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LTA 1954 - compensation ploy? |
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One of the changes introduced to LTA 1954 by the Regulatory Reform Order 2003 was a new type of application under s29(2). This allows an application by L for an order to terminate the existing tenancy without the grant of a new lease. To obtain such an order L must prove one of the statutory grounds for opposition.
A recent case showed an L trying to use this new procedure as a cunning way of avoiding paying compensation to a T who was vacating. Previously, L had served an s25 notice terminating T’s tenancy and opposing renewal on the grounds of L’s intention to redevelop. However, L subsequently abandoned redevelopment and told T it would no longer oppose a new tenancy. But, by then T had secured alternative accommodation and indicated that it would be giving up possession – and expecting to receive statutory compensation. Clearly, L did not want to pay this compensation and so tried to use the new s29(2) procedure as a way of avoiding doing so. Thus, L applied for an order terminating the new tenancy without the grant of a new lease. But, L knew that it would not be possible to win that case; he was plainly unable to show one of the statutory grounds of opposition (and acknowledged such when making the counter-claim!).
The logic behind L’s application was that if L’s application under s29(2) was refused, then the court would be obliged to order the grant of a new lease. T could then reject or accept the new lease as it wished. But, the point would be that a new tenancy would be ordered and thus T would end up losing its right to statutory compensation. On the wording of LTA there was really no legal answer to L’s ploy. But, T was successfully able to argue that it was an abuse of process; in the court’s view, L had started and continued with a claim that it had no intention of concluding, purely with a view to depriving T of statutory compensation. The end result was that L’s application under s29(2) was struck out as an abuse of process.
It has to be said that this decision does really involve palm tree justice by the court. The wording of the Act is quite clear and the logic being used by L was impeccable. But, for right or for wrong, the court’s decision does preserve what solicitors have always regarded as being the true position under the LTA – namely, as soon as L serves a notice or counter-notice specifying opposition to renewal purely on compensation grounds, then T has an entitlement to compensation. However, even if L changes his mind, T need only vacate the premises to collect that compensation. Perhaps more importantly, it shows the willingness of the courts to adopt a robust attitude to legal ploys of this sort.
See note on Felber Jucker v Sabreleague [2005] PLSCS 162 In [2006] The In-House Lawyer May p83.
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May 2006 |
