Backdated Rent Reviews

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    Backdated Rent Reviews

    Hi everyone, I'm new here. My family is in a rather difficult situation and I'm really hoping someone can offer some advice!

    My grandmother owns a property in Sheffield which comprises both a shop and a flat.

    The current tenant occupies both parts of the property. However he is, to put it mildly, a horrible person. I won't go into the details, but he has been abusing his tenancy and harassing my grandmother whenever she raises an issue. He has been there for 11 years and has enjoyed a very generous and lower than market-rate rent. However, in recent years he has begun to take advantage of my grandmother's good nature and started exploiting her generosity. Unfortunately, our family only came to realise the extent of this recently. It is very shocking, to put it mildly. My grandmother is in poor health and is now frightened and stressed about the whole thing.

    We will shortly be conducting a rent review (which is due this year anyway), but are wondering whether it is possible to charge the tenant backdated rent all the way back to the start of the lease. The tenant has made it VERY clear that he will not vacate the premises under any circumstance and will dispute anything we throw at him. He basically considers my grandmother's property as his own.

    I have already done some research and it seems favourable, but I need some advice. Here's what I know:

    1. All of the past rent reviews were ignored by both the tenant and landlord and so the rent has stayed the same for the entirety of the lease. It's possible there was some form of verbal agreement, but nothing at all in writing.

    2. The lease clearly states in regards to rent reviews that "time is NOT of the essence."

    And here are my main questions:

    1. I know that backdating rent reviews is possible with a standard commercial property lease, but this is a "Counterpart Lease" - does that make any difference?

    2. The tenant pays rent for the whole property (both the domestic and commercial parts) together. There is no indication in the lease how much of the rent is for the flat and how much is for the shop. Therefore, how can we charge him backrent based on the market value of the property if we do not know how much he has been paying for each part? I hope that makes sense, but that's the question that's worrying me the most.

    Thank you for reading and I'll really appreciate any responses.

    Jack.

    #2
    1. I know that backdating rent reviews is possible with a standard commercial property lease, but this is a "Counterpart Lease" - does that make any difference?

    A counterpart lease is not a type of tenancy. The word "lease" means both the tenancy and the document which creates the tenancy. The tenant holds a document signed by the landlord which is the lease and the landlord holds a document signed by the tenant which is the counterpart. So nothing to worry about there.

    2. The tenant pays rent for the whole property (both the domestic and commercial parts) together. There is no indication in the lease how much of the rent is for the flat and how much is for the shop. Therefore, how can we charge him backrent based on the market value of the property if we do not know how much he has been paying for each part? I hope that makes sense, but that's the question that's worrying me the most.

    The rent is assessed for the premises as a whole, though each part has different rental values; indeed different parts of the commercial part may have different rental values according to various factors. I think it is probably wise to get a surveyor on the job to assess the rent. A surveyor will not be intimidated by the tenant.

    I used to know a lot about the legal aspects of rent reviews, but have not kept up to date with recent developments. The general opinion was (and may still be) that where time is expressed not to be of the essence that, while that means you are not bound by any specific deadline, there does come a point where it is unreasonable to seek a review and that that point comes when you have passed the next review date. If that is the case, you can only backdate rent to the last review date. However, if it can be shown that the tenant acted unconscionably there may be a case for going back further. Again that is something to discuss with a surveyor (and you need to choose a landlord and tenant specialist) who will advise himself or recommend you take legal advice from a commercial landlord and tenant lawyer or put a case to counsel.

    Comment


      #3
      1. All of the past rent reviews were ignored by both the tenant and landlord and so the rent has stayed the same for the entirety of the lease. It's possible there was some form of verbal agreement, but nothing at all in writing.

      Subject to my answer re Q2, it's possible to implement all reviews since the start of the lease. (Case-law confirms that a review delayed for 13 years could still be operated). Whether a review agreement has to be documented in writing depends upon the wording of the actual lease. Where the parties have apparently taken no action or where it might be no action was verbally agreed, the onus would be on the tenant to prove a verbal agreement. There may be some written communications beforehand, whether an outstanding review that might've been verbally agreed can still be operated depends on the individual circumstances. I often get instructed to deal with current reviews where a previous review has not been actioned: whether it would be worth actioning an earlier review is a matter of informed valuation opinion, Just because there's a rent review doesn't mean the rent would necessary change (upward-only clause doesn't mean the rent has to increase, merely that the rent payable after the review would not be less than before).

      2. The lease clearly states in regards to rent reviews that "time is NOT of the essence."

      Despite that, it is possible for time to be of the essence because of some inter-relationship with other covenants in the lease.

      And here are my main questions:

      1. I know that backdating rent reviews is possible with a standard commercial property lease, but this is a "Counterpart Lease" - does that make any difference?

