| LANDLORD AND TENANT — Business premises — Application for new lease — Landlord’s application to grant new lease to tenant — Tenant’s acknowledgment form indicating intention not to oppose new lease but opposing terms of renewal — Tenant later serving notice indicating intention not to take up new lease — Whether tenant to pay landlord’s costs — Landlord and Tenant Act 1954 ( c 56), s 24(1) as amended by Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, art 3(1)
Lay and others v Drexler and others [2007] EWCA Civ 464
CA: (Chadwick, Laws LJJ and Evans-Lombe J): 18 May 2007
Where a tenant had filed an acknowledgment of service indicating an intention to take a new lease in response to his landlord’s application to the court to grant a new lease under the amended provisions of s 24(1) of the Landlord and Tenant Act 1954, subsequent notice to the court that the tenant no longer wanted a new tenancy was similar to filing of a notice to discontinue a claim for a new lease justifying an order that the tenant should pay the costs of the entire proceedings to the landlord.
The Court of Appeal so stated allowing an appeal of the landlord, Richard Neville Lay, CBE, Euan Michael Ross Geddes (Baron Geddes of Rolvenden) and John Adrian Watney, the trustees of the Portman Estate from the decision of Judge McMullen QC dated 22 June 2006 from the Central London County Court when he made no order to the costs of the proceedings and ordered the landlords to pay the tenants’ costs on the hearings of applications on 24 May 2006 and 22 June 2006.
EVANS-LOMBE J said that the legislative purpose of the amendment to s 24(1) of the Landlord and Tenant Act 1954 by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 was to substitute for the strict time limits which previously governed the steps available to as tenant to obtain the grant of al new business tenancy, a right to landlords to commence such proceedings so that by those proceedings, or the threat of them, landlords could compel tenants to make clear at an early stage their intention as to whether they were seeking the grant of a new tenancy and thereafter to pursue negotiations to arrive at agreed terms for the grant of a new tenancy, diligently. It was a classic case where the landlords were using their newly created right to commence proceedings under s 24(1) of the 1954 Act to protect a landlord’s interest in knowing whether he was going to have to remarket his business premises, from the effect of his tenant’s delays in either coming to a decision as to his future course of action or taking appropriate or any steps to arrive at agreed terms for a lease. It was clear that by filing an acknowledgment of service indicating an intention to take a new lease which, if terms could not be agreed, would be settled by the court under the provisions of ss 32- 35 of the Act, the tenants should be taken to have joined in the proceedings which would lead to the grant of a new lease so as to preclude them from suggesting that the proceedings had been started prematurely. The tenants were, in effect, commencing their own proceedings designed to obtain for themselves a new lese of the premises on terms more favourable than the landlord were prepared to offer. They were therefore committed to proceedings in the course of which costs would be incurred which, depending on the result, they might themselves be ordered to pay. The service on the court by the tenants of notice under s 29(5) was the equivalent of a notice to discontinue proceedings in which they had been seeking an order from the court awarding them a new tenancy upon terms settled by the court. It followed that the judge should have placed the burden of proof on the defendants to establish facts which would justify his departure from the normal order in these circumstances. Since the tenants were not able to do so to his satisfaction, he should have ordered them to pay the landlord’s costs.
LAWS LJ agreed and CHADWICK LJ gave a concurring judgment.
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