Twinmar Holdings Ltd v Klarius UK Limited [2013] EWHC 944 (TCC)

Tenant liable under repair covenant for cost of repair of roof lights under dilapidations claim

Klarius was Twinmar’s tenant of a warehouse and office space built in 1993. Klarius covenanted to keep the whole of the premises “in good and substantial repair and condition” and when necessary “to replace, renew and to keep clean all windows in the premises”. At the end of the lease in 2008, Twinmar served a schedule of dilapidations on Klarius following which Klarius disputed the sum claimed for repairs to the glass–reinforced polyester roof lights of the warehouse.

The court held Klarius was responsible for the cost of repair. The condition of the roof lights had to be, so far as was possible by means of maintenance and repair, the same as it was at the start of the lease. More specifically, the roof lights had to be capable of letting in the same amount of light and be structurally sound and weather proof. On the facts, the roof lights were not in good condition by the time the lease ended.

The court also held that the roof lights were not windows in this case as they were not glazed and had no frame. They did not therefore fall within the tenant covenant “to replace, renew and to keep clean all windows in the premises”.

Paul Johnson and others v Anne Alexander Old [2013] EWCA Civ 415

Payment under tenancy agreement was an advance of rent not a tenancy deposit to be paid into a deposit protection scheme

Mrs Old rented a flat under three successive assured shorthold tenancies from Mr Johnson. Rent was payable monthly in advance, but under the terms of each tenancy six months’ rent was payable in advance at the start of each tenancy unless and until Mrs Old received a more satisfactory credit rating. At the end of the third tenancy, Mrs Old continued in occupation under a statutory periodic tenancy, but fell into arrears. Mr Johnson sought possession.

Mrs Old claimed that the six months’ rent paid in advance at the start of each tenancy was actually a tenancy deposit for the purposes of the Housing Act 2004 and should have been paid into a deposit protection scheme. If this were the case, Mr Johnson had not complied with the requirements of the tenancy deposit scheme and could not seek possession until he had done so. Mr Johnson argued that the payment was not to secure an obligation (which would bring the money within the tenancy deposit scheme), but was an advance payment of rent.

The court agreed with Mr Johnson. Money paid to discharge a current liability was not paid with the intention that it would be held as security for the discharge of that liability. The money was not therefore a deposit and the requirements of the tenancy deposit scheme did not need to be complied with.

Stuart Henley and another v Emmanuel Cohen [2013] EWA Civ 480

Unlawful conversion of mixed use property to create a residential flat did not result in a right to acquire the freehold

Henley rented a two storey building from Cohen. Henley converted the premises at first floor level into a flat in breach of the lease and then sought to acquire the freehold of the building under the Leasehold Reform Act 1967.

The court held that the premises were not a “house reasonably so called” and Henley was not entitled to acquire the freehold. The premises were not adapted for residential use at the start of the lease, nor were they ever used for residential use until they were converted by Henley in breach of the lease. As a general rule, it would be unacceptable if a tenant were entitled to enforce a right to enfranchise by deliberately committing a wrong against its landlord in order to found the claim.

Gavin and another v Community Housing Association Limited [2013] EWCA Civ 580

No implied duty for landlord to repair retained premises where no express landlord covenant to do so

Gavin and Cracy were two tenants of adjoining commercial premises and Community Housing was their landlord. Between 2004 and 2005 the premises were damaged on several occasions by water and sewage leaking from the residential upper floors of the building which were retained by Community Housing.

There was no obligation on Community Housing in the leases in relation to the retained parts of the building and Community Housing maintained that it was not liable for the resulting damage, although it did take steps to remedy the leaks once it had received notice of them.

The judge at first instance found that, in all but one instance, there had been no breach of its repair duty by Community Housing. Breach required proof of negligence and notice of the defects that Community Housing had a duty to remedy. Gavin appealed arguing that Community Housing’s repair duty ought to be implied into the lease and was absolute rather than based on negligence.

The Court of Appeal dismissed the appeal. There was no reason based on necessity or business efficacy to imply a term into the lease over and above the express terms. Such an implied term would impose a stricter obligation on Community Housing than the law would otherwise impose. This was conceptually difficult and would improve the contract from Gavin’s point of view.

Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Limited [2013] EWCA Civ 577

Construction company’s delay in building not a repudiatory breach of contract where steps taken to cure breach before repudiation

In October 2008, Telford entered into an agreement for lease with Ampurius. Under the agreement, Telford agreed to build four mixed use blocks using reasonable endeavours to procure completion of the works by the target dates. Work on two of the blocks was completed late and work on the other two blocks was suspended due to funding difficulties. Shortly after work was resumed, Ampurius sought to terminate the agreement arguing that there had been a repudiatory breach.

The judge at first instance held that there had been repudiation as it would “frustrate” the commercial purpose of the project if, for a substantial period, Ampurius only received two blocks whilst the rest of the development remained a building site. Telford appealed.

The Court of Appeal allowed the appeal. Telford was not in repudiatory breach of contract for the delay, particularly given the steps taken to cure the delay when works resumed. The date of purported termination was the appropriate time to assess whether a breach was repudiatory and any steps taken to remedy an actual (as opposed to anticipatory) breach must be taken into account.

In assessing the benefit that Ampurius was intended to obtain from performance of the contract and the effect of the breach on Ampurius, the breach could not be characterised as repudiatory. The financial loss to Ampurius was comparatively small next to the purchase price, readily calculable and appropriately compensated in damages or by way of set-off against the purchase price.

