Saving heartache and expense on leasehold repairs

Many professionals and lay clients are unaware, or need reminding, of the Leasehold Property Repairs Act 1938.
A quick introduction, or a gentle reminder, may well
save a lot of heartache and expense.

The Act restricts the enforcement of covenants
to repair in long leases. There
are, of course, a number of ways of dealing with disrepair during the term of a lease.

The Act does not apply where a landlord serves notice and, upon default, carries out works and recharges them to the tenant (pursuant to a Jervis v Harris clause). Nor does it apply in a claim for specific performance (see Rainbow Estates v Tokenhold), although such claims have their own difficulties.

It does, however, apply in
the case where a landlord
seeks to forfeit the lease or
seeks damages for the disrepair.

The Act applies to covenants to keep or put in repair premises, and applies equally
to commercial and residential property. A long lease for
the purpose of the Act is one granted for a term of at least seven years, where three years
or more remain unexpired (sections 1 and 7 of the Act).

Where the Act applies, a landlord is required to serve a section 146 (Law of Property Act 1925) notice, even if it only seeks damages. Further, unless that notice informs the tenant of the right to serve a counter-notice claiming the benefit of the Act, and gives a name and address for service of that counter-notice, the 146 notice will be invalid.

The tenant has to be given
28 days from service of the
146 notice in which to serve its counter-notice; mortgagees are not entitled to serve one. If a counter-notice is served (which, in most cases, it is), the landlord must seek the court’s leave before taking further steps
to forfeit the lease.

Five instances

Such an application will be brought by a freestanding claim, and will only be granted if the landlord can prove that one
of the five instances set out in section 1(5) of the Act applies. These are, in summary:

a) that immediate remedial works are required to prevent substantial diminution in the value
of the reversion (or its
value has already been
so diminished);

b) that immediate remedial works are required to give effect to an enactment/court order/byelaw which relates to the property;

c) if the tenant is not in occupation of the whole, immediate remedial work
is required in the interests of the actual occupier;

d) that the breach can be immediately remedied at an expense that is small
in comparison with the greater expense that would be occasioned if work were postponed; or

e) ‘special circumstances’ which render it just and equitable that leave
be given.

Considering merits

Expert evidence from a surveyor will be necessary in almost every case. This should be obtained well in advance of making any application so that the merits can be considered at the outset. However, the relevant date for assessing whether one of the grounds is made out is the date of the final hearing.

In reality, if the court grants leave, forfeiture proceedings may not be necessary as the tenant will know what it must do to obtain relief so is likely to do so in short order to avoid further costs accruing. While the application will cause delay,
it will in many cases effectively finally dispose of the dispute between the parties.

However, bear in mind that
in many cases, because of the restrictive nature of the five grounds that apply, often only the most serious of works in any schedule of repairs will meet the test, with the result that the works required to obtain relief from forfeiture may well be limited too.

A final thought. If you
do forfeit a lease, whether
by peaceable re-entry or proceedings, without having complied with the Act, your client could end up with a
rather large bill from an
absentee tenant for wrongful forfeiture. SJ

KEY POINTS Does the Act apply? If so, would you be likely to obtain leave if a counter-notice were served? If yes, ensure your section 146 notice complies with the Act. If not, only serve a section 146 notice if you think that, tactically, it might swiftly resolve any dispute without the need to seek leave. Bear in mind the time it will take to resolve any application under the Act. Consider other options. Check if the lease has a Jervis v Harris provision. In all cases, consider the extent of the costs indemnity. If poor, note section 146(3) and sections 2 and 1(3) of the Act.

 

Simon Allison is a barrister practising from Hardwicke chambers