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Set-off

This page contains material dealing with
  • The right (or otherwise) of a tenant to set-off a valid claim against his landlord against the new landlord after the reversion has been assigned; and
  • Anti-set off clauses.

Set-off by tenant after landlord has assigned the reversion

Arrears accruing prior to assignment of the reversion

Smith v Muscat
[2003] EWCA Civ 962

Introduction

In a lease to which the Landlord and Tenant (Covenant) Act 1995 does not apply, on assignment of a landlord's interest in the property, the right to the rent including arrears passes to the landlord by virtue of s141 of the Law of Property Act 1925. By virtue of s142 the new landlord becomes liable to comply with the landlord's obligations under the lease but he is not liable in damages for breaches that occurred prior to the date of the assignment of the landlord's interest (Duncliffe v Caerfelin Properties Ltd [1989] 2 EGLR 38).

Facts

In this case T was a Rent Act tenant. In December 1995 T began to withhold rent from his landlord because of disrepair. In 1999 the landlord sold the reversion to the new landlord. T continued to withhold rent. The new landlord served a notice to quit and commenced possession proceedings. The judge held that T was entitled to set off damages in respect of the period that had accrued since the assignment of the reversion but was not entitled to set-off against the rent that had accrued prior to that date. T appealed.

Decision

Appeal allowed. T was not prevented from relying upon set-off by ss141 and 142. Those provisions only exclude
    "... a cause of action against an assignee landlord for his assignor's breach of covenant, not a set-off against a rent debt which has passed under s141... Mr Smith is entitled to set off against Mr Muscat's claim for assigned rent arrears any damages due to him for the assignor's breach of his repairing obligations because the debt, a chose in action, vests in Mr Muscat as assignee subject to all equities that were available to Mr Smith against the assignor." (Sedley LJ at para 28 and 33).

Arrears accruing after assignment of the reversion

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