Arrears of Rent after Lease Extension

[dave103]

Dear Colleagues,

I am the freeholder and have just granted a lease extension. I have discovered that the leaseholder still owes ground rent going back six years before the lease extension. I wanted to ask the following:

1) Shall I apply to the Residential Property Tribunal first for a 'determination' of the ground rent ? or do I have to serve a rent demand notice under the Leasehold Reform Act 2002 first ?.

2) Would a separate rent demand notice have to be served for each year of arrears?.

Any advice / opinions are appreciated.

 

[Jeffrey Shaw]

You do have to serve Notice under s.166 of the Act (= the Commonhold and Leasehold Reform Act 2002) containing the statutory information and compliant with what it says about dates. Otherwise, the Act itself provides that rent is irrecoverable. One Notice can cover several years' rent that fell due. But why did you complete the Deed of Surrender and Regrant without the rent being clear up to date?

 

[dave103]

Dear Jeffrey, the lease extension was done in such a hurry by the leaseholders solicitor, that the outstanding rent became an 'oversight'. I want to give any rent arrears to a charity

The old lease states that the ground rent is due on the 1st of September and is 100 pounds per year.
What is confusing me is 'the date' must not be either less than 30 days or more than 60 days after the date on which this notice is given or before that on which the leaseholder would have been liable to make the payment in accordance with the lease'. Is 'the date' referring to the date when the rent is due ? ( 1st September )
1) Does this mean that the date of the notice must be at least 30 days before the 1st September OR no more than 60 days after the 1st September ( if the notice is given after the 1st September )?
2) When is the earliest or latest I can serve this notice this year ?.
3) The new lease was granted in March 2017 - I can only claim rent arrears before this and subject to the 6 year limitation period ?.

In (note 2) of the notice, can I put the total amount of arrears?.

 

[Jeffrey Shaw]

1. The leaseholder/tenant (T) must be given at least thirty days (from the date of the s.166 Notice) within which to pay.
[So a Notice served today, 8 February, must set a payment-due date no earlier than 10 March.]
2. The Notice's rent payment date cannot be earlier than when the lease demands rent.
[So a Notice in 2018 for the full £600 cannot be served earlier than 1 August, nor can it demand payment earlier than 1 September.]
If it's served earlier, it would cover only the £500 that has already fallen due.
3. Yes, the amount unpaid is £600. A single s.166 Notice can cover the whole sum.
The wording that you italicised could be re-written thus:
A. The Notice's rent payment date must be at least thirty days after the Notice date.
B. The Notice's rent payment date must be no more than sixty days after the Notice date.
C. The Notice's rent payment date cannot be earlier than when the lease demands rent- as reply 2 above.

But of course the time limit for demanding rent already due runs up to six years after the due date (s.19 of the Limitation Act 1980).

 

[dave103]

Jeffrey Thank you.
My attempt at interpretation of the 'notice provisions' are :
1) if the rent becomes due on the 1st September, then no more than 60 days before this is Wednesday 4th July 2018 - which is the earliest notice date I can demand the arrears, or the date after that I can demand the arrears is the 3rd August 2018 ? (at least 30 days before the rent payment date)

2) if the rent arrears begins from September 2010, and the new lease was granted in March 2017 ( assuming the new lease has peppercorn ground rent and is not included in the arrears ) - is the period after March 2017 still taken in to account for the purposes of the limitation act ? ( meaning any time after March 2017 is deducted from the 6 year limitation period - hence reducing how far I can go back ).

 

[Jeffrey Shaw]

1. No. You cannot demand rent before it falls due. Even a Notice served up to 30 days early cannot specify a rent payment due before the date which the lease specifies. On 4 July, you could demand only the existing arrears- still having to set a rent payment date no earlier than 4 August.
2. Yes. From the date of the new lease at a peppercorn rent, no more money rent falls due. It's now 12 February 2018, so all rent that fell due on or before 12 February 2012 is statute-barred.

 

[dave103]

Jeffrey, the old lease states that the rent due date is the 1st September. After the lease extension, the new lease states that the rent payment date is the 1st of January. As the old lease is still running, does the rent due date of the 1st September still apply ?.

 

[Jeffrey Shaw]

Is the old lease running? Surely the new one is a Deed of Surrender and Regrant which- inter alia- simply makes references to the old lease but which ought to have included a clause whereby T surrendered the old lease to L (you) in conjunction with L granting the new lease to T.

NB: the fact that the new lease might state its term as something like 'old lease term plus 50yrs' does not mean that the old lease is still running!

 

[dave103]

Jeffrey, just had a look at the new lease and it says 'this document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it' ( which is the 8th August 2017 ).

 

[Jeffrey Shaw]

You're looking at the wrong bit; and didn't your own solicitor explain any of this to you?
What do the first few main [=non-definitional] clauses of the lease say?
How does it define the term which is now granted?

 

[dave103]

Jeffrey, I've attached a picture of the front page of the lease. Can you tell me which section I should be looking at?. Thanks

 

[Jeffrey Shaw]

No, that's just the index. I'd need to see first few main [=non-definitional] clauses of the lease: clauses 2-6 plus the Schedule.

 

[dave103]

Hi Jeffrey, have scanned the ones you wanted to see:

 

[Jeffrey Shaw]

From main clauses 3 and 5.1, it's clear that the lease was a statutory extension [s.56 of 1993 Act].
So the new term should in fact carry only a peppercorn rent, not a monetary rent at all [s.56(1), final lines].
Even if there is a new monetary rent, the old lease/term/contents will be irrelevant. The new lease/term/contents alone will now govern the position.
Hence (re your post #7):
a. the old lease is NOT still running; and
b the rent due date of the 1st September DOES NOT still apply.

 

[dave103]

Jeffrey, if you look at page 5 ( Clause 3) it says "for the purposes of this lease (the new lease)...the new lease shall be varied" - does this mean that the variation only applies to the new lease ? ( and not the old lease ) or applying s56 (1)(a) LRHUD 1993 "in substitution for the existing lease" - meaning the new lease has varied itself and in doing so, substitutes itself for the old lease ? ( surrender and re-grant ).

How do I recover the rent arrears of six years under the old lease ? - by serving a notice under s166 CLRA 2002 in December 2018 ? (taking in to account the Limitation Act )

 

[Jeffrey Shaw]

We can't go on like this. You need to consult your own solicitors. I have told you already that the new lease replaces the old lease
But here's a final post, setting out s.56(1) with my own underlining added [from http://www.legislation.gov.uk/ukpga/1993/28/section/56]:

56. Obligation to grant new lease.

(1) Where a qualifying tenant of a flat has under this Chapter a right to acquire a new lease of the flat and gives notice of his claim in accordance with section 42, then except as provided by this Chapter the landlord shall be bound to grant to the tenant, and the tenant shall be bound to accept:
(a) in substitution for the existing lease, and
(b) on payment of the premium payable under Schedule 13 in respect of the grant,
a new lease of the flat at a peppercorn rent for a term expiring 90 years after the term date of the existing lease.