Sunderland City Council v Stirling Investment Properties LLP [2013] EWHC 1413 (Admin)

Owner entitled to rating exemption following rateable occupation by a Bluetooth box

Stirling was the owner of a warehouse in Sunderland. The premises were empty for some years until Stirling entered into an agreement with a marketing company to locate a Bluetooth box on the premises. During the 43 day period of occupation, the marketing company paid nominal rent but accepted responsibility for nondomestic rates.

After the marketing company ceased to use the premises, Stirling claimed the benefit of six months’ rates relief following the period of “rateable occupation” by the marketing company. The Council brought a claim for non-payment of rates, arguing that the marketing company’s acts did not constitute occupation and, in the alternative, the occupation was so minimal as not to amount to occupation. The judge at first instance found in favour of Stirling, holding that the presence of the Bluetooth equipment constituted occupation, regardless of the fact it had been placed there for advertising not warehousing. The Council appealed.

The Court of Appeal upheld the judge’s decision. The occupation by the marketing company, despite its actual limited use of the premises, was sufficient for rating purposes to mean that they “occupied” the premises. Once the marketing company had identified the optimum location for their equipment, they did not need to “use” more than a minute fraction of the area encompassed within the premises for the occupation to be rateable. Although the rent paid was nominal, the acceptance by the marketing company of liability for rates was not and reflected the value of the lease to the occupier. The intended use, although slight in terms of the extent of the space occupied, surmounted the de minimis hurdle and did give rise to actual occupation.

Public Safety Charitable Trust v Milton Keynes Council [2013] EWHC 1237 (Admin)

Charity’s rates relief in relation to leased commercial premises dependent on extensive use of premises for charitable purposes

PSCT had taken leases of various commercial premises for nominal rents, subject to short notice periods. PSCT received reverse premiums from the landlords on the basis that, as a charity, PSCT could claim relief from payment of non-domestic rates. As a result the rates savings were shared between PSCT and the landlords.

At each of the premises, domestic broadband boxes were installed, taking up a minimal amount of space and requiring no more than occasional maintenance visits. The boxes transmitted Bluetooth messages on crime prevention and public safety and also provided free Wi-Fi access. The provision of the service was charitable in nature. The question before the court was whether liability orders could be imposed against PSCT in relation to rates.

The court decided that it was reasonable to infer that Parliament had intended the words in the charitable exemption “wholly or mainly used” to mean that the exemption depended on the charity actually making extensive use of the premises for charitable purposes rather than any use of the premises which was charitable. Consequently, PSCT could not benefit from the rates exemption.

OM Property Management Limited v Thomas Burr [2013] EWCA Civ 479

Service charge costs incurred when invoiced not when services were supplied

Mr Burr was the leasehold owner of a flat in a development which included a communal leisure centre with a swimming pool which had its own gas supply. OM was the management company responsible for managing the development.

When OM started managing the property in 2001, it was advised that one energy company supplied the gas. OM paid the invoices from the energy company and passed the charges on to the tenants through the service charge. However, in November 2007 the management company was notified by a second energy provider that it had been supplying gas to the swimming pool. As a result, £100,289.28 was charged to the leaseholders in the year end accounts for 2008.

Mr Burr issued proceedings alleging negligence on the management company’s behalf and also alleging that the demands for payment were out of time under the Landlord and Tenant Act 1985 as they had been incurred more than 19 months before they were demanded. The issue before the court was when the relevant costs had been “incurred” for the purposes of the Landlord and Tenant Act 1985.

The court made a distinction between a liability to pay and the incurring of costs and held that Mr Burr was liable to pay. Costs were incurred on the presentation of an invoice or on payment. The relevant costs had therefore not been “incurred” until the second energy provider presented its invoice in 2007 and those costs were passed on to the tenants within the relevant time limit. In reality, most modern leases require the tenant to pay service charge on account, so the practical relevance of time limits under the 1985 Act may be limited.

Cusack v London Borough of Harrow [2013] UKSC 40

Property owner not entitled to compensation following council’s decision to prevent access to forecourt across pavement

Mr Cusack practised as a solicitor from a property on a main road in Harrow. The property was originally built as a residential dwelling with a front garden that adjoined a footpath alongside the road. The ground floor of the property was subsequently converted to offices and the garden at the front of the property was turned into a forecourt for use as a car park. In order to enter and leave the forecourt, cars had to cross the footpath.

In 2009, the Council informed Mr Cusack that the vehicles crossing the footpath were a danger to pedestrians and other motorists and that it intended to erect barriers in front of the property to prevent access. To do so, they proposed to use a statutory power which would not require compensation to be paid to Mr Cusack. Mr Cusack sought an injunction to prevent the Council from erecting the barriers. The judge at first instance found in favour of the Council, but the Court of Appeal subsequently held that the Council should have used a different statutory power which would mean that compensation was payable to Mr Cusack. The Council appealed.

The Supreme Court found in favour of the Council. The owner of a property adjoining a highway has a common law right of access to the highway, but that right has been greatly limited by statutory provisions and there is no general right to compensation if access is restricted. The Council was entitled to rely on the clear wording in the statutory provision which prevented compensation from being paid, even though there was another statutory provision which would require compensation to be paid. Further, there was no breach of the Human Rights Act 1998 because the Council’s actions did not prevent Mr Cusack’s right to peaceful enjoyment of his property.