Landlord and Tenant
So far as action by Larry is concerned, the original tenant, Thomas, is greatly assisted by the operation of the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995). This applies (by virtue of s.1) to tenancies granted on or after 1st January 1996 (“new tenancies”). The previously invidious situation of a tenant remaining liable under certain covenants notwithstanding an assignment is rectified by section 5 of the Act which provides that upon an assignment, a tenant is automatically released from his covenants under a lease. Certain assignments are excluded from this provision. However, the exclusion provided for in LT(C)A 1995, s.11 does not apply since the assignment to Alf took place with Larry’s permission. Nonetheless, there are two further factors which should be investigated before it is concluded that Larry has no remaining remedy against Alf. First, section 16 of that Act provides an exception to the release of liability. Where the assignment is conditional upon the consent of the landlord, the landlord may require the tenant to enter into an authorised guarantee agreement (’AGA’). This is a guarantee by the assigning tenant of the performance by his assignee of the tenant’s covenants in the lease. The tenant would provide such guarantee either as a principal debtor (in which case the landlord can proceed immediately against him in the event of default) or as a guarantor (in which case the landlord would first have to exhaust his remedy against the assignee). Enquiries should therefore be made to establish whether Larry’s advisers had the foresight to secure such an agreement at the time of the assignment to Thomas. The second issue in respect of which it may be necessary to consider proceeding against Alf relates to the disrepair of the premises. By its nature, disrepair is a gradual process which may well have commenced prior to the assignment. If this were so, the Landlord and Tenant (Covenants) Act 1995 will not assist Alf who could be proceeded against for the breach of this covenant. However, this will not be necessary if Thomas is capable of providing a satisfactory remedy since an assignee is liable for breaches of a continuing nature notwithstanding the fact that the breach commenced prior to the assignment.
So far as the disrepair is concerned, Larry has a number of options. It would be usual for the lease to contain the reservation to him of rights of entry, inspection and repair. In any event, s.11(6) of the Landlord and Tenant Act 1985 implies into the lease a covenant by the lessee allowing the landlord to enter the premises at a reasonable time upon the giving of 24 hours notice in writing for the purpose of inspecting their condition. In Granada Theatres (fn1, supra), it was held that a landlord of a business tenancy has an implied licence to enter for the purpose of effecting the repairs for which he is liable.
Larry may seek to forfeit the lease for the breach by Thomas of the covenant “to keep the whole of the demised property in good and substantial repair”. However, in taking such action, he will be subject to the requirements of the Leasehold Property (Repairs) Act 1938 . Larry will have to serve a forfeiture notice under s.146 of the Law of Property Act 1925 upon Thomas. Provided that, as here, the lease is for more than seven years and has an unexpired residue of at least three years, by s. 1(1) of the 1938 Act, Thomas will be allowed 28 days from the date of the notice to serve a counter-notice upon Larry. He must be informed of his right to do so in the s.146 notice in characters no less conspicuous than those used on any other part of the notice . The effect of service of the counter-notice is that no proceedings by the landlord to enforce a right of re-entry, forfeiture of for damages may then be taken without the leave of the court. In order for leave to be granted, the landlord must prove on a balance of probabilities the existence of one of the five grounds specified by s.1(5) of the 1938 Act :
- The value of the reversion has been or will be substantially diminished if leave is not granted;
- Immediate repair is required by law, court order or the requirement of an appropriately empowered authority;
- Where the tenant is not the sole occupier of the premises, the repair is necessary in the interests of another occupier;
- When the breach can be immediately remedied at an expense that is small in relation to the greater expense that would be incurred if the work were postponed;
- Where there are special circumstances which in the opinion of the court render it just and equitable to grant leave.
Larry will also be able to seek damages against Thomas but the measure of such damages is restricted by s.18(1) of the Landlord and Tenant Act 1927 which limits them to the diminution in the value of the reversion by reason of the breach. Larry should be cautioned that such damages will not be available if at the end of the term the premises are to be demolished or subject to such structural alterations as would render the value of the repairs worthless.
