Time And Tide Wait For No Landlord… Even Now
As the coronavirus continues to impact us, so too does the uncertainty underpinning every aspect of our daily lives – professional, personal and everything in between.
As a consequence, the pause button has been firmly pressed on a number of institutions ordinarily so fundamental to us. Courts and tribunals have closed their doors, religious gatherings have been suspended, even bastions of familiarity and routine such as the Olympics have been cancelled for the first time in a generation.
Furthermore, whilst the introduction of a Government bailout package and emergency legislation have both offered some much needed respite, they have also compounded an unquestionable sense of disruption and deviation from the ‘norm’.
Against the backdrop of this far-reaching hiatus, one can certainly be excused for assuming that everything is now on hold, locked down for the foreseeable future until the pandemic shows any meaningful signs of abating.
However, the clock hasn’t stopped for everyone, including landlords who have been served with a formal notice by their tenant for the purpose of extending their lease.
What notice and why?
Any tenant who wants to extend their lease under the Leasehold Reform Housing and Urban Development Act 1993 (the “Act”) must serve their landlord with a notice in line with section 42 of the Act in order to do so.
The Act is unforgiving at the best of times, prescribing a strict statutory timetable which must be complied without exception, even in these unprecedented times.
Once the tenant serves their notice, the clock starts ticking and the landlord must be very mindful of the ensuing deadlines involved.
What dates do I need to be aware of?
The tenant’s notice must allow a landlord “not less than 2 months” from the date of receipt in which to respond with their ‘counter-notice’. This is the most immediate and pressing concern for the landlord.
This may sound like a generous amount of time but it should be borne in mind that, within this period, the landlord will be expected to find a solicitor and instruct a valuer who will in turn require adequate time in which to provide a survey report, whilst also allowing for the subsequent drafting and service of the counter-notice.
This can all take time of course, especially in the current circumstances. It is therefore advisable to act as quickly as possible upon receipt of a tenant’s section 42 notice in order to safeguard against any potential delays and ensure the counter-notice is served in advance of the specified deadline.
What if I miss the deadline?
A tenant’s notice will, amongst other things, specify the premium they propose to pay for the new lease. This will usually be a much lower figure than the true value, a tactic employed to assist their bargaining position in the negotiations that follow. The notice may also propose certain amendments to the existing lease which could prove more favourable to the tenant, and therefore by implication, less favourable to the landlord. For example, they may suggest the landlord be subject to more onerous repairing obligations or allow the tenant to make structural alterations to their property.
The landlord’s counter-notice is the medium by which they can challenge any such proposals, reject them and make their counter-proposals. Clearly, this will have financial benefit in terms of arguing for a higher premium but also in recording a landlord’s objection to any other, often non-permitted, amendments to the lease.
However, if a landlord fails to serve their counter-notice by the date specified in the tenant’s notice, then generally speaking the tenant is entitled to a new lease on the terms proposed within their notice, however unfair or unacceptable they may have otherwise been deemed to be.
What will it cost?
Nothing – under the Act, the tenant is obliged to cover the landlord’s reasonable costs incidental to the lease extension, including any legal and/or valuation fees.
It should be noted that, if the terms of the new lease have not been agreed within 6 months of service of the landlord’s counter-notice, either party may apply to the First Tier Property Tribunal (“FTPT”) to settle the terms remaining in dispute, and the landlord is unable to recover any costs associated with these proceedings.
However, this step is usually the exception as opposed to the rule and any decision to progress to the FTPT must always be taken carefully and pragmatically in view of the disputed terms and the potential further costs.
If you require further advice in relation to any of the above, please do not hesitate to contact Adam Davis in our Leasehold Enfranchisement Team on 020 7288 4756
or email at email@example.com. All of our lawyers are working from home and, from an operational point of view, it is very much business as usual.