#3497 - Repair, Rent, Service Charge & Insurance Notes

Type of clause?	What does it do?	Landlord’s Concerns	Tenant’s Concerns	Remedy for Breach
Repair	‘Leave no brick uncovered’: When drafting repair obligations make sure all parts of premises are covered by an obligation to repair – either landlord or tenant must take responsibility:	Which areas are whose responsibility Decoration requirements “Leave no brick uncovered”	careful about repairing “inherent defect” under covenant to repair Repair vs. improvement – do works go to the whole or substantially the whole of the structure, or only to a subsidiary part or change the building into a different character from that which had been let? Cost of works in relation to the previous value of the building Standard of repair determined by “age, character and locality” at the time of the letting “good condition” – more onerous clause	Landlord may bring a claim for damages S18 LTA 1927 – limits the maximum amount recoverable in all cases by providing that the damages cannot exceed the amount by which the value of the reversion has been diminished by the breach No damages are recoverable for failure to put or leave the premises in repair at the termination of the lease, if the premises are to be pulled down shortly after termination Leasehold Property (Repairs) Act 1938 If the lease granted for 7 years or more and still has at least 3 years left to run – special procedure landlord must follow to sue for damages. Landlord must serve notice on tenant under s146 LPA 1925 and must inform tenant of right to serve a counter-notice within 28 days. If counter-notice served, landlord cannot proceed without leave of court – landlord must prove: Value of reversion has been substantially diminished; or Immediate remedying of breach required for preventing substantial diminution; or Special circumstances which render it just and equitable that leave be given Self-help If lease contains express right for landlord to enter demised premises and carry out any necessary repairs then this can occur Specific performance – rare! Forfeiture Tenant’s remedies: Damages – compare the value of the premises to the tenant at the date of assessment with their value if the landlord had complied with his obligation. Also entitled to damages for consequential loss Self-Help Specific Performance Appointment of receiver
Insurance	Ensures that the building and premises is ensured in case of fire, flood, damage etc. Each tenant could insure his own premises and landlord insure common parts but this is not so practical Alternative and common approach is for landlord to insure whole block and cost passed on to tenants through service charge Pool Re – government backed scheme for insuring against terrorism Insurers are themselves covered in the event that there is a terrorist claim Damage to physical property rather than cyber terrorism Meaning of Acts of terrorism: S2(2) Reinsurance (Acts of Terrorism) Act 1993 HM Treasury Guidance Have to extend insurance to entire portfolio	Reinstated in event of damage as physical basis of investment Charge tenant through service charge	Reinstated so that he can continue to occupy the let premises as intended under the lease Risks insured against – stated expressly Amount of Cover – insured to full reinstatement value including Costs of demolition and site clearance Professional fees Allowance for inflation Application of policy monies – covenant by landlord to reinstate premises Rent suspension during any period that premises cannot be occupied following damage by insured risk Right to determine lease on notice if reinstatement impossible	If tenant covenanted to insure and failed to do so then landlord can claim damages if premises damaged – measure being the cost of rebuilding
Rent	Amount of rent must be certain The actual amount need not be stated as long as some means are provided by which the exact amount can be ascertained Lease set out date from which rent payable and date of first payment, payment dates, and whether rent is to be payable in advance or arrears. Unless lease states otherwise, general law provides rent payable in arrears	VAT to add to rent	Rent suspension clause if premises damages or destroyed and so cannot be used by tenant Interest on late payment	S17 LT(C)A 1995 Serve notice of claim upon former tenant or his guarantor within 6 months of current tenant’s default. Failure to serve valid notice will result in being unable to recover sum from person concerned Only 6 years’ arrears of rent are recoverable If sum owed is greater than 750, the landlord can consider starting insolvency proceedings against tenant Distress – enter upon the demised premises and seize chattels to the value of the debt S6 Law of Distress Amendment Act 1908 If there is a sub-tenant then superior landlord can serve notice on sub-tenant requiring him to pay his rent to the superior landlord until arrears paid off Forfeiture
Service Charge		Obligation to provide services Payment in advance Reserve right to charge for services on the basis of an estimate Sinking fund - discretionary Terms in lease to deal with adjustment to charges	Share of cost – divide cost by reference to floor area tenant occupies or distribute on a “fair and reasonable” basis Ensure estimate based on a proper assessment of what projected costs are to be Transparent auditing provisions Make sure that any other items of expenditure landlord may incur are expressly made recoverable, for example: Bank interest and bank charges Legal expenses and other professional fees Management charge; and Costs of enforcing the obligations under the lease, for example to pay the rent and service charge.	Same as for rent
Rent Review	Fixed increases: Could unfairly disadvantage a party depending whether a rent is being underpaid or overpaid Peg rent to inflation: RPI – may vary dramatically...

#3497 - Repair, Rent, Service Charge & Insurance Notes - Property Law and Practice

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