      Lease document comprises two parts: the Lease and the Counter-Part. There is no difference - (unless information in the blanks filled in on completion differs, in which case the mistakes would have to be rectified per the original parties' intention)

      2. The tenant pays rent for the whole property (both the domestic and commercial parts) together. There is no indication in the lease how much of the rent is for the flat and how much is for the shop. Therefore, how can we charge him backrent based on the market value of the property if we do not know how much he has been paying for each part?

      Assuming the whole of the property is let on the one lease, the valuation guidelines for the rent review will be in the lease. You cannot charge any increase in rent until the revised rent is agreed or ascertained per the review provisions in the lease. Assuming the review is to the market rent (not a formula), the market rent is not necessarily the sum of the parts. Also the rent of a flat where the lease includes business premises (shop in this case) is unlikely to be the full rent as if let on an Assured Shorthold Tenancy because a discount is given for management, etc. (There is no standard discount.)

      An experienced commercial property surveyor should be able to advise in detail.

      Comment


        #4
        Dear Lawcruncher: thank you very much for your reply. The clarification on the meaning of the counterpart lease is reassuring and now that you've said it, it does seem rather obvious!

        As for the backdated rent, yes we are intending to seek advice from a surveyor. I actually know someone who works for a company who was very recently charged backdated rent for 3 previous reviews. They had to pay it in the end, so it does seem that it is possible in certain circumstances, but of course every case is different. For us, the idea behind backdated the reviews is either to force the tenant into complying with our request that he vacates the premises (i.e: we'd agree to drop the bill if he went quietly), or to fund our court proceedings against him (if it came to that!).

        I have another couple of related questions, if you don't mind?

        Over the last year, the tenant has reported damages to the property. These damages don't seem to have been his fault directly (though I suppose it could be claimed that they were due to him failing to upkeep the property correctly) - they involve faulty electrics, broken doors etc. It has come to our attention that instead of paying for the repairs himself (which I believe he is responsible for under the terms of the lease), he has forced my grandmother to pay them on his behalf. Unfortunately, she has paid for all of the repairs, believing that the tenant was in financial difficulty (we've since discovered that he actually isn't hard up at all, despite giving my grandmother an Oscar-worthy sob story).

        We have recently written to him asking for the repair money and stating that he has not been in compliance with the terms of the lease. He has written back (rather rudely, I might add) claiming that he and my grandmother had a 'verbal agreement' (there's nothing in writing) and that basically my grandmother 'waived the breaches of lease' by paying for the damages. He's basically saying that we should have made a claim at the time, rather than paying it. The problem is, at least one of the repairs were urgent and posed an immediate fire risk. Also, the lease states that he is responsible for all payments due under the terms 'whether formally demanded or not'. What should we do?

        It seems the tenant is in breach of the lease on a number of matters (there are others besides the issue of damages), however he is robustly disputing everything, sending rude letters and verbally harassing my grandmother with phone calls. Basically, he is saying "I had verbal agreements, if you have a problem you can take me to court" - because he knows full well that we cannot afford to take him to court. So what can we do? He hasn't complied with the terms of the lease, he won't vacate the property and we can't afford to take him to court. It just seems like a hopeless situation.

        Any advice would of course be greatly appreciated. Thank you very much for your time.

        Comment


          #5
          Dear rentreviewspecialist: Thank you also for your reply, which I only saw after posting my previous message. That's good advice, thanks - so it does sound favourable for backdating the rent reviews, albeit rather complicated. Considering all of the other factors and the conspicuous actions of the tenant, I think we might have a chance. But of course, we will employ the services of a surveyor to assess everything thoroughly.

          Would you be able to offer any advice on the additional questions I've just posted? Thank you so much.

          Comment


            #6
            "So what can we do? He hasn't complied with the terms of the lease, he won't vacate the property and we can't afford to take him to court. It just seems like a hopeless situation."


            With 'verbal agreements' whether genuine or lies, it's always difficult to enforce because basically it's one person's word against another.

            For whatever reason your grandmother paid for the repairs, fact is she did. I shouldn't think you could now expect the tenant to reimburse the cost. As for existing breaches, they could be enforceable and depending upon whether capable of remedy you might be able to apply for forfeiture. You may not be able to afford to take him to court, but that's no reason for not embarking: how do you know he'd want to be on the receiving end of court proceedings until you try?

            By the sound of your comments, this is not a matter for inexperience or the faint-hearted. I recommend you consult an experienced commercial property lawyer/solicitor and/or commercial property surveyor.

            Comment


              #7
              Thank you. Yes, I can appreciate the difficulty in asking for reimbursement of the repair costs. The problem is that we know with absolute certainty that the tenant will fight for possession of the property, even if it went to court. There is a lot to lose on both sides.

