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Rent reviews - six month delay? |
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There is a potential trap for Ls if an outstanding rent review has not been
determined within six months of the review date. Likewise, the same trap
seems to apply to a service charge payment that has not been calculated
within six months of the original due date.
The problem in both instances is that no money will be recoverable from a former T (or guarantor) unless
notice has been served under s17 Landlord and Tenant (Covenants) Act
1995, which says that if L wants to recover a ‘fixed charge’ (which
includes rent or service charge) from the former T, then L must give
notice to the former T (or guarantor) within six months – or the money is
lost. Whilst this rule is primarily intended to stop Ls allowing arrears to
accumulate without the former T’s knowledge, it also seems to have
indirectly created a trap into which unwary Ls can fall when there are
delays in settling an outstanding rent review or service charge.
It follows that Ls who are involved in rent reviews or service charge
calculations where the final amount will not be known for more than six
months from the original date, may feel it prudent to serve notice on
former Ts and guarantors as a protective measure. But, since no default
has yet occurred, it seems doubtful that the cost of serving such notices
could be recovered under the lease. Plus, of course, serving such
notices may risk the former T or guarantor calling for an overriding lease
(although it is not entirely clear whether an overriding lease could in fact
be claimed on the basis of L’s notice – which is, after all, going to be for
a nil amount, since it is no more than a protective notice advising that a
possible claim might be made).
Note that none of this affects the normal situation where a fixed charge,
such as rent or service charge, is not paid by T on time. In such cases
an s17 notice will be served in the normal way on the former T (or
guarantor) within six months of the date of default. See note on Scottish
& Newcastle v Raguz [2006] EWHC 821 (Ch) in [2006] NLJ 1874.
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January 2007 |
