Landlords have been spared an expensive administrative process to recover rent from former tenants and guarantors in a landmark House of Lords judgement today.
The case of Scottish & Newcastle vs Raguz centres on how rent is recovered from a former tenant who has sublet space if the new tenant is unable to pay rent.
When a former tenant is liable to pay rent the landlord has to serve a notice within six months of the charge becoming due.
However, if there is an outstanding rent review the landlord must also serve a protective ‘section 17’ notice six months prior to rent review warning the former tenant that the amount being claimed could be increased. Further notices must be served six months prior to the subsequent rent payment dates and a final notice must be served within three months of the rent review being determined confirming the figure.
The process has been an expensive administrative headache for landlords.
Both the High Court and the Appeal Court had previously ruled to keep the notices, but the House of Lords today overturned their judgements.
‘Thank goodness for a dose of common sense from the House of Lords,’ said Dan Levy, head of property litigation at Mishcon de Reya. ‘The last thing that landlords need in this climate are any more legal bear traps to prevent them recovering arrears.’
‘As Lord Scott has put it so eloquently, the Court of Appeal decision's produced "a ridiculous conclusion",’ added Nicholas Cheffings, head of Lovells’ real estate dispute team.
'The requirement on landlords to serve notices every six months was an administrative nightmare for landlords and a trap for the unwary and yet it brought no practical benefits to former tenants.’