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Dewar Hogan Dewar Hogan Dewar Hogan Dewar Hogan Dewar Hogan

Landlords who push at the boundaries get pushed back – what happened at Farley Court, NW1

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 prepare 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 will often prevail over a less robust opponent with a strong case – c’est la vie!

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 the standard lease that had been granted to other lessees in the block who had claimed new leases, and the Landlords would not accept any amendments. Rather than accept the Landlords’ position, the Lessee commenced proceedings in the First Tier Tribunal, but before the FTT was required to make a final decisions terms which favoured the Lessee were agreed. But that was not the end of the matter. Because of the Landlords’ intransigence the Lessee applied for an order for costs against them.

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 different terms to that 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, and made an order for costs against the Landlords.

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.

Has this slap on the wrists made any difference? It’s unlikely. Landlords know about probability. They know that, for all the reasons mentioned above, if pressed most lessees won’t offer much resistance even if that means ending up with a lease that isn’t as valuable or marketable than it would be otherwise.