not include the necessity to remit the legal fees as a condition of completion. The contract included the obligation for the buyer to pay various sums ‘on completion’, but with regard to the legal costs it simply required that the purchaser was ‘responsible for the legal costs incurred by the vendor’. This did not make the timing of the payment of the essence of the contract, therefore the Court of Appeal found that the payment of those costs was not a condition for the completion of the sale.
Partner Note
Please let us know if you would like a copy of our article on the original High Court case.