Hazel -v- Hassam Akhtar & another - Court of Appeal: 12th December 2001

United Kingdom

Facts:

The Claimant was a tenant of business premises held under a lease for 16 years from 1984 and expiring on 31st July 2000. The tenant covenanted to pay the rent by equal quarterly payments in advance. In 1999 the original landlords disposed of their freehold interest to the Defendants. Solicitors retained by the Defendants wrote to the tenant in July 1999 demanding payment of rent they thought was overdue from the previous December and March but, in fact, that letter crossed with the tenant's payment of rent.

In January 2000 a notice to terminate the tenancy, pursuant to the Landlord and Tenant Act 1954, was served on the tenant. The tenant served a Counter-notice, indicating he was unwilling to give up possession, and subsequently applied to the court for the grant of a new lease. The application for a new lease was opposed by the landlords on the ground, inter alia, in Section 30(1)(b) of the 1954 Act, being that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which had become due.

The Decision:

The Judge dealing with the 1954 Act application for a new lease found that the tenant had never paid the rent on the due date, which was exacerbated by the tenant paying the rent by cheque, which increased the number of days of arrears. The Judge found for the landlord.

On appeal, the court noted that there had been no complaint from the landlord nor any request or demand that the rent be paid promptly. The court looked at the whole history of rent payments under the lease, including taking account of the fact that the tenant's conduct as to rental payments was acceptable to the previous landlords - no complaints having been made - who had, in effect, assented to the practice of slightly late payments by cheque. Although this conduct did not amount to a variation of the terms of the lease, it did have the effect that the landlords were estopped from insisting on the tenant complying strictly with the lease terms unless the landlord had given reasonable notice to that effect.

As to the current landlords, the court considered whether they had given such notice and whether the tenant's conduct, after receipt of that notice, could be described as a persistent disregard of the rental obligation. The landlords' solicitors letter in July 1999 did not constitute such a notice when in fact it was a wrongful demand for two earlier quarters rent and therefore the Judge had misdirected himself in holding that there was a relevant history of late payment of rent, amounting to a persistent failure within Section 30(1)(b). The court also considered that the decision not to grant a new tenancy was, in the circumstances of the case, unduly harsh and the court, therefore, decided to exercise the discretion afresh and grant a new tenancy.

Comment:

A useful warning to landlords and their agents that this ground of opposition to a new tenancy will not be available, or at least is unlikely to be successful, unless steps have been taken during the tenancy to deal with late payment of rent. A review undertaken at the time shortly before service of a termination notice and noting delay in paying the rent, but no steps having been taken to deal with this previously, will be insufficient to rely on this ground.

Quite apart from being able to satisfy this ground of opposition, there are also cash flow considerations which should encourage both the landlord and his agents to review regularly during the term of the lease whether rental payments have been received when they fall due; and taking steps to deal with "persistent" late payments. To the extent that a landlord has delegated to his agent the management of a building, and the agent does not take steps to deal with late payment as it occurs, there could be a possible exposure to the agent should that result in this ground of opposition not being available at the lease expiry. Put another way, where a conscious decision is taken not to deal with tenants who are late payers, perhaps the landlord should be warned that by doing so could inhibit the ability to rely on this ground of opposition. Clearly, there will be a cost benefit analysis to be undertaken for the costs for chasing tenants for late payment and which may not be justified to keep "live" this possible ground of opposition.

This article was first published in Property Week. If you require any further information please contact Andrew Walker at [email protected] or on 020 7367 2710