Property in dispute - September 2011

This month’s update includes a summary of a Leasehold Valuation Tribunal decision in which it was considered whether solar panels are a nuisance as well as a case in which the Court of Appeal considered whether the county court judge had correctly exercised his discretion when calculating an interim rent where the tenancy would not be renewed.

Solar panels are becoming more and more popular especially to environmentally friendly home owners.  Such home owners are able to grant a lease to a third party to install solar panels on their property.  These leases are commonly referred to as feed in tariff (FIT’s) lease.  The home owner benefits from using the electricity generator by the panels free of charge.  The third party benefits by being able to export any surplus energy which is generated to the national grid and to claim and keep the feed in tariff payments paid for electricity generated by the panels. 

The panels are usually installed on the roof of the property and may cover large areas of the roof.  Some people consider them an eyesore.

In the matter of Re 11 and 27 Parklands View (forfeiture) [2011] EWLVT a tenant under a long lease of a detached house on an estate granted a FITs sublease for a term of 25 years.  The developer of the estate was the superior landlord (“the landlord”).  The tenant did not seek any consent from the superior landlord for the grant of the sublease.  The FITs sublease allowed the subtenant to install panels in the air space immediately above a large area of the roof of the house.  The panels were visible from the road.  The landlord objected to the panels and wished to forfeit the lease.  As the lease was a long lease of the dwelling he could not serve a section 146 notice until he had obtained a determination from the Leasehold Valuation Tribunal (LVT) that there had been a breach of covenant in the lease.

The landlord objected to the panels and sought a determination from the LVT that the panels were a breach of:-

1. The covenant prohibiting additions to the property without prior consent of the landlord (consent not to be unreasonably withheld);
2. The covenant prohibiting any user which may be or grow to be a nuisance or annoyance or cause disturbance to the landlord or to the owners or occupiers of the neighbouring property;
3. The covenant in the lease prohibiting use for any trade or business purpose. 

The tenant applied for retrospective consent to the grant of the FITs lease and the installation of the panels but this was refused by the landlord.  The landlord refused because he said he was concerned that the panels exceeded the design tolerances of the roof which was dangerous, he was also concerned that the panels would invalidate the NHBC insurance backed warranty and also because some prospective buyers and neighbours had complained about the panels. 

The tenant argued that the consent had been unreasonably withheld.  The tenant also argued that the breach had been waived by the subsequent acceptance of the ground rent.  However the waiver issue is not discussed further in this article because it does not create any new law. 

The LVT decided that the panels were an addition to the property so did require prior consent. However, it said that consent had been unreasonably withheld because the concern that the panels might overload the roof was unfounded on the basis of expert evidence, there was no evidence that the panels would invalidate the NHBC insurance backed warranty and the aesthetic objections were minor. The LVT decided that in the circumstances it would not be proportionate for the landlord to refuse consent.  In relation to nuisance the LVT thought that a reasonable person would no more find the panels annoying than they would the erection of a satellite dish on the roof.  Further the grant of the FITS sublease did not amount to the use of the property by the tenant for business purposes.  The rent paid by the tenant was only a peppercorn and in any event the resulting business was merely ancillary to the residential use. 

This decision does not make it compulsory to grant consent to the FITs sublease.  There may be circumstances in which refusal of consent is reasonable.  The more evidence that can be presented to the LVT by the landlord the better. 

Please note that there has been comment that the LVT’s comments regarding the insurance issue was flawed and if you require further information on this please contact us.

Interim Rent

In Neale and another –v- The Witney Electric Theatre (2011) EWCA CIV 1032 the Court of Appeal considered whether the County Court judge had correctly exercise his discretion when determining an interim rent application under section 24D of the Landlord & Tenant Act 1954 (“the Act”). 

Once a landlord has served a section 25 notice or a tenant has made a section 26 request for a new tenancy, either the landlord or tenant can make an application to the Court to determine an interim rent under the Act. 

Where the new tenancy is of the whole of the premises and the landlord is not opposed to the grant of the new lease the general rule is that the interim rent will be the rent payable under the new tenancy (section 24C(2) of the Act).  In all other cases the interim rent will be the rent that it is reasonable for the tenant to pay (section 24D(1) of the Act).  This method provides for a “cushioning effect” for tenants, as it tends to produce a rent that is below the rent ultimately payable under the new tenancy.

When applying section 24D the Court must have regard to the rent payable under the terms of the old tenancy and the rent payable under any sub-tenancy of part.  Otherwise, the Court must apply the same rules as it would when deciding the rent payable under a renewal lease, for a tenancy of the whole from year to year.  These rules mean that the Court must determine the rent by reference to the rent at which the property might reasonably be expected to be let on the open market by a willing landlord.  At the same time certain effects on the rent must be disregarded including the fact that the tenant has been in occupation, goodwill attached to the property as a result of the tenant’s business and certain improvements. 

In this case, it was known at the date of the interim rent hearing that the tenants were not entitled to a renewal lease.  The interim rent was fixed at the same level as the passing rent even though the County Court judge had noted that the market rent calculated on a year by year basis would be around 25% less than the passing rent.  The Court of Appeal found that this was a reasonable exercise of the Court’s discretion as the Court had a broad discretion when fixing a reasonable rent under section 24D of the Act.