Lease disputes are common both in the residential and commercial context. Whether you are a long-term tenant who owns a flat or a house as leasehold, and has difficulties getting the landlord to undertake repairs, or a commercial tenant facing excessive service charges – the key is to stay active and not be afraid to deal with the issues. You need to clearly understand the terms of your lease and most common disputes that may arise.
Most Common Lease Disputes
Most common lease disputes involve problems associated with:
- Rent review clauses;
- Lease renewals;
- Unpaid rent;
- Service charges; and
- Maintenance (repairs).
Rent Review Clauses
It is common for long term leases to include rent review clauses, usually every 5 years. This ensures that landlords can adjust the rents to reflect changes in the market trends. On the other hand, these clauses almost never are of any benefit to tenants, being upward only. Therefore, if prices in the market drop, the landlord is at a benefit. Good comprehension and timely execution of rent review clauses is vital for tenants who want to avoid backdated (and therefore unexpected) increases that could negatively impact on their ability to pay. It is prudent of tenants to appoint professional advisers to estimate potential increases. It is advisable to allow at least 2-3 months before the review date. In the case of any disputes, most modern rent review clauses contain alternative dispute resolution provisions for resolution of any problems that may arise during the rent review process.
Service Charges
Service charges are one of the most frequent causes of lease disputes. The main reason behind this is due to the fact that there is an inherent conflict of interest between the landlord and the tenant, whether in residential or commercial context. Naturally, the tenant will want to pay for the most affordable contractors to carry out the maintenance duties. The landlord, being afraid of the quality of service, may oppose the tenant’s choice of contractor and ask to contract the work with more reputable and expensive contractor, to ensure that the level of service is better. Although, it might seem quite easy to resolve at first, major and costly litigation can follow if a mutually agreeable consensus cannot be achieved.
Rent Arrears
Falling behind with your rent can have severe consequences; it may not only lead to disputes over your lease but also ultimately result in eviction, court action and bailiff intervention. If you know you may have difficulties in paying your rent, it is vital to let your landlord know before the actual non-payment. Most leases will include relevant provisions entitling landlords to take certain actions after the rent has been unpaid for a set period of time (i.e. one month).
Lease Renewals
It is common for lease disputes to arise in relation to terms in the new (renewed) lease.
Typically, the tenant enjoys the right to a renewal lease with a commercial lease under the terms of the Landlord & Tenant Act 1954. However, there are a number of statutory provisions that allow the landlord to object. Should the landlord wish to object he must serve a notice of intention to oppose the lease renewal. In the event of such notice being served, the tenant must apply to court within six months of the statutory notice expiration date. Very rarely, this can be extended and once the deadline expires the tenant is likely to lose his right to renewal completely.
Some leases also attract protection of the Landlord and Tenant Act 1954. Such leases continue automatically beyond their expiry date until terminated by the landlord or the tenant with at least 6 months’ notice.
Maintenance
Leases always impose a positive duty on tenants to ensure that properties are kept in good state of repair. These provisions are extremely important as any lease disputes over them are directly relevant to lease renewals and even more importantly lease expiration dates, when the tenant does not intend to stay in the premises. It is not uncommon for tenants to leave the property and subsequently receive a detailed schedule of costs along with demand for compensation.
Dilapidation claims may be very costly involving building surveyors, barristers and solicitors. It is therefore vital for tenants to ensure that regular inspections by professional surveyors are carried out during tenancy and in particular 4-6 months before leaving the premises.
Matthew Price - landlord & tenant specialist
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