|
Rent review – notice to former Ts? |
|
Landlord and Tenant (Covenants) Act 1995 radically restricted the ability of
L to sue a former T for breach of obligations in a post-1995 lease. But s17
introduced valuable protection to all Ts – indeed it is one of the few parts of
the Act that applies retrospectively (ie to both ‘old’ and ‘new’ leases). Under
s17, if L wants to recover a fixed charge (which includes rent or service
charge) from a former T, then L must give notice to the former T within six
months or the money is lost.
This rule is primarily intended to stop Ls
allowing arrears to accumulate without the former T’s knowledge. But it
seems it can also create a pitfall for L when there is a rent review:
- L must serve a prescribed Form 1 Notice on the former T within six
months of the date on which the ‘fixed charge’ becomes due;
- when a Form 1 Notice has been served, the amount the original T must
pay cannot exceed the amount specified in that notice (unless the notice
says the liability may be for a greater amount);
- within three months from the amount being determined, L must serve a
Form 2 Notice saying that L does intend to recover the greater amount
from him. Only then can L sue.
What may not be appreciated is the way that these rules can work in a rent
review – and, in effect, require L to serve notice on a former T even when
there is no suggestion of any breach by the existing T. In a recent case, the
High Court decided that even if there is no default by the current T, if L wants
to preserve his ability to claim the uplift on a rent review from a former T,
then L must serve Form 1 Notices on the original T from the rent review date
onwards (specifying, in effect, ‘nil’ or ‘nothing at the moment but wait and
see’). L must then serve a Form 2 Notice within three months of the date
when the reviewed rent becomes demandable following the rent review. If L
does not do that then the former T will not be liable to pay the uplift on the
rent review. Accordingly, if a rent review is ongoing, and L is concerned to
preserve the ability to recover any uplift from a former T (or a guarantor of a
former T), then L must follow this procedure. It is not good enough to simply
await the outcome of the rent review before serving any notices; if L does
that, then it may well be too late to recover the uplift.
Many will regard this decision as a nonsense, since it creates technical
procedural hurdles for no good reason. But, if this High Court decision is
correct then whenever L is involved in a rent review, the wise course of
action is to serve a Form 1 Notice on any former Ts as from the rent review
date. Source: TLT Solicitors, commenting on Scottish & Newcastle v Raguz
[2006] EWHC 821 (Ch).
|
|
July 2006 |
