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Schedules and notices

This page includes information on the following topics:
  • Alterations - notices to re-instate.
  • Collateral agreements
  • Notice of disrepair (Princes House Ltd)

Alterations - notice to re-instate

Westminster City Council v HSBC Bank plc
[2003] EWHC; [2003] 16 EG 103 (Mr Recorder Black QC, sitting as a High Court Judge).

Facts

Over a number of years alteration works had been carried out to the building pursuant to licences to do those works. Each licence stated that the tenant should re-instate at the end of the term, using words such as "should the landlord require" or "if required by the lessor". At the end of the lease the landlord served a schedule of dilapidations, which contained a requirement to re-instate. The schedule did not refer to the licences. The tenant argued that a reasonable recipient of the schedule of dilapidations might have some doubt as to whether or not the schedule was also a notice under the relevant licences. Was this sufficient notice?

Held

Yes. Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] 1 EGLR 57 relied upon.
    "I must .. consider whether the schedule of dilapidations, when property construed, amounts to a requirement to reinstate in accordance with the licences. The schedule did not, as a matter of act, refer to the licences. The appropriate test is whether, nevertheless, a reasonable recipient would have understood one of the purposes of the schedule as giving the notice necessary to invoke the reinstatement obligations. I find that a reasonable recipient in the position of the [tenant] would not have been misled as to the [landlord's] intentions. When I focus upon the fact, as I am enjoined to do by Lord Steyn's speech in Mannai, that a reasonable recipient is bound to have the terms of the lease in the forefront of his mind, I am confident that the schedule would be understood to be referring to reinstatement under the licences, given that the authorised alterations could be called upon to be removed and reinstated only under the licences."

Collateral contract

Landlord agreeing not to serve schedule of dilapidations

Business Environment Bow Lane v Deanwater Estates Limited
[2007] EWCA Civ 622

The CA declined to hold that there was a collateral contract to a lease preventing a landlord from serving a schedule of dilapidations on T notwithstanding an assurance by L's predecessor that no such schedule would be served at the end of the lease.

In giving the main judgement of the court, the Chancellor reiterated the need for caution in applying the law relating to collateral contracts to land transactions and went on to remind the parties that:
    "In a normal conveyancing transaction in a commercial context with both parties represented by experienced solicitors the usual course of dealing is to ensure that all agreed terms are put into the contract and conveyance, transfer or lease. Accordingly those who assert a collateral contract in relation to a term not so contained must show that it was intended to have contractual effect separate from the normal conveyancing documents. Otherwise it will be invalidated by s.2 Law of Property (Miscellaneous Provisions) Act 1989 even if evidence as to its existence is admitted." (para 43)
The court looked in detail at the law surrounding collateral contracts and in particular examined the reasoning behind the judgements in Brikom Investments v Carr [1979] 1 QB 467 and Inntrepreneur Pub Company Limited v East Crown Ltd [2002] 2 LILR 611, and also examined the correspondence between the parties and their representatives afresh. It concluded that, although borderline, the correspondence ultimately did not demonstrate objectively that the parties intended, when entering into the new lease, to make any contract other than that resulting from the new lease.


Notice of disrepair

Princes House Ltd v Distinctive Clubs Ltd
[2007] EWCA Civ 374

Summary

This case arose in the context of a claim for service charges brought by the landlord. The tenant was seeking to set-off his claim for damages for disrepair against that claim. The principle issue in the case concerns the requirement to give notice to the landlord. In this case there was a specific requirement to do so. However, it was held that the landlord had waived the requirement for notice because he had himself told the tenant that repairs to the roof were required.

Facts

T was the tenant of basement premises at Princes House, 190-195 Piccadilly. The landlord brought proceedings for arrears of service charge in the sum of about £442,000 inclusive of interest, and obtained judgement in the sum of about £201,000 inclusive of interest. The tenant counterclaimed in the landlord's proceedings and was awarded the sum of £237,000 inclusive of interest, so extinguishing the landlord's judgement.

The service charge provisions of the 1998 lease provided that the tenant was to contribute to the costs of, inter alia, the repair and maintenance of the roof of a part of the premises known as the "BAFTA block". The service charge for such repairs was capped for the first 5 years of the lease, at £4,500 for the first year and £1,500 (with provision for indexation) in subsequent years. The landlord was required to repair and maintain the roof and to use all reasonable endeavours to provide its services so far as was consistent with the principles of good estate management. The landlord's liability to repair was further restricted under the lease until such time as (i) it had been notified of the disrepair by the tenants and (ii) a reasonable time for remedying the disrepair had elapsed.

In 2002, the landlord wrote to the tenants enclosing a budget for service charge expenditure for 2003, and advising them of the need to replace the roof of the "BAFTA" block and of its intention to do so in 2003. The works were delayed until 2004. As a result, the cost of the works was not capped by the service charge cap.

Issues

The landlord argued that:
  • Until notice was given to it under the lease, the landlord was not obliged to repair the roof;
  • That it was reasonable to delay the works until 2004; the delay was for the convenience of the "BAFTA" tenant and consistent with the principles of good estate management; and
  • Damages should be restricted to patch repairs until 2004.
Decision

The Court of Appeal held that the lease clause requiring notice of disrepair to be given to the landlord before liability to repair could arise existed for the landlord's protection; without it the landlord would be liable to repair under its covenant from the moment the roof fell into disrepair British Telecommunications PLC v Sun Life Assurance Society PLC [1996] Ch 69; the roof not being part of the tenant's demise. Accordingly, it was open to the landlord to waive a proviso inserted solely for its protection. The landlord could not now rely on the notice clause in the lease, since it had waived the requirement for notice (which it was entitled to do) by informing the tenant that the roof required replacement and that it intended to effect that replacement in 2003. As Lord Justice Chadwick said at para 22:
    "In those circumstances, I would hold that it was no longer open to the landlord to rely on the protection afforded by the first limb of clause 5.5.2 of the lease. As the judge put it, at paragraph 100 of his judgment, the contention that a landlord who has informed the tenant that it proposes to carry out works of repair to the roof which it knows to be out of repair can then raise, as a defence to a claim based on its failure to do so within reasonable time, the objection that the tenant has not given notice of that lack of repair lacks both merit and realism. In my view, what has happened in this case is that the landlord has indicated to the tenant that it does not intend to rely upon the need for notice under clause 5.5.2 before carrying out its obligations under paragraph 2 and 3.1.7 of the Fourth Schedule."
The court then looked at the second part of the notice clause, namely that the landlord's liability to repair did not arise until a reasonable time had elapsed. The court said that the amount of "reasonable time" would depend on all the circumstances, including the landlord's own knowledge of the disrepair, and went on to say that it considered that on the evidence before him the judge at first instance had been entitled to conclude that the landlord could have carried out the roof repairs in 2003 had it used all reasonable endeavours. Indeed there was evidence that the "BAFTA" tenant would have been happy for the works to have been carried out then had matters got under way quickly.

Finally, the court found no merit in the landlord's argument that damages should have been restricted to the cost of patch repairs until 2004. That would have been appropriate until the landlord had worked up a replacement scheme, but as that had been done by 2002, there was no ground for restricting damages beyond that point.


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