Larry has three potential options in relation to the unpaid rent: an action to recover the rent, distress and forfeiture. The first of these is straightforward, Larry may sue to recover the rent in the same way as any other debt subject only to commencing the action within six years as required by s.19 of the Limitation Act 1980. This is of little practical value if Thomas is perceived to be a “man of straw”. Distress is an ancient self-help remedy which entitles the landlord (or more usually bailiffs instructed by him) to seize the tenant’s chattels and after five days (or fifteen if the tenant makes a written request to the landlord) sell them to realise the sum owed. There are restrictions upon this remedy such as the landlord not be allowed to seize tools of the tenant’s trade and, once again, it may be of little practical value to Larry if Thomas does not have chattels of sufficient value upon the premises to cover the debt. Further, it has been observed that:
“…serious doubts exist as to the compatibility of distress with [the Human Rights Act] 1998. Distress might breach both [the European Convention on Human Rights], Art.6 and also the First Protocol of the Convention, Art.1. The tenant has almost no opportunity before a distress claim to challenge is validity. Therefore, the usually preferable manner of proceeding in the event of rent arrears is again by way of forfeiture. This can be effected either by court order or by “peaceable re-entry” . Usually a landlord must make a formal demand for rent before forfeiture is allowed but Larry is assisted in this case by the fact that not only is the rent due from 25th December 2005 but also remains unpaid from the last due date of 29th September 2005. Since the rent is payable quarterly, this means that some six months’ rent is outstanding. Section 210 of the Common Law Procedure Act 1852 provides that a formal demand is not required if half a year’s rent is in arrear and sufficient distress is not available. It is clear from Hammond v Mather that the latter requirement is rarely significant since distress will not be available if the premises are locked. (In any event, it is common for leases to provide for forfeiture for non-payment of rent “whether formally demanded or not”.)
In common with the vast majority of landlords, it is probable that Larry will apply for forfeiture to the County Court for the district in which the premises are situated. He should be aware that Thomas will then have the opportunity to apply for relief from forfeiture under s.138 of the County Courts Act 1984 the purpose of which is to grant relief to the tenant . If Thomas pays the rent arrears into court not less than five clear days before the return day for his defence, the proceedings will end automatically by virtue of s.138(2) of the Act. By s.138(3), if the court is satisfied that Larry is entitled to forfeiture, it must order possession not less than four weeks from the date of the order. However, the court has the discretion to extend the length of this period and if Thomas were within such time pay off the arrears and costs, possession will not be recovered. Beyond this, Thomas may make subsequent applications to the court for extension of the time and obtain relief automatically if payment is made a required within the time allowed. Should Larry opt for peaceable re-entry (should the right exist), Thomas will still be able to obtain relief against such forfeiture if he pays the sums that are due, reimburses Larry for the costs and expense to which he has been pt and the court deems it just and equitable
Bibliography
- Collins, S. & Cattermole, R., Anti-Social behaviour, Powers and Remedies (2004), Thomson, Sweet & Maxwell, London.
- Garner, S. & Frith A., A Practical Approach to Landlord and Tenant, (4th Ed., 2004), OUP, Oxford.
- Luba, J. & Knafle, S., Repairs - Tenants’ Rights, (3rd Ed., 1999), LAG, London
- MacKenzie, J-A. & Phillips, M., Textbook on Land Law, (10th Ed., 2004), OUP, Oxford.
- Morris, J., Principles of Landlord & Tenant Law, (2nd Ed., 1999), Cavendish, London & Sydney
- Oakley, A., Megarry’s Manual of the Law of Real Property, (8th Ed., 2002), Sweet & Maxwell, London
- Smith, P., Evans and Smith, The Law of Landlord and Tenant, (6th Ed., 2002), OUP, Oxford
- Smith, R., Property Law, (5th Ed., 2006), Pearson, Longman, Harlow, England
- Wilkie, M., Cole, G. & Luxton, P., Landlord and Tenant Law, (2006), Palgrave MacMillan, Hampshire, England
- Westlaw
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