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Do you know that as a Landlord following a lease assignment, you must act very quickly if you wish to hold a former tenant or guarantor liable for outstanding rents, and any other costs, due under the lease when carrying out a rent review?
A short-term lease will usually have a fixed rent for the full term of the lease. With mid to long-term leases, however, it is usual for the rent to be reviewed at certain points throughout the term. It is a very rare occurrence that a rent review is concluded by the review date stated in the lease, and the usual position is that the existing rent is payable until the review has been finalised. At this point the difference between the existing rent and the new rent is then backdated to the review date and becomes payable at the next quarter’s rent date with interest.
Originally it was thought that if following a rent review the current tenant was unable to pay the backdated surplus in rent, the landlord only had to serve a section 17 notice on the former tenant (or guarantor) within 6 months of the determination of the new rent to preserve the right to recover arrears of rent.
However this is not so. Recent case law has stated that a landlord must serve a section 17 notice on the former tenant within 6 months of the date that the reviewed rent first accrues.
So What Does This Mean?
When carrying out a rent review, a landlord must serve a notice on the former tenant within 6 months of the reviewed rent becoming due, even though the rent review has not been finalised, and irrespective of whether there is any outstanding rents due at that time.
If I don’t do this, am I as a landlord still able to make a claim against a former tenant?
Any demands made for rent against former tenants or guarantors after the six months has expired, will be legally unenforceable. Thus it is very important for a landlord to make sure that the correct notices are served in the necessary time limits.
Why?
The reasoning behind all of this is to relieve former tenants of liability in respect of any charge unless the landlord has taken the step of notification to preserve his liability. Essentially, it imposes a limit on the time frame that a former tenant can be held liable for the rent of a property that has been assigned out of his or her control.
When the new rent is finally assessed, can I claim the full increased rent?
Yes, so long as the necessary requirements have been followed.
A former tenant or guarantor is not liable to pay any more than that amount stated on the notice, unless 1) the liability is determined to be greater, 2) the original notice informed the tenant that there could be an increased liability and 3) within 3 months of the date of the determination of the new rent, the landlord serves a further notice on the former tenant informing them that the landlord intends to recover the greater amount from them (plus interest where payable).
In summary a landlord must:
1. Serve a section 17 notice on the former tenant or guarantor within 6 months of when the reviewed rent first accrues whenever a rent review is being carried out;
2. Ensure that notice states that there is a possibility that the liability may increase; and finally
3. Within 3 months of the determination of the new rent, serve a further notice on the former tenant or guarantor advising of the intent to recover the greater amount.
Confused? The law of Landlord and Tenant can be complex and often requires expert legal advice. Jill Lawton is a Partner in the Commercial Litigation Department, who has acted for both Landlord’s and Tenants in bringing such claims. Call Jill on 01689 887855 or email her at jill.lawton@cwj.co.uk