I write an everyday column for Property Investor Information, and I used to be just lately requested a query there about lease will increase.
The query was about how usually a landlord was allowed to extend the lease, however his query included the wording of a clause in his tenancy settlement which was as follows:
The owner could improve the Lease at any time after the preliminary Time period by giving the tenant no less than one month discover (if the tenancy has change into a periodic one) or two months discover (if one other six-month Time period has been agreed) in writing previous to a lease cost day specifying the brand new lease.
Now I don’t know whether or not you will have an identical clause in your tenancy settlement however for those who do:
- If you’re a landlord, you must get it modified, and
- If you’re a tenant, be aware that it’s most likely unenforceable
Why? As a result of it breaches the ‘unfair phrases’ guidelines set out in Half 2 of the Shopper Rights Act 2015.
The Unfair Phrases Guidelines
These have been initially launched by the use of a European directive which member nations have been then required to include into their very own regulation. It’s unaffected by Brexit because it was integrated into UK regulation within the Shopper Rights Act.
The laws purpose to stage the enjoying subject between shoppers and companies as far as contracts are involved.
Companies typically have lengthy, hard-to-read contracts drafted by legal professionals (ceaselessly containing ‘authorized language’ and jargon), whereas most shoppers are wholly unfamiliar with contract regulation and, most often, don’t even learn the contracts.
So what the unfair phrases guidelines do is make clauses unenforceable if they’re deemed to be ‘unfair’ underneath the principles.
So why is the lease clause above unfair?
The reason being that it purports to offer the owner an unfettered proper to extend the lease to no matter he desires. For instance, it doesn’t:
- Restrict the attainable lease improve, for instance by giving a proportion for the lease improve which should not be exceeded, or
- Hyperlink it to one of many varied indexes such because the retail value index or the CPIK index
- Specify that the lease improve be referred to arbitration if it’s not agreed by each events
The one necessities appear to be that the lease improve is notified to the tenant in writing earlier than the lease cost day and that the tenant be given both one or two months discover relying on the circumstances.
So, going simply by the wording within the clause, the owner might arguably improve the lease by £50,000 per week!
Which might be unfair.
Which is why the Unfair Phrases laws make the sort of clause unenforceable.
So what does this imply?
It implies that if a landlord will increase lease underneath such a clause, the lease improve will probably be unenforceable (and the tenant won’t need to pay it).
So if, for instance, throughout possession proceedings based mostly on lease arrears, the tenant challenges the lease arrears claimed by the owner, saying that it was elevated underneath an unfair clause, the Decide could maintain that because the lease was not correctly elevated, a part of the arrears determine is disallowed.
Which might price the owner his possession declare and make him weak to a prices order ordering him to pay his tenant’s authorized prices.
Nonetheless, if the tenants have paid the lease for a time frame with out criticism, then they could be held to have consented to the rise. So, in case you are a tenant, and also you contemplate that your landlord’s lease improve clause is invalid – problem it from the beginning and refuse to pay the elevated lease. Though you could wish to search authorized recommendation first (see right here for some attainable companies you may use).
If you’re a landlord, I counsel you test your tenancy settlement now. Not all tenancy agreements have lease assessment clauses, but when yours does, be certain that it’s enforceable.
In any other case, you could have issues.
Trying to the long run
It could be that this put up will go old-fashioned pretty quickly if the Renters Reform Invoice comes into regulation, as that can outlaw lease assessment clauses altogether, and landlords will solely be capable to improve lease underneath the part 13 discover process.
However on the time of writing, that has not occurred but.
