article
Recovery of rent arrears
3rd November 2008
The House of Lords have overruled the Court of Appeal in a decision
which will reduce an unnecessary administrative burden on
landlords.
Scottish & Newcastle –v- Raguz [2008] UKHL 65 looked at the
situation where landlords are seeking to recover rent from a former
tenant where a rent review is outstanding.
The High Court and Court of Appeal interpreted s17 of the
Landlord & Tenant (Covenants) Act 1995 with the effect that
where a rent review has not been completed by the review date,
section 17 notices had to be served against tenants within six
months of each rent payment date to ensure the preservation of the
right to claim against an original tenant. Once the rent review is
concluded, a further notice should be served within three
months.
The Court of Appeal did accept that this would create an
administrative burden, but stated that this was an inescapable
result of the statutory language. The consequence of this is that a
landlord would be required to serve notices on former tenants
whenever a rent review was completed after the initial review date
regardless of whether the tenant was, in fact, in arrears.
In overruling this decision, the House of Lords stated that s17
notices still had to be served, but only within six months of the
rent review being finalised. The additional rent payable under the
rent review was deemed to be a new fixed charge which becomes due
under s17 when the increase had been determined. The Law Lords were
unusually critical in their judgement, stating that the Court of
Appeal decision had produced “remarkably silly consequences”.
The practical consequence of this decision is that landlords
retain their right to recover increased rent and the situation has
been restored to the position before the High Court decision.
Landlords are only required to serve a notice where there are
arrears and within six months of the date of determination of the
new rent.
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