Property Pearls of Wisdom

Property Pearls of Wisdom

Published: 21 October 2013

To break or not to break

PCE Investors Ltd v Cancer Research UK (2012) made an important ruling in favour of landlords so far as break clauses are concerned. In this case, the tenant’s option to break a lease was conditional on 3 things. The tenant having:

  • Served not less than 6 months’ prior written notice on the landlord,
  • Paid the rents reserved and demanded in the lease up to the break date, and
  • Given the landlord vacant possession of the premises.

The break clause was expressed to be the fifth anniversary of the term which expired mid-quarter on 11 October. On 21 September the landlord had issued a demand to the tenant for the whole quarter’s rent; however the tenant only paid the rent for the period 29 September to 11 October. All other conditions of the break had been satisfied. The landlord argued that the break was invalid because the tenant had not paid the whole quarter’s rent.

The Honourable Mr Justice Peter Smith held that it was clear from the lease that the tenant was obliged to pay the full quarter rent which fell due on 29 September and so by apportioning, the tenant had failed to comply with the terms of the break. He went on to say that “silence was golden” so it was not for the landlord to point out to the tenant the mistake it had made.

However, whether this decision can be applied to situations where the landlord has not demanded a full quarter rent, as it had done so here, remains to be seen.

The moral of the story remains that all tenants should exercise great caution when serving break notices.  Even after service of the break notice, failing to comply with lease terms – in this case inadvertently paying the wrong amount of rent led to the tenant losing its break rights.

Whether you are a landlord or a tenant, it is vital you seek legal advice before serving a notice or, as the case may be, as soon as one has been served on you. Please contact one of our property experts who would be happy to assist.

Squatters’ rights amended

Under recent legislation, the new crime of squatting in a residential property came into force which is now punishable by up to 51 weeks’ imprisonment and/or a fine of up to £5,000.

This offence now applies, interestingly, to both occupied and unoccupied properties. Recourse for a homeowner or, indeed, a residential landlord will now rest with the local police as opposed to the civil courts.

Landlords Off The Hook? Duty to consult on service charges

The Landlord and Tenant Act 1985 (the Act) requires landlords of residential premises to consult tenants before undertaking work above a certain value. If the landlord fails to consult properly, it cannot recover more than £250 from each tenant in respect of works. The Act provides that the Leasehold Valuation Tribunal (LVT) has the power to dispense with all or any of the consultation requirements if it is satisfied that it would be reasonable to do so. 

In the landmark case of Daejan Investments v Benson the landlord applied to the LVT for a dispensation to enable it to recover £280,000 from its tenants, as opposed to £1,250 in the absence of dispensation (Daejan had failed to provide details of one of the estimates it had obtained for the works, and had also cut short the statutory consultation period during which tenants can make observations).

In this case although the LVT had refused a dispensation, regarding Daejan's failure as a serious breach of the statutory requirement to consult, the Supreme Court took another view. When considering an application for dispensation, the LVT should consider what prejudice has been caused to the tenants by the landlord's failure to consult properly. 

The burden of showing prejudice is on the tenants who will have to explain what they would have said about the works had they been consulted properly. If the tenants can show prejudice, then the LVT should view the tenants' case sympathetically.

Here, the Supreme Court held that the LVT should grant dispensation. It found that the £50,000 reduction offered by the landlord exceeded any prejudice suffered by the lessees.

The case raises very interesting questions as to how the LVT will deal with applications for dispensation going forward. Whilst the decision will not relieve landlords from their duties under the Act, they can certainly be less fearful of the consequences of failing to comply strictly with the consultation requirements. As for tenants, the onus is on them to demonstrate that prejudice has been suffered. Enjoying expensive works to their block without having to pay for them will now be harder to achieve!

For advice and information on the above, please contact Paula Abrahamian by email or call her on 0207 632 1443.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.