ABG Property Newsletter – June 2012

Superior landlord’s consent to underletting

In a recent case the Court of Appeal considered whether or not the superior landlord’s consent had been properly obtained to a proposed underletting. It ruled that, under the terms of the lease, the superior landlord’s consent could only be given in a formal licence which had to be executed as a deed and that, although the superior landlord had given consent in principle, consent had not been validly obtained because it was not in the prescribed form executed as a deed.

In this case the tenant entered into an agreement to grant under-leases of two floors to a prospective under-tenant who intended to carry out substantial alteration works. The agreement provided that if the superior landlord’s consent had not been obtained by a longstop date, either party could serve written notice to terminate the agreement with immediate effect. The agreement defined the superior landlord’s consent as consent by way of “the Licence to underlet” in a form set out in the schedule to the agreement.

A formal licence to underlet was prepared, but was not executed as a deed because the superior landlord’s costs had not been paid. The prospective under-tenant then served notice to terminate the agreement for the under-lease. The tenant responded to this by serving a notice to complete and claimed substantial damages for the under-tenant’s failure to take the under-leases. However, the tenant’s claim has been rejected by the Court of Appeal which ruled that there was no valid superior landlord’s consent at the time when the under-tenant served its notice to terminate the agreement. The agreement had been clear and unambiguous that it was mandatory for the licence to underlet to be in a prescribed form set out in the schedule to the agreement.

Landlord’s address required for residential service charge

In a recent case the Lands Chamber ruled that a landlord’s demand for the service charge due under a residential lease was void on a technicality because the demand for payment did not include the landlord’s own address.

Under the Landlord & Tenant Act 1987 where a written demand is issued to a tenant of residential premises it must contain the name and address of the landlord. In this particular case the service charge demand gave the address of the landlord’s managing agent, not the landlord itself. In these circumstances it was decided that the demand was invalid.

Fortunately the landlord was able to correct this by serving a new demand, but residential landlords need to be aware of this technical point in order to avoid similar difficulties.

Covenants against subletting

Where a lease is for a term of 40 years or more and 25 years of that term have expired, the Lands Chamber has power to discharge or modify restrictions affecting the leasehold land.

In a recent case the leases of flats in a block of 31 flats prohibited subletting, but by agreement the leases of a number of flats had been varied to permit subletting.

The tenant of one of the other flats went to work in Australia and sought the landlord’s permission to sublet his flat. However, the landlord refused and so the tenant applied for the discharge or modification of the subletting covenant on the basis that the leases of other flats had been varied to permit subletting.

Nevertheless the Lands Chamber refused the application, as a result of which the tenant was in breach of covenant by having sublet the flat. The Lands Chamber decided that there were substantial benefits in owner occupation in that flats which are owner occupied are likely to be better kept and better managed. Other owners did not want to live in a block where tenants were continually moving in and out and there might be lengthy voids. In practice only one of the other flats had been sublet so the block retained its own occupier character.

Applications to modify or discharge restrictions contained in leases are rare and this case shows that lessees should not assume that, in circumstances where an application can be made, it will be readily granted.

 

The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

Siobhan Goodacre
sgoodacre@abg-law.com
+44 (0)115 934 3325

Wendy Shaw
wshaw@abg-law.com
+44 (0)115 934 3303