If you have an outstanding rent review and want to preserve the right to recover any arrears from a former tenant a recent court ruling means you need to act now to ensure the right is preserved or risk losing the right forever.
Landlords now need to consider serving notices on former tenants every rent payment date (usually quarterly) during a rent review to protect the right to recover arrears from a former tenant.
It is unusual for a rent review to be agreed by the review date. Leases are usually drafted so the existing rent is payable until the reviewed rent is finalised. The difference between the existing rent and reviewed rent is then backdated to the review date and becomes payable (with interest) usually with the following quarter's rent.
Often a rent review can take a considerable time to complete. If once finalised a tenant cannot pay the backdated surplus it has been usual to serve notice on the former tenant (where there is one) under Section 17 of the Landlord and Tenant (Covenants) Act 1995 giving it notice of the sums that are then due and unpaid.
The Court has ruled this is not correct. A Section 17 notice should be served within six months of the normal rent payment date even if the level of reviewed rent is not known on that date. This means that if a Section 17 Notice is not served within six months of the normal rent payment date under the lease, normally a quarter day, the landlord will not be able to recover the surplus once the reviewed rent is agreed.
This decision may not just apply to rent reviews but possibly to all other sums due under the lease which fall to be determined at some date in the future such as service charges.
Law: Scottish & Newcastle plc - v- Zeliko Stephen Raguz
