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Case Law Update

Two new cases have been reported recently which are of interest.

Cheerupmate2 Ltd v Calce [2017] UKUT 377 (TCC), 20 September 2017

In this case the Upper Tribunal (UT) held that a purported forfeiture of a tenant’s 900 year lease for non-payment of rent was invalid as the landlord had not complied with sections 166 and 167 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002).

On acquiring the reversion to the lease, the landlord informed the tenant of the change of landlord and simultaneously served what he intended to be a notice under section 166 of the CLRA 2002 (section 166 notice), demanding unpaid rent from 2010 to 2015 of £11. When the tenant failed to pay by the date specified, the landlord entered the land and secured it, claiming forfeiture by peaceable re-entry. The same day the landlord applied to close the tenant’s leasehold title. The tenant objected and the matter was referred to the First Tier Tribunal (FTT). The FTT found against the landlord and an appeal was pursued by the landlord to the UT.

A tenant with a long residential lease is only liable to pay rent if demanded by a section 166 notice, which must be in a prescribed form. The landlord had used an old version, which failed to explain clearly the effect of section 167. The UT determined that this rendered the notice invalid.

The UT also considered the timing of the purported forfeiture. The lease did not permit forfeiture for non-payment of ground rent until the tenant had been in arrears for two years. This was extended by section 167 of the CLRA 2002 which only permits forfeiture where either of the following apply:

• The arrears exceed £350.

• An amount has been outstanding for more than three years.

The UT found that both time periods commenced on the payment date specified in the section 166 notice, not the due date under the lease. The landlord was therefore not entitled to forfeit until three years had elapsed from the date in the notice.

Cos Services Ltd v Nicholson [2017] UKUT 382 (LC), 03 October 2017

In this case the lessees of a block of flats challenged insurance premiums claimed by the landlord between 2014-2017 of sums between £12,600-£13,500 per year. The FTT held that only sums between £2800-£3000 were recoverable. The landlord appealed.

The UT held that the burden was on the landlord to satisfy the relevant tribunal on the balance of probabilities that the costs in question had been reasonably incurred and that under s 19 of the Landlord & Tenant Act 1985 is necessarily a two-stage test: did the landlord act rationally in its decision making when incurring the costs and is the sum being charged, in all the circumstances, a reasonable charge.

Applying the two stage test, the UT held that the insurance premiums being charged by the landlord to the tenants were excessive, in the sense that considerably lower premiums for similar protection could have been obtained elsewhere. The landlord had therefore failed to satisfy the UT that the amounts sought to be charged to the tenants were “reasonably incurred” and the appeal was dismissed.

The Tribunal held that whilst it is open to any landlord with a number of properties to negotiate a block policy covering the entirety, or a significant part, of its portfolio, it must also satisfy the Tribunal that the invocation of a block policy has not resulted in a substantially higher premium. The landlord should be able to explain the process by which a particular policy and premium have been selected, with reference to the steps taken to assess the current market.

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