Landlord Pays Price for Failing to Inform Tenant
24 February 2010
If a landlord has concealed or misrepresented facts, it can be ordered to pay a departing commercial tenant compensation for any damages or loss sustained by the tenant that arise as a result of having to quit the premises.
The legislation bringing this into effect is relatively new and the first case in which it has been put to the test was only decided recently. It involved a landlord which gave notice to its tenant that it wished to refurbish the premises and that it was necessary for the landlord to obtain vacant possession of the premises to carry out the proposed works. This is one of the reasons for which a landlord can oppose the grant of a new lease to a tenant.
The tenant’s lease was scheduled to come to an end in January 2007 and the landlord’s notice was served in August 2006. The tenant offered to increase the rent payable to the landlord in exchange for a new lease, but the offer was refused by the landlord.
The landlord then changed its mind about the redevelopment and, in October 2006, it instructed agents to market the premises for let. The tenant was not informed of this and signed a lease on new premises in November 2006, vacating the old premises the following month.
When the tenant became aware of the fact that the landlord no longer intended to carry out the refurbishment of the premises, it sought compensation. The court took the view that the landlord had correctly stated its intentions at the time and had no obligation to inform the tenant of its change of mind. Accordingly, the tenant lost. The tenant then appealed the decision to the Court of Appeal.
The Court of Appeal considered that a landlord’s conduct could give rise to a misrepresentation or concealment. The landlord’s notice had referred to the statutory process whereby a tenant is required to vacate premises at the end of a lease because of the landlord’s formal opposition to the renewal of the lease. Accordingly, the representation made was either a continuing one or one which became false and thus created a duty to inform the tenant of the changed circumstances.
This case is important for landlords as, in similar circumstances, failing to notify a tenant of a change in intention after the tenant has been informed that its application for a new lease will be opposed may lead to a claim.
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