Termination of Tenancies for Tenant Default - Law Commission

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SPECIAL CASES OF TENANT DEFAULT Denial of the landlord’s title 3.39 There is implied into every tenancy a condition that the tenant shall not do anything that may prejudice the title of the landlord. 35 Tenants are therefore liable to forfeiture of their tenancy if they deny their landlord’s title, without the need for a forfeiture clause expressly reserving to the landlord a right of re-entry. It has been held that the principle is analogous to the repudiation of a contract. 36 The CP’s provisional proposals 3.40 The CP concurred with the view expressed in the First Report that this doctrine represents an unnecessary vestige of feudalism. We therefore provisionally proposed that in tenancies granted after the scheme comes into force, there should no longer be an implied term to the effect that the tenant should not deny or disclaim the landlord’s title. We also proposed that any such term implied in a tenancy granted before that time should be ineffective. This should not, we added, prevent the inclusion of (or render ineffective) any express term in a tenancy to the same or similar effect. 37 Consultation 3.41 There was unanimous support for this proposal. Reform recommendations 3.42 During the process of finalising our recommendations, it became clear that simply abolishing the implied condition, as provisionally proposed in the CP, would have unintended far-reaching consequences. It would disapply the implied condition that a tenant may not deny or disclaim the landlord’s title for all purposes and not just in relation to the scheme. 3.43 We have therefore concluded that the legal effect intended by the CP’s provisional proposal is best achieved by leaving untouched the implied condition but providing that breach of the condition should not constitute tenant default. 3.44 We intend to proceed with our provisional proposal that nothing in the scheme should prevent the inclusion of (or render ineffective) any express term to the same or similar effect as the implied condition not to deny or disclaim the landlord’s title. It will be open to the parties to agree an express covenant to the same effect, breach of which will be tenant default (unless it is an excepted covenant). We take the view that express provision in the draft Bill is not required on this point as our recommendation applies only to the implied covenant not to deny or disclaim the landlord’s title and not to any express covenant to that effect. 35 Abidogun v Frolan Health Care [2002] L&TR 16. 36 W G Clarke (Properties) Ltd v Dupre Properties Ltd [1992] Ch 297. 37 CP, para 4.16. 38
3.45 We recommend that the breach of an implied covenant not to deny or disclaim the landlord’s title should not be a tenant default. 38 Non-payment of rent and other sums 3.46 Under current law, non-payment of rent does not give rise to a right to forfeit the tenancy unless a formal demand is made or the requirement for a formal demand has expressly been dispensed with in the terms of the tenancy. For this reason, a dispensing provision is commonly included in tenancy agreements. In addition, where half a year’s rent is in arrear and there are insufficient goods available for distress, the landlord may forfeit a tenancy without having made a formal demand for rent. 39 The CP’s provisional proposals 3.47 The CP endorsed two recommendations in the First Report. 40 The first was to repeal those statutory provisions requiring the landlord to make a formal demand for rent prior to forfeiting the tenancy. The second was that, as a general rule, non-payment of rent for 21 days after it has become due should comprise tenant default. 41 It would, however, be open to the parties to agree that the landlord must make a formal demand prior to taking steps to terminate the tenancy on the basis of non-payment of rent or to stipulate a longer or shorter period before nonpayment comprised tenant default. Consultation 3.48 Most consultees who commented on these proposals expressed their support. The biggest area of disagreement was the length of time that rent should be in arrear before non-payment comprises tenant default. We received suggestions ranging from seven days to eight weeks. Reform recommendations 3.49 We intend to proceed with the CP’s provisional proposal. The period of 21 days is in our view a reasonable one, and the parties are free to make alternative provision. 3.50 We recommend that, in the case of a tenancy, other than a long lease of a dwelling, non-payment of rent with or without formal demand should constitute tenant default after 21 days (unless the tenancy requires a formal demand or provides for a period other than 21 days, in which case the express terms of the tenancy should prevail). 42 38 Draft Bill, sch 2, para 7. 39 County Courts Act 1984, s 139(1); Common Law Procedure Act 1852, s 210. 40 CP, para 12.4(5). 41 First Report, paras 5.21 to 5.26, recommendations (16) and (17). 42 Draft Bill, sch 2, para 6. 39
Page 1 and 2: The Law Commission (LAW COM No 303)
Page 3 and 4: THE LAW COMMISSION TERMINATION OF T
Page 5 and 6: Consultation 40 Reform recommendati
Page 7 and 8: Consultation 68 Reform recommendati
Page 9 and 10: (7) Any other matter 102 THE LEASEH
Page 11: Restrictions on using the summary t
Page 14 and 15: where appropriate using the various
Page 16 and 17: etains an equitable jurisdiction to
Page 18 and 19: of the law”. A number of leading
Page 20 and 21: procedure, the tenancy will not ter
Page 22 and 23: Part 6 examines the position of tho
Page 24 and 25: 2.7 When a tenancy is terminated un
Page 26 and 27: unless valid notices have been give
Page 28 and 29: Transfer order 2.30 Only a qualifyi
Page 30 and 31: 2.41 Where a landlord serves a summ
Page 32 and 33: PART 3 TENANT DEFAULT INTRODUCTION
Page 34 and 35: scheme by characterising the obliga
Page 36 and 37: to include such clauses and to allo
Page 38 and 39: perform their obligations under the
Page 42 and 43: Assignment 3.51 Most tenancies cont
Page 44 and 45: the incoming tenant of the assigned
Page 46 and 47: often stipulate that a right to for
Page 48 and 49: insolvency process having the same
Page 50 and 51: 3.93 In addition, section 81 of the
Page 52 and 53: 1996 and Chapter 5 of the Commonhol
Page 54 and 55: covenant is non-payment of rent, a
Page 56 and 57: Reform recommendations 3.132 We rec
Page 58 and 59: The CP’s provisional proposals 4.
