UK: News Update, Winter 2000 - Property Law

Last Updated: 23 March 2000

RECOVERABILITY OF OVERPAYMENTS OF RENT

There have been significant changes in the law relating to the recovery of overpayments, in particular rent under a tenancy agreement.

Following a rent review, a number of payments of rent had been made at too high a level and the tenant asked for repayment (please see endnote 21). Of the 10 payments the tenant paid the first five in ignorance that the rent was higher than the landlord's entitlement. With the sixth he knew it was too high but thought it would be recoverable and the final four had been paid after landlord had agreed that the payments were so high.

Until recently the law had been complicated by the fact that where overpayment had been made under a mistake in law, i.e. based on a misunderstanding of what the law was, it was not recoverable whereas it may be reclaimed when paid under a mistake of fact. However, fortunately for the tenant, a case recently decided by the House of Lords abolished this distinction at a stroke thus making all the above overpayments recoverable.

Points to watch: This is clearly an important case which will affect any situation where payments or overpayments had been made under a mistake of law or fact. However, time is running, so that any tenants who wish to instruct their legal advisers to conduct a review of payments made in the past must do so before limitation expires.

Contact name: Andrew Beck

TENANCY OR LICENCE?

There may well be circumstances where a dispute arises as to the precise nature upon which commercial premises are let, particularly as a tenant has extensive rights under landlord and tenant legislation. What constitutes a tenancy?

The precarious position of the licensee relative to that of a tenant can lead to disputes as to the nature of occupation - for instance serviced offices are commonly expressed to be occupied only on a licence basis. In a recent case (please see endnote 22) it was acknowledged that the 'hallmarks' of a tenancy were:

  • occupation for a set term
  • periodic payments
  • exclusive possession

However, the Court decided that these factors were not conclusive as was previously commonly considered. The judge stressed that in reaching any such decision all relevant factors including the understanding of the parties had to be taken into account.

Contact name: John Kelsall

Current Landlord & Tenant Act 1954 applications may lapse in 2000

Background

Business tenants should be aware that the automatic stay of dormant cases on the 26 April 2000, introduced by the Civil Procedure Rules 1998 (CPR) could endanger their Landlord & Tenant Act (Act) rights.

There are a great number of lease renewal proceedings issued prior to the CPR when the almost universal practice was for the court to adjourn hearings to 'a date to be fixed' while the landlord and tenant negotiated the new terms of the tenancy. Only if negotiations broke down would either the landlord or the tenant apply for a hearing. These existing cases are now governed by the transitional provisions of the CPR.

The Transitional Provisions

Part 51 of the CPR sets out the transitional provisions. The transitional provisions do not apply to cases commenced after the 26 April 1999. The CPR will only apply to existing cases when they first come before a judge (whether at a hearing or on paper) and if an existing case has not come before a judge by 26 April 2000, the proceedings will be stayed.

The glossary to the CPR defines 'stay' as:

"A stay imposes a halt on proceedings, apart from taking any steps allowed by the rules of the terms of the stay. Proceedings can be continued if a stay is lifted".

CPR Part 51 Practice Direction 19 provides that any party to the proceedings may apply for the stay to be lifted.

Continuation of Tenancies under the Act

Section 64 of the Act provides that the continuation of the tenancy, protected by the Act, expires 3 months after the date on which the tenant's court proceedings are finally disposed of. The Act itself has not been amended by the Woolf reforms. Therefore pre-April 1999 case law of the Act is still a good precedent:

Re: 20 Exchange Street (please see endnote 23), held that the final disposal of the case had not taken place on the date on which the Court of Appeal refused to grant leave to appeal, but on the date on which the time for lodging a petition to the House of Lords for leave to appeal expired. Therefore a case is only 'final disposed of' when there is no possibility of it being resuscitated.

Existing cases which are stayed under Part 51 can be resurrected by an application and therefore it is highly unlikely that the court will regard the automatic stay as the final disposition of the tenant's proceedings.

The Application to Lift the Stay

There is no guidance in the CPR as to the grounds that the applicant must satisfy on an application to lift the stay. However, it is probable that the application to lift the stay will need to be supported by evidence and will not be 'rubber stamped' by the court.

