Welcome to the November 2011 special property edition of the Gaby Hardwicke Business Brief. We publish the Business Brief regularly and it contains information on important legal developments, forthcoming legislation and other items of interest to you and your business. Our aim is to update you on the most important issues in the shortest possible time and to give you advanced warning of regulation, with advice on how to minimise its impact.

We hope that you find this newsletter useful. If you have any comments or suggestions, please email us or call David Getty on 01323 435955.

A recent Court of Appeal decision highlights the risks for commercial tenants of failing to correctly exercise the break clause in their lease. In this case, the tenant failed to give vacant possession strictly in accordance with the terms of the clause.

The tenant had wanted to carry out repairs to the property to minimise a dilapidations claim. There was no obligation on the tenant to complete the works before vacating the property; they were only required to pay rent up to the break date and give vacant possession.

By deciding to stay in the property to complete the repairs, the tenant failed to give vacant possession and was, therefore, not entitled to terminate its lease. Fortunately, the tenant had a further right to terminate eight months later, which it correctly exercised. However, the tenant still had to pay an extra eight months' rent and legal costs.

For more information please contact Nick Wickens.

Businesses involved in residential property development should be aware of a recent decision in the Technology and Construction Court. The court held that a builder, who had taken more than four years to renovate a terraced house, had taken too long to carry out the works and had caused a private nuisance to neighbours living in the adjoining property. Improperly fixed scaffolding repeatedly banged against the wall of the neighbours’ property and workmen using the scaffolding could see into their bathroom and garden. The neighbours were awarded total damages of £96,800.

For more information please contact Jeremy Laws.

Since October 2011 landlords have been obliged to provide water companies with their tenant’s contact details. Should the landlord fail to comply with this provision, he will become liable for the invoices of the water usage at the rented property. This means that the water company may then seek payment from the landlord, the tenant or both.

This obligation will apply to all residential premises that are occupied by someone other than the owner. This includes not only tenants, but also anyone who lives in a property without paying rent, for example the partner of a tenant. Houses in multiple occupation and accommodation for the elderly are also covered.

In light of this new obligation, landlords and agents should consider amending their tenancy agreements to specify that tenants must provide evidence of the water bill being paid to date, when they leave, otherwise it will be deducted from the deposit. It might also be useful to require tenants to give an alternative address when they vacate the property.

For more information please contact Hamed Ovaisi.

A recent Court of Appeal decision has held that plaster is part of the structure of a building as an essential part of the ceilings and partition. Plaster is considered a constructional finish to walls and ceilings, to which the decoration is applied. The relevance of this decision is that, as plaster is held to be structural and not a decorative finish, it will come within a landlord’s responsibility to repair any damaged plasterwork under landlord and tenant legislation.

Landlords should be aware of this potential increase to the scope of their responsibility to repair. Landlords may wish to review their current leases to determine where responsibility for repair falls.

For more information please contact Nick Wickens.

Landlords should be aware of the benefits of seeking legal advice early when a tenant is in arrears of rent.

We recommend that landlords seek legal advice when there is just one month’s rental arrears, rather than waiting for more time to pass and further arrears to accrue. Action may then be taken on a preventative basis sooner rather than later on the landlord’s behalf.

Landlords should bear in mind that it may take between 8 and 16 weeks to get to the position of having a hearing to obtain a possession order. This is a considerable length of time to wait when there may already be 2 to 3 months’ arrears at the point of instructing solicitors.

When a tenant disappears, the landlord should not assume that the tenant has legally surrendered the lease of the property.

If the landlord is unsure whether the tenant intends to return, then he should take great care, since a wrong move may result in the landlord facing civil and/or criminal proceedings for unlawful eviction.

For more information please contact Hilary Thorpe.

In general, a successful party cannot recover its costs in the Leasehold Valuation Tribunal (LVT). In practice, most tenants will manage to apply to the LVT for an order barring the landlord from adding his costs to the service charge, even though the terms of the lease permit such recovery. But it is wrong for the tenant to think that he or she need only make a successful application to avoid paying any of the landlord’s costs.

Some leases contain covenants which provide for the recovery of legal costs, if there is a breach of covenant, outside the service charge. This is outside the scope of the order that the LVT can make preventing such a charge being added to the service charge. The tenant under such a lease is likely to be on the receiving end of the bill for the landlord’s legal costs with the only recourse being to apply to the LVT for a determination of liability to pay. In this type of application, the LVT is unlikely to be able to prevent the landlord from recovering these fees completely.

Landlords may wish to review their leases to determine the scope for recovery of their costs in such a situation.

For more information please contact Hilary Thorpe.

A recent court decision has prevented a freehold owner of premises from recovering service charges from the leaseholder because the freeholder failed to comply with a term of the lease when submitting the service charge demand.

The lease contained a clause requiring the freeholder to obtain a certificate from a surveyor to show the amount of service charges due. Where no certificate had been provided, it was held that no service charge liability arose and the leaseholder was therefore under no obligation to pay. In this particular case, an order was also made preventing the freeholder from recovering any costs through any future service charge demands.

This case highlights the importance of understanding and complying with the terms of the lease. If you do not understand the lease, or feel it is inadequate, you should seek legal advice.

For more information please contact Nick Wickens.

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