              When you talk about forfeiture, how exactly can this be triggered by breaches of the lease? You imply that breaches have to be incapable of being remedied by the tenant, but I'm not exactly sure what such a breach might be. Could you please provide some examples of breaches that are incapable of being remedied?

              The problem is that the majority of the tenant's breaches can either be remedied or they happened in the past. For example, his company went into insolvency two years ago, but he failed to notify my grandmother. That in itself is a breach, but how can we use it against him if it's in the past and everything is based on verbal communication (whether genuine or lies). He has also failed to pay insurance rent, but again, my grandmother never formally demanded payment (although the lease does state that the tenant must make all payments owed whether formally demanded or not).

              I'm just struggling to see how we can take any action against him, if his defence is always that he had a 'verbal agreement' and if he can remedy the breach.

              Thanks again.

              Comment


                #8
                And by the way, we have already employed a solicitor. However, things don't seem to be progressing - typically, we send him a letter highlighting the breaches, then he sends one back disputing them (followed by threatening phone calls). It seems to be going nowhere and we are running out of money.

                Comment


                  #9
                  Has your solicitor not served a Section 146 Notice?
                  [I]The opinions I give are simply my opinions and interpretations of what I have learnt, in numerous years as a property professional, I would not rely upon them without consulting with a paid advisor and providing them with all the relevant facts[I]

                  Comment


                    #10
                    Hi MrJohnnyB: No, our solicitor has not served that notice. After the tenant responded to our last letter (in which his solicitor made a number of inaccurate references to the lease, ones which even I can see!), our solicitor has jumped immediately to the conclusion that we either need to a) Do nothing or b) Start court proceedings. Neither of which seem very feasible to us.

                    Having just looked up the Section 146 notice, it's clear that court proceedings cannot commence without serving that notice first. The problem is that, so far as I can see, the tenant will just remedy the breaches as soon as he's received the notice. But how can he remedy breaches that have occurred in the past, such as the insolvency and missed insurance rent?

                    Comment


                      #11
                      With respect, it is impossible to comment in great detail without reading the actual lease of the property, and having any facts beyond those you are telling us above.

                      Re the insolvency, presumably the administrator notified your grandmother? In any event, whether the tenant had to inform the landlord depends on the lease. Usually, it's up to the landlord to keep tabs on the status of the tenant. If the tenant is a ltd company and that company is no more then who is paying the rent and why has the landlord accepted rent from a different company?

                      Re rent and items in the lease reserved as rent, the tenant has to pay whether or not formally demanded. However, insurance rent would be a variable (premiums differ from year to year) so the tenant is unlikely to be at fault when he wouldn't know how much to pay until the actual amount is demanded.

                      All breaches are capable of remedy. it is a remedy if the mischief caused by the breach can be removed. If not then it is irremediable.

                      Past breaches are probably past, and/or it may be that some would be deemed waived by acquiescence, but surely there is some breach at present? With forfeiture proceedings per s146 you need to be sure of your facts. There some useful info re breaches in Channel Hotels & Properties (UK) Ltd v Al Tamimi and others [2003] and in Savva and another v Houssein [1996]

                      Your solicitor, with respect, can only act on instructions: have you tried asking him (the solicitor) what he would do about the situation if he were the landlord?

                      Re the defence of 'verbal agreement' there is surely a limit to a verbal departure from the contractual terms and conditions of the lease. Objectively, on the balance of probabilities, it's unlikely your grandmother would have verbally agreed to everything when there is a lease in place.

                      Comment


                        #12
                        Rentreviewspecialist: thank you very much for your answers. That does help a lot and yes, I appreciate the difficulty in answering without seeing the lease.

                        Re the insolvency: I will have to check, but I am quite sure that there was no notice received from the administrator. The lease does state that the tenant should notify the landlord - it is a condition under the 'Forfeiture' clause.

                        After the insolvency (which my grandmother only discovered recently), the tenant sub-let the property without my grandmother's knowledge or consent. That is how he continued to pay the rent. Sub-letting is expressly forbidden under the terms of the lease, regardless of consent. Either way, my grandmother received no written request to sub-let the property. We have raised this breach with the tenant, who has again disputed it by saying that they had a verbal agreement. My grandmother knew nothing about the sub-tenant until after he had already been living there for over 6 months! Anyway, the tenant has now hurriedly evicted the sub-tenant, so I suppose he has effectively 'remedied the breach' there, so there's no case for forfeiture with regards to that?

                        Thank you also for those references to previous cases - I shall look them up. I absolutely understand that our solicitor can only act on our instructions, which is why I'm trying to become as informed as possible before our next meeting.

                        Comment


                          #13
                          How come you are using a solicitor yet having to do his job for him?

                          Comment


                            #14
                            Ha, I'm beginning to ask myself the same question! I think he'll be told to pull his socks up at our next meeting.

                            Comment

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