Real Estate

Repair or replacement: it’s the landlord’s choice
5 October, 2017

In March this year I reported on the Court of Appeal case of London Borough of Hounslow v Waaler [2007], regarding recoverability by the landlord of their costs for discretionary improvement works, and whether the costs had been reasonably incurred according to Section 19(1) LTA 1985.  One of the points emphasised in this case was that, where there was more than one possible reasonable course of action available, the landlord must choose which option to pursue.

 

This principle has recently been applied by the Upper Tribunal in the recent case of DeHavilland Studios Limited v Peries and another [2017].

 

Ms Peries and Mr Voysey held a long lease of a live/work unit on the first floor of a converted factory in East London.  The landlord was DeHavilland Studios Ltd.

 

The lease contained a covenant on the part of the landlord to keep the retained parts in “good and tenantable repair and decorative condition”, the costs being recoverable from the tenants through the service charge provisions.

 

The windows of the property were in disrepair.  Whilst the tenants of flat 12 agreed that the windows were in disrepair, there was disagreement over the consequences of the disrepair.  It was the landlord’s view that the windows could be repaired and that was the solution it proposed.  The tenant believed the windows should be replaced.  The cost of replacing all the windows in the building was significantly higher than repairing them.

 

The landlord took the decision to repair all of the windows in the building and sought to recover the cost of the works, to the tune of £100,242, through the service charge.  The tenants believed that they were not liable for any part of this sum which had been included in the service charge.

 

The tenants applied to the First-Tier Tribunal (FTT) under Section 27A of the Landlord and Tenant Act 1985 for a determination of their liability to pay a proportion of this sum under the service charge.

 

The FTT held in favour of the tenants that the windows should be replaced, stating that “The costs to be incurred in respect of repairing the windows are not reasonable” and that “replacement of the windows is the most reasonable option“.  The tenants were not liable to pay any part of the service charge relating to the replacement of the windows.  The FTT claimed that in reaching its decision it had taken into account both expert’s reports, which had found that either replacement or repair was reasonable.

 

The landlord appealed on the ground that the FTT had applied the wrong test and, in particular, it had not determined that it was unreasonable for the landlord to repair the windows.  Instead, it had determined that both repair and replacement were reasonable but that, in its view, replacement was the better option:  this approach was wrong in law and contrary to authority.  Permission to appeal was granted.

 

Whilst it could not be confident about its findings, the Upper Tribunal held that on balance the FTT had appeared to conclude that both replacement and repair were reasonable options, but that replacement was more reasonable.

 

In reaching its decision, the Upper Tribunal applied the principle laid down by Lewison LJ in Waaler, which was that:

 

the tribunal should not simply impose its own decision.  If the landlord has chosen a course of action which leads to a reasonable outcome the costs of pursuing that course of action will have been reasonably incurred, even if there was another cheaper outcome which was also reasonable.

 

The Upper Tribunal held that the FTT had fallen foul of this principle.  It had found that both replacement and repair to the windows would be reasonable but it preferred reinstatement, “and that was a course which was not open to it.

 

The Upper Tribunal held that the landlord was entitled to a declaration that the decision to repair, rather than replace, the windows was a reasonable one and they were entitled to recover the reasonable cost of the repair via the service charge.

 

This case only serves to reinforce the importance of Waaler when considering the recoverability of service charges, and both landlords and tenants would be wise to bear in mind this decision when considering carrying out improvement works.


Charity begins in town
22 September, 2017

Research by think tank Demos, highlighted in a recent Civil Society news report, has considered the social benefits of charity retail.

 

The report estimates that charity shops in the UK save their councils £27 million a year by diverting clothes from landfill, and two-thirds of volunteers believe their charity shop role improves their employment prospects, makes them more confident, improves self-esteem and enables them to gain new skills.

 

Yet over half of the public respondents said that they associate charity shops with high street decline, and half consider that a healthy high street should contain fewer charity shops.

 

We know the face of retail is changing, with the shift to the sale of new goods online, and the corresponding withdrawal of retailers from traditional high street space.  So far, so 21st century.  But perhaps as shoppers we need to start getting real about the impact our new consumer habits will have on our town centres, and as members of our community we could start to understand the new environment, and the opportunities that it presents.  Charity shops seem to be a hugely beneficial use of community space.  With online consumption of goods at an all-time high, there can be no shortage of pre-loved items to be recycled/re-used, for the benefit of the environment (less landfill), the charity shop customers (bargains) and the charities running the shops (profits).  Not to mention the benefits of getting people into the workplace, and the roles that charity shops play in supporting vulnerable members of our society.  Isn’t it time to rethink our perceptions of success and failure, and consider our high streets half full, rather than half empty?


Continued interest in Airbnb
19 September, 2017

Following our earlier plogs concerning Airbnb (20.09.16 and 03.04.17), recent research by the Residential Landlords Association (“the RLA”) has found that there has been a 75% increase in the number of multi-listings (those advertising more than one property) on Airbnb in London between February 2016 and March 2017.  The RLA suggests this is due to changes in Mortgage Interest Relief, and you can read more here.