There is no guarantee that every application to lift a stay will be successful and such an application may lead to renewal proceedings being struck out. If the renewal proceedings are struck out and no appeal is lodged, then the continuation of the tenancy under the Act will come to an end 3 months after the last day for appealing the Striking Out Order.

Points to Watch: There are two safe courses of action in relation to existing cases. Firstly the tenant could conclude its negotiations with the landlord and complete a new lease before 26 April 2000. Secondly, the tenant could apply for a hearing to be listed before 26 April 2000, so that the proceedings are governed by the CPR. Business tenants should be aware that there are likely to be a number of similar applications listed before 26 April 2000 and therefore applications should be made well before the deadline.

Contact name: Andrew Beck

Shortfall Debt Recovery - When is it too late for lenders to sue for mortgage shortfalls?

Background

When a mortgage company repossesses a property, which is then sold, it can sue its former borrower to recover any shortfall. Lenders have assumed they have 12 years to commence proceedings. However, on 30 January 1997 Lord Justice Auld in the Court of Appeal gave a judgment in the case of Hopkinson v Tupper (please see endnote 24) where he indicated that the limitation period is in fact 6 years.

Limitation Act 1980

Section 20 Limitation Act 1980 (Act) gives a 12 year limitation period in respect of money secured by a mortgage or other charge. This is reinforced by Section 8 which states that an action upon a Specialty (eg a Deed) would also have a 12 year limitation period. Until the decision of Lord Justice Auld it was therefore felt that a 12 year limitation period would apply to mortgage shortfall cases.

Whilst the Court of Appeal did not give a definitive determination that the limitation period was 6 years, it did state that the point was 'seriously arguable'. The key element in the decision, from which all else flows is:

"in my judgment, it is seriously arguable that where a mortgagee has repossessed and has sold the security and is seeking to recover the shortfall, his claim is in simple contract whatever the nature of the instrument under which the debt was initially secured".

Section 5 of the 1980 Act sets out a 6 year limitation period for actions based on contract. In the view of Lord Justice Auld Section 20 did not apply because it spoke in terms of 'money secured on a property'; but that would not be relevant if the property had already been sold. In those circumstances, the mortgagees' claim would be a simple contract debt and a 6 year period would apply.

The non-application of Section 8 of the Act is the weak link in Lord Justice Auld's reasoning. There are a multitude of cases where simple contract debts and specialty debts have been viewed as very different and separate entities.

However, whatever the merits of the decision, we do have a situation in which the Court of Appeal is now saying that it is 'seriously arguable' that a 6 year limitation period applies in such cases.

When does the limitation period start to run?

The limitation period can be restarted by an acknowledgement or part payment by the debtor (section 29). Accordingly, if the debtor acknowledges his debt and his legal liability to pay it the limitation period will start to run again from the date of such admission. This should be borne in mind when making initial contact with a borrower in relation to a shortfall.

Points to Watch: The argument in Hopkinson needs to be applied to the specific drafting of each particular lending arrangement. There is a clear distinction between a situation on the one hand where the lending arrangement is set out in a letter and the mortgage is simply security, and on the other hand where the lending arrangement and the security all form part of one integral document by deed. Each case will need to be considered on the basis of the proper construction of the particular lending documentation.

Whether the decision will be followed is not clear. However in the event that the decision is followed a comprehensive review of all potential claims is now required in order to avoid claims being statute barred in the future.

Contact name: Andrew Beck

Walker Morris Client Newsletters can serve only to alert the reader to recent developments and to act as a preliminary, but no comprehensive guide. They should not therefore be relied upon in place of specific advice.

ENDNOTES:

  1. Nurdin & Peacock Plc v DB Ramsden & Co Ltd (No. 2): 1999 NPC 17
  2. Mehta v Royal Bank of Scotland plc and others: Times 25 January 1999
  3. Re:20 Exchange Street Manchester [1956] 3 All ER 490
  4. Hopkinson v Tupper CA 30 January 1997 CL June 1997

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions