Case law: Ambiguity in residential lease casts doubt on whether landlord's obligation to consult with tenants over major works applies
Residential landlords should ensure that when deciding on the term of a lease, they take into account any potential obligations to consult with tenants about major works that will be triggered if the lease exceeds 12 months, and ensure there is no ambiguity over whether the proposed lease is for 12 months or more, a recent case makes clear.
This update was published in Legal Alert - July 2018
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Under property law, residential landlords:
- proposing to carry out major works (including repair, maintenance and improvement)
- which would require each tenant whose term is for more than 12 months to contribute more than £100 per year in their service charge to pay for those works
must first follow a consultation process, otherwise they cannot ask more than £100 from each tenant for the works.
In a recent case, an agreement had been entered into "for a period of one year", which "will continue thereafter until terminated upon three months' notice by either party". This could either mean that:
- the agreement was for only 12 months (even though it would carry on unless terminated), in which case the obligation to consult over major works would not apply, or
- the agreement was to continue for more than 12 months unless terminated by three months' notice (ie it would last for at least 15 months) - and the obligation would apply
The landlord argued that the court should look at the minimum possible term that could apply when deciding whether an agreement was for more than 12 months. On that basis, it argued that the clause meant a tenant could give notice three months before the agreement expired, so it would expire precisely 12 months after the agreement began. As this was not 'more than 12 months' after it began, the obligation to consult with tenants over major works did not apply.
The Court of Appeal agreed with the landlord that it was the potential minimum term of the agreement that mattered, so an agreement will trigger a requirement to consult over major works if there is a minimum commitment to a term of more than 12 months.
However, it disagreed with the landlord on the interpretation of the agreement. It found that the three months' notice could not be given until after the initial 12-month period had expired, so the minimum period for which the agreement could run was 15 months – ie more than 12 months. The obligation to consult before making major works therefore applied in this case.
- Residential landlords should ensure that when deciding on the lease term, they take into account any potential obligations to consult with tenants in relation to major works that will be triggered if the lease is for more than 12 months, and ensure there is no ambiguity over whether it is for 12 months or more
Case ref: Corvan (Properties) Ltd v Abdel-Mahmoud  EWCA Civ 1102
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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