The end of the Landlord and Tenant Act 1954?
8 September, 2017

Commentators have called the recent High Court judgment in S Franses Limited v The Cavendish Hotel Limited [2017] EWHC 1670 (QB) the ‘end of the Landlord and Tenant Act’.  Although this commentary seems extreme, the final outcome of the case is still awaited as the High Court judge did grant a leapfrog certificate allowing the tenant to seek permission to appeal directly to the Supreme Court, indicating its importance.  It is not yet known when the appeal will be heard.  In the meantime, this case study will be of interest to both commercial landlords and tenants.

 

A lease protected by the Landlord and Tenant Act 1954 (“the 1954 Act”) gives security of tenure to tenants who occupy premises for business purposes.  The lease will not come to an end at the expiry of the term but instead will continue until it is ended by one of the ways specified by the 1954 Act, for example service of a landlord’s notice under section 25 or service of the tenant’s request for a new tenancy under section 26.  If the landlord opposes the grant of a new lease, one or more of the seven grounds of opposition in section 30 must be stated.

 

Facts

 

S Franses, a commercial tenant, occupied premises on the ground floor and basement of 80 Jermyn Street under a lease protected by the 1954 Act.  When the tenant’s lease expired on 2 January 2016 it served notice under section 26 of the 1954 Act for a new lease on 15 March 2015.  The landlord served counter-notice on 15 May 2015 and opposed the grant of a new lease under section 30(1)(f).  This ground states that “the landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession.”  This is the most frequently used ground of opposition by landlords.

 

Proceedings began in July 2015 and the landlord put forward various schemes for alterations and works.  For the purposes of the trial, the landlord put forward scheme 3 which entailed demolishing and putting up several new internal walls to create two retail spaces and demolishing a single staircase and creating two new staircases/lift shafts.  There was no separate entrance for unit 2 and visitors would be required to walk through unit 1 to gain access.  The judge at first instance found that “some aspects of the intended works have been contrived only for the purposes of ground (f).”  The landlord accepted in cross-examination that the works would not commence if the tenant left voluntarily.

 

9 Grounds of Appeal

 

  1. There was not sufficient intention on the landlord’s behalf to carry out scheme 3 because the works were only being carried out to satisfy ground (f).
  2. The judge was wrong to rely on an undertaking by the landlord to carry out scheme 3.
  3. The judge misunderstood information about the various schemes and this led to error when assessing the credibility of the landlord.
  4. The judge applied the wrong legal test in holding that a reasonable time for commencing works was within 12 months of obtaining vacant possession.
  5. The judge was wrong to hold that the scheme 3 works would constitute derogation from the grant of the current tenancies and/or breach of the covenant of quiet enjoyment.
  6. The judge failed to consider the new terms of the tenancy in determining whether the scheme 3 works could be reasonably carried out without obtaining possession.
  7. When considering whether scheme 3 fell within ground (f) the judge failed to consider which works could be carried out under the landlord’s right of entry.
  8. The judge failed to consider that one half of each of the party walls fell outside the holding.
  9. In accepting the landlord’s undertaking to carry out the works, the judge erred in principle by refusing to make an order for the tenant to access the premises to verify compliance.

Decision

 

While there were 9 grounds of appeal, it is the first ground that is the most controversial because the landlord effectively used the 1954 Act to rid itself of a tenant with security of tenure.

 

When considering ground 1, the judge considered the subjective and objective elements of the legal test for ground (f).  In order to rely on ground (f), the landlord must show that, on the termination of the tenancy:

 

  1. He has a firm and settled intention to carry out the relevant work.
  2. He intends to demolish or reconstruct the premises (or a substantial part of them), or to carry out substantial works of construction.
  3. He cannot reasonably carry out the works without obtaining possession.

 

It was held the correct analysis for the objective element is not that the landlord’s intention is conditional upon the termination of the tenancy (as the tenant put forward) but that it was conditional upon the works being necessary to satisfy ground (f).

 

As for the subjective elements, the intention must be genuine and that intention must be fixed, settled and unconditional at the time of the hearing.  The application of the word ‘unconditional’ was debated as the works were conditional on the landlord’s claim succeeding and achieving vacant possession.  It was concluded that when considering ground (f) the court is to consider the nature of the landlord’s intention at the end of the tenancy.  In other words, the fact that the landlord would not carry out the works if the tenant remained in occupation did not matter.

 

The appeal was dismissed, despite the judge agreeing that there was clear evidence that the works were intended to obtain possession and found that the various schemes lacked commercial viability and practical sense.

 

Until the appeal is heard, this may mean that landlords can use the 1954 Act to obtain vacant possession and get rid of tenants by concocting renovation schemes that could not be done without obtaining possession.


Case Summaries: Rights of Way
17 August, 2017

Implied rights of way, s.62 and rights of necessity

 

Linvale Investments Limited v Christopher Eric Walker [2016] WL 03049957

 

Linvale purchased Orbital Business Park for £4,225,000.  The company planned to let the buildings on the property and re-sell it 2 years later for a profit of £2-4 million, depending on how good the tenants’ covenants were.  A company director of Linvale, Mr Walker, held a ransom strip in his personal name for taxation purposes.  This ransom strip also served as a fire escape route from Unit J1, a factory, on Linvale’s land.  The receivers of the property at Unit J1 claimed the factory had the benefit of a right of way over the ransom strip.

