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New Laws Set to Bring More Difficulties for Landlords
Up to now, one of the most powerful weapons available to a landlord has been the right to forfeit a lease, by peaceable re-entry, which occurs automatically if there are arrears of rent. No notice is required and the cost is minimal. All the landlord does is instruct a bailiff to change the locks, the lease has gone, a mortgagee’s security has gone and the landlord has back possession, subject to the right of a tenant, mortgagee or sub-tenant to seek relief.
A change is underway, however. This year's Law Commission consultation paper significantly dilutes the remedy. A report on the consultation process is due for publication. If the likely recommendations become law, as they no doubt will, landlords will be required to serve a pre-action notice on a defaulting tenant, requiring any breach to be remedied within a reasonable time. Even if the tenant does not comply and the landlord re-enters the property, the lease will not end for another month, during which time the tenant, or any mortgagee or sub-tenant, can seek relief from the court.
Alternatively, if peaceable re-entry is not possible nor sensible, the landlord can apply to the court for a termination order (which is absolute) or a remedial order (which allows the tenant the chance to remedy its breach of covenant). All these of course take time, during which the landlord can find himself out of pocket. In any event, when the proposals become law in the not too distant future, landlords' enforcement rights will be severely curtailed and mortgagees, amongst others, will be in a far better position to protect their interests than they are at the moment. "It will be harder now to remove weaker tenants. So Commercial property owners are going to have to be more careful in the future" warns Metliss, "making sure that their acquisitions have the right tenant profile".
Please note SJ Berwin will be holding a seminar in which a "Landlord and Tenant Update" will be given on Thursday, 10th February 2005.
Notes:
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Monday 29th November 2004
New Government proposals, looking likely to soon become law, will severely curtail the rights of landlords if tenants default, claims Michael Metliss, property litigation partner of corporate and commercial law firm SJ Berwin, "…and are a further example of what seems to be a current trend towards legislation favouring tenants' interests."Up to now, one of the most powerful weapons available to a landlord has been the right to forfeit a lease, by peaceable re-entry, which occurs automatically if there are arrears of rent. No notice is required and the cost is minimal. All the landlord does is instruct a bailiff to change the locks, the lease has gone, a mortgagee’s security has gone and the landlord has back possession, subject to the right of a tenant, mortgagee or sub-tenant to seek relief.
A change is underway, however. This year's Law Commission consultation paper significantly dilutes the remedy. A report on the consultation process is due for publication. If the likely recommendations become law, as they no doubt will, landlords will be required to serve a pre-action notice on a defaulting tenant, requiring any breach to be remedied within a reasonable time. Even if the tenant does not comply and the landlord re-enters the property, the lease will not end for another month, during which time the tenant, or any mortgagee or sub-tenant, can seek relief from the court.
Alternatively, if peaceable re-entry is not possible nor sensible, the landlord can apply to the court for a termination order (which is absolute) or a remedial order (which allows the tenant the chance to remedy its breach of covenant). All these of course take time, during which the landlord can find himself out of pocket. In any event, when the proposals become law in the not too distant future, landlords' enforcement rights will be severely curtailed and mortgagees, amongst others, will be in a far better position to protect their interests than they are at the moment. "It will be harder now to remove weaker tenants. So Commercial property owners are going to have to be more careful in the future" warns Metliss, "making sure that their acquisitions have the right tenant profile".
Please note SJ Berwin will be holding a seminar in which a "Landlord and Tenant Update" will be given on Thursday, 10th February 2005.
Notes:
- SJ Berwin's Real Estate Division totals just under 100 staff of which 18 are partners and 50 assistants, encompassing the disciplines of Commercial Real Estate, Construction, Planning & Environment, Property Litigation, Real Estate Funds and Tax. There is an increasing emphasis on cross firm activity with related areas of Banking and Corporate. The division acts for blue chip clients including British Land, Royal Bank of Scotland, the Hilton Group, Brixton plc, AXA, The Crown Estate, Marks & Spencer and Gazeley.
- The Real Estate Team has recently been awarded "Real Estate Team of the Year" in the Lawyer Magazine Awards 2004, following its advice on the RBS/Canary Wharf transaction the highest-value property investment transaction in the UK in 2004.
- Revenue from Real Estate represents approximately 21% of the firm’s total revenue.
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