Remedies for breach of covenant to repair

If you establish that there has been a breach of the repair covenant, there are a number of available remedies to the landlord. Firstly, you can consider specific performance. Specific performance is an equitable remedy that is available to force the tenant to comply with a positive covenant. However, the courts will only grant this relief where other remedies are not appropriate. See for example the case of Rainbow Estates Ltd v Tokenhold Ltd in1999.

Landlords can also claim damages. If the tenant is in breach of contractual obligations in the lease an action can lie in breach of contract. However, in the case of a breach of covenant to repair, two important statutory provisions mean that the landlord cannot recover the full cost of the repairs. Firstly, Section 18 of the Landlord and Tenant Act of 1927 limits the amount of damages to the amount by which the landlord’s reversion has diminished in value as a result of the disrepair. Secondly, the Landlord and Property Repairs Act of 1938 applies to leases granted for more than seven years with more than three years left to run. If the Act applies and the landlord wants to sue for damages, a special procedure must be followed. The procedure used in forfeiture for non-payment of rent which is quite straightforward should be distinguished from forfeiture for breach of other types of covenant where the landlord must be careful to follow the statutory procedure laid down in Section 146 of the Law of Property Act 1925. The landlord must begin by serving a Section 146 Notice on the tenant which will specify the breach, require the breach to be remedied and require the tenant to pay compensation for the breach. If the tenant does not comply with the notice then the landlord can forfeit either by peaceable re-entry or by court order. There is an added complication in cases of disrepair where the lease was originally for seven years or more or has at least three years left unexpired. In this case the Leasehold Property Repairs Act 1938 applies and requires the Section 146 Notice to include notification of the tenant’s right to serve a Counternotice within 28 days.

A tenant may breach covenants in the lease in a number of ways. They may let third parties into occupation or try and assign or underlet without obtaining the landlord’s consent. Solicitors should be flexible in considering what kind of remedy may be appropriate in any given scenario.

Lease termination and security of tenure under a business Lease

We now have to consider ways in which Leases can be terminated at common law when the tenant is not in breach of the tenant’s covenants in the Lease. We will consider security of tenure for business Leases under Part 2 of the Landlord and Tenant Act 1954 and how Leases are terminated at common law.

At common law there are a few ways in which Leases can come to an end. Firstly, by the effluxion or passing of time. If a fixed term Lease ends, then the Lease will expire.

Secondly by giving a notice to quit. Period tenancies are determined by the appropriate period of notice to quit given by the landlord or tenant. So if it is a periodic tenancy a landlord will serve a notice to quit following which the Lease will come to an end.

Thirdly a Lease can be surrendered. This occurs when a tenant yields up the Lease to the landlord who accepts the surrender. A surrender can only be achieved if both the landlord and tenant agree to it.

Lastly a merger. This occurs where the tenant acquires the immediate reversion to the Lease or acquires the Lease at landlord’s estate in the land. This is the opposite of a surrender. It can also occur when a third party acquires both the Lease and the reversion.

Under s.23 of the 1954 Act, there must be a tenancy of a property which is occupied by the tenant for business purposes. Business is widely defined and includes a trade profession or employment and in the case of a body of persons any activity carried on by them.

Not all types of business tenancy are protected.

1.         Tenancies at Will which can be terminated at any time do not have the protection of the 1954 Act.

2.         Fixed term tenancies are not protected – landlords cannot circumvent the 1954 Act by granting a succession of six month tenancies if the tenant has already been in occupation for more than 12 months when another Lease is granted that tenant will gain protection of the Act even if the new Lease is six months or less.

3.         Farm business tenancies and mining Leases are expressly excluded from the 1954 Act.

Assuming that the tenancy is covered a tenant who is occupying a property for business purposes and is not caught by any of these exclusions will be afford protection by the 1954 Act s.24 of the 1954 Act states that a tenancy to which this part of the Act applies shall not come to an end unless terminated in accordance with the provisions of this part of the Act.

The 1954 Act provides for only seven modes of termination:

1.         Service of the landlord’s notice under s.25.

2.         Service of a tenant’s request for a new tenancy under s.26.

3.         Forfeiture.

4.         Surrender.

5.         In the case of a periodic tenancy by the tenant giving the landlord notice to quit.

6.         In the case of a fixed term Lease by the tenant giving the serving three months’ written notice on the landlord under s.27 as long as the notice does not expire before the contractual expiry date.

