Property litigation weekly update – 12 May 2022


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This week, the team reports on the recent case of Rail for London Ltd v Mayor & Burgesses of the Hackney LBC, the latest Non-Statutory Guidance on property guardians, and the announcement of the Renters Reform Bill in the Queen's Speech.

Estoppel by convention for unpaid rent in an underlease – Rail for London Ltd v Mayor & Burgesses of the Hackney LBC [2022] EWHC 1075 (Ch)

This High Court decision concerns the legal principle of estoppel by convention. Estoppel is a complex area of law and professional advice should always be taken before considering advancing such a position. However, in simple terms, estoppel by convention prevents a party from later denying a shared assumption, relating to their contract or relationship, if it would be unjust to do so.

The facts

A lease and an underlease were granted on the same day in 1996. The Rent under the lease included the Basic Rent received by the tenant pursuant to the underlease. In 2003, the underlease was surrendered at a premium of £7.8m. The tenant continued to pay the rent under the lease based on the calculation of Basic Rent as had been defined in the underlease (a sum of £6m paid between 2003 and 2019).

Rail for London sought a declaration in these proceedings that, as a result of the surrender of the underlease, the Basic Rent is not payable under the lease. In its defence, Hackney sought to argue (among other things) that Rail for London was stopped by convention from asserting the Basic Rent is not payable because, for 16 years, there had been a shared common assumption that the Basic Rent remained payable under the lease, despite the surrender of the underlease. Hackney contended that it had relied on this shared common assumption and that it would suffer a substantial detriment if Rail for London was now able to resile from this because (a) it was now unable to pursue an action against the solicitors that acted for them and (b) it did not pursue alternative contractual relief against Rail for London's predecessor, London Underground, following the surrender in 2003.

The decision

Rail for London applied to strike out the estoppel argument from Hackney's defence and relied on case law that establishes that estoppel by convention may only be used as a 'shield and not a sword'. Rail for London contended that Hackney was trying to create an enforceable right to receive rent were none previously existed.

However, Hackney contended that it was not using estoppel by convention to generate a legal obligation out of nothing: it was not that the parties considered that the meaning of the lease had changed following the surrender, but that the parties had proceeded, post-surrender, on the assumption that the lease required the Basic Rent to continue to be paid despite the surrender.

After a detailed analysis of the case law in this area, the judge dismissed the strike out application, holding that the legal position is not clear cut enough to be dealt with at a strike out application and should be fully argued at trial.

Takeaways

  • Consider the lifecycle of a lease and be wary of cross-defining rent provisions between leases where one lease might end before the other.
  • Applications to strike out parts of a defence can be an effective tactical device to weaken an opponent's case in litigation, to help narrow the issues and to save time and costs when preparing to argue the issues at trial. However complex questions relying on unsettled areas of law or facts which are untested by existing case authorities may not be suitable candidates for strike out applications.

Property guardians – non-statutory guidance

There has been plenty of litigation around the issue of property guardians, primarily around the questions of security of tenure and HMO licensing. We covered the case of Global 100 Limited v Laleva in a previous edition of this bulletin.

The Government has recently published guidance, setting out the rights of property guardians. The advice is aimed at current and prospective guardians, rather than the companies that employ them, or the landlords who may retain their services to look after their empty buildings. However, it makes an interesting read for anyone considering the use of a guardian scheme.

Property guardians are frequently housed in empty commercial premises (offices, schools, pubs etc), which are vulnerable to occupation by squatters (since trespassing in a residential property became an offence under section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, residential homes are theoretically less vulnerable). The guidance note serves as a reminder that property used to house guardians must meet housing safety standards and may in some cases need to be licensed as an HMO.

Renters Reform Bill

For the first time since the start of her reign, the Queen did not read her speech to Parliament. Instead, in a historic and unprecedented move, the Queens' Speech was read on 10 May 2022 by her son, Prince Charles, due to the Queen's continuing mobility issues. In the speech, the long awaited, by tenants at least, Renters Reform Bill was announced. The Bill will aim to abolish so-call "no fault" Section 21 evictions and strengthen landlords' rights of possession, providing a fair and effective market for both tenants and landlords.

It remains to be seen what form the new Bill will take, however the government briefing dated 29 December 2021 states that that the Bill will:

  • End no fault evictions by repealing section 21 of the Housing Act 1988;
  • Provide for the requirement of only one "lifetime" deposit which will move with the tenant,
  • Provide a commitment to strengthen landlords' rights of possession.

Currently the Bill will only apply to England. Scotland legislated to abolish no-fault evictions in respect of tenancies created on or after 1 December 2017, whereas the Senedd has legislated to introduce minimum notice periods of six months for tenants in the private rented sector with a standard contract. These provisions are expected to come into force in 2022.

In Northern Ireland, tenancies created after 1 April 2007 are generally "non-protected". If a landlord wishes to end a non-protected tenancy on a no-fault basis, the length of the notice depends on how long the tenant has lived in the property.

As always, we will keep you updated when more information is provided by the Government later this year.

Links to insights from around the firm

Positive news

  • Portugal just plugged in Europe's largest floating solar power park. The 12,000 solar panels on the Alqueva reservoir, which is used to generate hydropower, would produce 7.5 gigawatt/hour (GWh) of electricity a year and will supply 1,500 families with power or a third of the needs of the nearby towns of Moura and Portel. EDP, Portugals main utility company, built the floating solar farm which is furthering EDP's plans to reach new zero by 2030.
  • A Texas woman has been crowned the ultimate bargain hunter after purchasing a chipped marble statue for $35 from a thrift store which turned out to be a priceless 2,000-year-old Roman bust. The bust, which likely belonged to Roman military leader Sextus Pompey, was purchased by Laura Young who has been reselling antiques for 11 years. It is now on view at the San Antonio Museum of Art through May 2023.
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