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Fortune favours the brave – a landlord and tenant perspective

Fortune favours the brave – a landlord and tenant perspective

Fortune favours the brave – a landlord and tenant perspective

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The interests of residential landlords and tenants are regulated by contractual terms and a statutory overlay, and if there is a problem the court or the tribunal is in the wings ready to intervene – but it’s never really as simple as that!

Although rights and obligations etc can be enforced the prospect of taking proceedings is, for some, so daunting that they are prepared to forgo their rights rather than face the stress, cost, and uncertainly of litigation. Many residential lessees fall into this category. They face landlords who are well equipped to engage in a dispute. They are experienced, organised, and funded – and in some cases they may only be answerable to distant shareholders or pensioners. As in many disputes a wealthy and committed party with a weak case can prevail over a less robust opponent with a strong case.

But just occasionally there is a much more even playing field. Recently we acted for a lessee who wanted to extend the lease of a flat in Farley Court in Marylebone (Sandeep International PTE Limited v London Underground (1) and Goldcane Limited (2) 2019 FTT. The law is clear enough. The general position is that a new lease should be granted on the same terms as the existing lease. Notwithstanding this the Landlords presented for agreement a draft lease in a modern form. It was the Lessee’s case that the draft contained more than 50 clauses that were different from the ones contained in the original lease, many of them prejudicial to the Lessee. The Landlords’ justification was that the draft lease was their standard lease for the block and that all lessees had agreed to it – they (the Landlords) would not accept any amendments. Against this uncompromising background the Lessee commenced proceedings in the First-Tier Tribunal. Eventually the terms were settled in the Lessee’s favour before the FTT was required to make a final decision – but that was not the end of the matter.

The FTT has only limited power to make an order for costs against a party but it may do so if there has been unreasonable conduct, and it did so in this case. The Tribunal considered that the Landlords were entitled to press the Lessee to agree to a lease on terms different to those to which the Lessee was entitled. However, they said it was unreasonable to persist in doing so, without an explanation, after the Lessee had made it clear that this was not acceptable. The Tribunal found that the Landlords’ unreasonable conduct resulted in the Lessee incurring costs that could have been avoided.

In this case the Lessee was a company which was able and willing to resist pressure from the Landlords to accept their standard lease. It was the Lessee’s case that that lease would have prejudiced its interests. That issue was not considered by the Tribunal but it is quite possible that any such prejudice could have included damage to the value of Lessee’s investment, which is a point for both lessees and their professional advisers

Will this slap on the wrists make any difference to the way Landlords deal with their lessees? It seems unlikely. Landlords know about probability. They know that if their approach is focused and robust enough then most of the time they will get their own way – c’est la vie!