 

The factory had been vacant for around 2 years.  There was no continuous use of the escape route and a right of way could not be established using s.62.  Nor could the Wheeldon v Burrows requirement of ‘continuous and apparent use’ be met.  However, the court found that it was the intention of the parties that the factory would be let and the fire escape route would be used by the tenants as needed.  An implied easement was found based on the common intention of the parties.

 

Wood & Anr v Waddington [2015] EWCA Civ 538

 

The land in question was previously one farm which was sold off in parts.  The land was crossed with two tracks and two public bridleways.  The Woods claimed that they had the benefit of rights of way over two tracks.  Mr and Mrs Sharman (the Woods’ predecessors) had used the tracks on Mr Waddington’s land without any objection.

 

The court considered the track that led to the road first.  When considering s.62, the court held:  “what is important is the extent to which there are visible signs of a track or road.”  There was evidence that the track was visible on the day the land was transferred to the Sharmans and neighbours provided evidence that the track was used once a month.  The court held that this constituted a pattern of regular use and was ‘enjoyment’ for the purposes of s.62.

 

The court then considered a track that led to the public bridleway.  This was a hard track and was visible on the ground.  S.62 had not been excluded in the conveyance and it was held that:  “The grant in the written terms of a conveyance of a limited right will not exclude the operations of section 62 to confer a greater right than that which is contained in the conveyance itself.”  This is qualified by the fact that rights can be no greater than their predecessors in title.

 

Notices, obstruction and prescription

 

Trevor Winterburn, Elizabeth Winterburn v Garry Bennett, Lynne Bennett [2016] EWCA Civ 482

 

The Winterburns ran a fish shop and, along with their suppliers and customers, regularly parked in a parking lot owned by the Conservative Club Association.  Over a 7 year period the Club asserted on 12-15 occasions that it owned the parking lot and the Winterburns and their suppliers and customers had no right to park there.  The Club posted a sign, clearly visible to those entering their parking lot, which read:  “Private car park.  For the use of Club patrons only.  By order of the Committee.”  The entrance to the parking lot was subsequently blocked off, prohibiting any vehicular access.

 

The Winterburns claimed a right for themselves, their suppliers and customers to park vehicles in the Club’s parking lot.  The claim was based on acquisition by prescription by lost modern grant, which requires 20 years of uninterrupted user ‘as of right’.  This means that the parking lot was used without force, secrecy or permission.  The element of ‘without force’ was the issue in this case.  The court held:  “The erection and maintenance of an appropriate sign is a peaceful and inexpensive means of making clear that property is private … I do not see why those who choose to ignore such signs should […] be entitled to obtain legal rights over the land.”

 

Blocking access

 

Adam Stoddard Page v Convoy Investments Limited [2015] EWCA Civ 1061

 

Mr Page purchased 2 lots from a farmer at auction.  Both lots had the benefit of a right of way for agricultural purposes over the retained land that led to the public highway.  The farmer then sold the retained land to Convoy.  Convoy installed electric gates at the entrance to the roadway that required a fob or code to gain entry to its land and the right of way benefiting lot 1.  This obstructed Mr Page’s access to his land and he claimed the gates were a substantial obstruction to the reasonable use of the right of way.

 

The court agreed with Mr Page, despite Convoy offering Mr Page the code and a fob after installation of the electric gates.  The court found that:  “fobs and codes may be a convenient way of opening gates in a domestic context, but not being a farmer …”  When the lots were conveyed to Mr Page there were no practicable gates in use; therefore Mr Page is entitled to require Convoy to keep the gates open at all times.

 

Martin Harry Bradley, Rosemary Diane Bradley v Peter Greenwood Heslin, Marianne Heslin [2014] EWHC 3267 (Ch)

 

Two houses, No.40 and No.40A, originally belonged to one owner.  No.40 was sold off and eventually both houses changed ownership.  A right of way was granted to No.40 in the original conveyance over roughly 200 feet of the driveway so that the owners of No.40 could access their property with or without vehicles from Freshfield Road.

 

The Bradleys now own No.40 and regularly close the gates at the entrance of the driveway, which the owners of No.40A, the Heslins, claim is an obstruction to accessing their house.  The Bradleys claim they own the pillars and assert their right to close the gates due to proprietary estoppel (or alternatively, adverse possession of the northern pillar and under prescription or lost modern grant to close the gates).  The court agreed that No.40 owned the pillars, the southern pillar by the original conveyance and the northern pillar by adverse possession in 1992.

 

When the Bradleys close the gates over the driveway it is a trespass over the Heslins’ land, unless there is an easement.  The court looked at the intermittent use of the gates over time and held no right was acquired by prescription or lost modern grant.  The court held that the original owners’ relationship was bound by estoppel and therefore the Bradleys had a right to close and open the gates for all purposes connected with reasonable enjoyment of No.40A.  The court suggested closure of the gates from 11 pm – 7.30 am and installation of an electric gate operable from a vehicle.


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