Page 60 and 61: do so by delaying until the default
Page 62 and 63: it is unlikely that a tenant would
Page 64 and 65: (4) give the date by which action m
Page 66 and 67: Specify the time for remedial actio
Page 68 and 69: (3) must specify in respect of the
Page 70 and 71: agreement (subject to a maximum ext
Page 72 and 73: underlying principle that qualifyin
Page 74 and 75: all tenancies granted for seven or
Page 76 and 77: 4.92 As we intend to retain the sam
Page 78 and 79: PART 5 MAKING A TERMINATION CLAIM (
Page 80 and 81: e set off against the cost of carry
Page 82 and 83: future liabilities under the terms
Page 84 and 85: (6) where a tenancy comes to an end
Page 86 and 87: 5.43 During the period of the stay,
Page 88 and 89: described. During the consultation
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termination of a tenancy under the
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5.69 We recommend that the proceeds
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5.75 The First Report therefore rec
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making any order under the scheme t
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5.93 The CP provisionally proposed
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of the parties. 78 Proportionality
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past conduct of the parties. This m
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(7) Any other matter 5.127 It would
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PART 6 QUALIFYING INTERESTS INTRODU
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1925 extends to lessees, under-less
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according to the lease without any
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interchangeably by the courts, by s
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entitled to use the scheme to prote
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(2) if not in occupation, a right w
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property. The simplest means of ens
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(1) What should the landlord be exp
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claim with the court for service on
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have to apply for relief, which, if
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qualified covenant not to assign th
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that it is both appropriate and pro
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order unless the person who holds t
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CP suggested, close down any potent
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PART 7 SUMMARY TERMINATION PROCEDUR
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action rather than by physical re-e
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Paper was published. 22 It proposed
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7.28 It was hoped that this recomme
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equirement for service of a notice
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7.51 The final restriction was: It
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in the sub-tenant being removed fro
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termination claim, the summary term
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7.71 The summary termination proced
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Repairing covenants 7.79 The repair
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7.88 We do not wish to discourage t
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dispensation power will only be exe
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to costs under the summary terminat
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7.112 We recommend that: specifying
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PART 8 LIST OF RECOMMENDATIONS PART
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8.13 We recommend that the Insolven
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(a) the day after the deadline spec
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(6) if the court dismisses an appli
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8.39 We recommend that, where a ten
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8.49 We recommend that: (1) where t
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(4) the default is a breach of cove
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APPENDIX A DRAFT LANDLORD AND TENAN
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ii Interpretation, etc. 28 Meaning
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2 178 Landlord and Tenant (Terminat
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4 180 Landlord and Tenant (Terminat
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6 (8) This section is subject to se
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8 13 Remedial order 184 Landlord an
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10 186 Landlord and Tenant (Termina
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16 30 Meaning of “qualifying inte
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20 Preliminary 196 Landlord and Ten
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22 Proper address 198 Landlord and
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26 Settled Land Act 1925 (c. 18) 4
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32 Protection from Eviction Act 197
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34 Landlord and Tenant Act 1985 (c.
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38 (2) After that subsection, inser
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40 Settled Land Act 1925 (c. 18)—
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APPENDIX B EXPLANATORY NOTES TO THE
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landlord assigns the reversion, he
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33. For example, if a tenant defaul
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53. Subsection (5), although broadl
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If the court is satisfied of this,
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91. Subsection (4) mitigates the ef
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108. Under the current law, forfeit
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126. Subsection (2) applies where t
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145. Subsection (1)(d) includes wit
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unless he or she obtains a court or
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person who is the tenant as a resul
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termination notice (except where th
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Robin Sinclair, Solicitor Slaughter
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