7.         In the case of a fixed term Lease the tenant ceasing occupation for business purposes at the end of the Lease under s.27(1)(a).

We will now go through these in turn.

s.25 Notice

If a Landlord would like the Tenant to leave at the end of the term or they wish to grant a new Lease on new terms, then a Section 25 notice must be served within 6 to 12 months before the Landlord wants the tenancy to end. There are two types of Section 25 notice the Landlord could serve. As mentioned, one suggests a new tenancy on different terms and the other initiates termination of the tenancy. The Landlord can oppose a tenancy on seven grounds (A-G) which are stated in Section 30(1) of the LTA 1954. These include the Tenant being in arrears of rent, the Tenant not complying with their obligations, the Landlord wishing to occupy the premises or redevelop the premises.

The s.25 Notice must state the date upon which the landlord wants the tenancy to end this date cannot be earlier than the date the tenancy could have been terminated under the common law.

There are strict time limits when calculating the date upon which the landlord wants the tenancy to end. The s.25 Notice has to be served no less than six months and no more than 12 months before the termination date specified in the Notice the termination date.

Application to the court following service of a s.25 Notice

If the landlord indicates in the s.25 Notice that it will post a grant of a new tenancy the tenant must apply to the court before the expiry of the s.25 Notice or they will lose their rights under the 1954 Act. If the landlord indicates they are not opposed to grant of a new tenancy the parties will enter into negotiations for the grant of a new Lease but the tenant should still apply to the court within the time limit to safeguard their position. This time limit can be extended by agreement between the parties e.g. where they are near to agreement on the terms of a new Lease and wish to avoid the expense of court proceedings.

Renewal by the tenant under a s.26 request

A tenant of a Lease protected by a 1954 Act who wants to terminate the Lease on the contractual expiry date may do so by ceasing to occupy for business purposes by the end of the Lease or serving s.27 Notice giving the landlord three months’ prior written notice. If a protected tenant wishes to remain in the property after the contractual expiry date they could choose to do nothing as the tenancy will continue they could simply wait until the landlord serves a s.25 Notice.

Alternatively the tenant could take the initiative and serve a s.26 request. s.26 request serves to bring the current tenant to an end and constitutes a request for a new tenancy. For example the tenant might choose to serve a s.26 request if they believe the rents have fallen and a reduced rent could be achieved for a new Lease or the tenant has plans to assign the Lease and believes that the tenancy would be more attractive to buyer if a new fixed term has been granted.

Application to the court following service of a s.26 request

If the landlord wishes to oppose the grant of a new tenancy it must serve a counter Notice on the tenant within two months of the service of the tenant’s s.26 request stating the s.30 grounds for opposition. The tenant must then ensure that they apply to the court for a new Lease or they will lose their rights under the 1954 Act.

The application must be made prior to the commencement date of the new tenancy specified in tenant’s s.26 request unless the landlord agrees to the extension of this time limit. The landlord can pre-empt the tenant’s application to the court by applying for an order to terminate the Lease on the grounds stated in the counter Notice. If the landlord does not oppose the grant of a new tenancy it need not serve a counter Notice and the parties will negotiate the terms of the new Lease. However the tenant should make an application to court before the commencement date of the new tenancy specified in the s.26 request to safeguard their position.

Landlord grounds of opposition under s.30

If the landlord opposes the renewal of the tenancy its s.25 Notice or counter Notice to a s.26 request must state on which of the seven specified grounds under s.30 of the Act it does so the grounds are as follows: All of these grounds are discretionary and the court will decide whether or not to allow a tenant a new Lease. It is not sufficient for the landlord just to establish the ground it also has to show that the tenant ought not to be granted a new tenancy in view of the facts giving rise to the grounds. Ground F is the most frequently used ground. The landlord must show that on the termination of the tenancy:

1.         It had a firm and settled intention to carry out relevant work e.g. that it obtained the necessary planning permission and financial arrangements are in place.

2.         It intends to demolish or reconstruct the premises or to carry out substantial works of construction on the whole or part of it.

3.         It cannot reasonably carry out the work without obtaining possession.