News

Landlords fear claims deluge

News

Estates Gazette

14 November 1998

by Richard Gerrard of EGi

A House of Lords decision could open landlords to backdated claims from business tenants totalling millions of pounds.

The ruling, which overturns 200 years of established law, will mean that landlords could be forced to reimburse tenants if they paid too much for service charges, for refurbishment of premises, or under any term in a lease that has been misinterpreted.

The case, Kleinwort Benson v Lincoln City Council, overturns a 1760 decision. Until now, overpayments could not be recovered if they were made because of a legal mistake.

The House of Lords says it is in the public interest that the law is changed. The highest court in the land rejected the argument that the change would open the way to a tide of litigation. And the decision is retrospective. Tenants and others seeking to recover overpayments can now bring backdated claims.

The consequences of the ruling for the property industry were unearthed by Allyson Colby, a solicitor at Wragge & Co. Her head of department, Suzanne Lloyd-Holt, said: “If a landlord sends out a bill that is too high and a tenant simply looks at the bottom line and pays, previously the tenant couldn’t get it back if it was a mistake of law.

“That will now change. Landlords and property companies will want to look at their service charge accounts and examine the wording of their leases.”

Martin Poole, finance director of Greycoat, accepted that the ruling was a fundamental change, but said: “I would hope that we were not charging tenants wrongly anyway.”

But James Scott, portfolio manager of Asda Property, said:”Every landlord must take this on board and assess the impact on his business. Tenants will be checking their records.”

Pamela Hirst, director of standards and practice at the RICS, commented: “This is something we won’t be able to ignore. We will have to consider issuing guidance to members. In addition, it may be necessary to consider lobbying for legislative change, and the implications for our members in the public sector and local government will have to be carefully assessed.”

by Richard Gerrard of EGi A House of Lords decision could open landlords to backdated claims from business tenants totalling millions of pounds. The ruling, which overturns 200 years of established law, will mean that landlords could be forced to reimburse tenants if they paid too much for service charges, for refurbishment of premises, or under any term in a lease that has been misinterpreted. The case, Kleinwort Benson v Lincoln City Council, overturns a 1760 decision. Until now, overpayments could not be recovered if they were made because of a legal mistake. The House of Lords says it is in the public interest that the law is changed. The highest court in the land rejected the argument that the change would open the way to a tide of litigation. And the decision is retrospective. Tenants and others seeking to recover overpayments can now bring backdated claims. The consequences of the ruling for the property industry were unearthed by Allyson Colby, a solicitor at Wragge & Co. Her head of department, Suzanne Lloyd-Holt, said: “If a landlord sends out a bill that is too high and a tenant simply looks at the bottom line and pays, previously the tenant couldn’t get it back if it was a mistake of law. “That will now change. Landlords and property companies will want to look at their service charge accounts and examine the wording of their leases.” Martin Poole, finance director of Greycoat, accepted that the ruling was a fundamental change, but said: “I would hope that we were not charging tenants wrongly anyway.” But James Scott, portfolio manager of Asda Property, said:”Every landlord must take this on board and assess the impact on his business. Tenants will be checking their records.” Pamela Hirst, director of standards and practice at the RICS, commented: “This is something we won’t be able to ignore. We will have to consider issuing guidance to members. In addition, it may be necessary to consider lobbying for legislative change, and the implications for our members in the public sector and local government will have to be carefully assessed.”