LANDLORDS & TENANTS
Are You Aware….

Q:As a landlord or tenant, how will the increase in VAT in the new year affect me?

• rent and service charges – if a landlord has elected to recover VAT then naturally these payments will increase in the new year
• rent deposits – check the rent deposit deed because it may oblige a tenant to top-up the principal amount deposited to take account of the rate increase

Q:My tenant is in arrears of rent and service charges. I have instructed solicitors to recover these. Can I recoup my legal costs?

It depends. Careful consideration needs to be given to the wording of the costs recovery clause (if any) in the lease.

It may be that only costs of proceedings or steps taken in contemplation of proceedings are recoverable. The recent case of Agricullo Limited v Yorkshire Housing Limited [2010] EWCA Civ 229 highlights how critical the wording of a covenant is.

Although this case concerned disrepair and not the recovery of rent or service charge arrears, it illustrates that close attention to the wording in leases is required. In this case the lease provided that only legal costs incurred in connection with the service and preparation of certain notices and the costs of the proceedings consequent upon such notices were recoverable. The notice in question was prepared and served and after length discussions, the tenant undertook the remedial works. The Court of Appeal held that the costs for the preparation and service of the notices were recoverable but the landlord’s remaining costs were incurred as a result of negotiations and not proceedings and the tenant was not liable to pay them.

In the absence of a contractual entitlement to recover costs a landlord will be unable to recoup its legal costs from a tenant. But if proceedings are issued, provided the arrears exceed the small claims limit of £5,000, the Court has a discretion to award a winning party its costs.

The question of costs is highly contentious and has generated a whole area of satellite litigation so if in any doubt, always best to seek legal advice.

Q:We have a 1954 Act tenancy which is coming to an end. Our landlord tells us that it has plans to redevelop the premises we occupy. What should we do?

As a tenant you really have 3 options:-

• first, do nothing and see whether the landlord serves a hostile section 25 notice;
• secondly, take pre-emptive action and serve a section 26 request for a new tenancy;
• thirdly, approach the landlord informally on a without prejudice basis to see whether an arrangement can be made.

With hostile renewal proceedings the landlord must prove at trial the necessary intention and ability to redevelop. As a landlord it also sensible, if practically possible, to be in a position to demonstrate this at the time any hostile section 25 notice is served because this should hopefully save time and costs in the long run and a tenant can divert its energies into sourcing alternative premises.

In some cases a hostile section 25 notice will be served but it is apparent that the landlord is unable or unwilling to redevelop within the next 12 to 18 months. A tenant would be wise to issue an application for a new tenancy as soon as possible as any delay will be to the landlord’s advantage.

At trial the job of the Court is to balance the parties’ interest. However, whilst bearing in mind the tenant’s entitlement to a reasonable level of security of tenure, the Court will not deprive a landlord from its ability to redevelop premises in the future. A possible solution to such a scenario is to order the grant of a new lease for a short term but with the insertion of redevelopment breaks which will enable the landlord to bring the tenancy to an end by serving a further hostile section 25 notice , say in one or two years’ time.

This Q&A written by Claire Lamkin from the firm’s Property Litigation department also appeared in Retail Gazette in December 2010.

http://www.retailgazette.co.uk/search?utf8=%E2%9C%93&q=claire+lamkin&commit=Search