One of the changes made to Part II of the Landlord and Tenant Act 1954, by the Regulatory Reform (Business Tenancies)(
Landlords welcomed the change, partly because it ended a tenant’s ability to delay the renewal process and partly because of the relaxation of the rules requiring a tenant to serve notice its landlord indicating whether it intends to stay or go at the end of a lease. The landlord’s ability to issue proceedings for the renewal of a lease enables it to ascertain a tenant’s intentions where the position is in doubt because the tenant has been dragging its feet. The commencement of proceedings enables landlords to bring matters to a head or, if the tenant asks the court to dismiss the proceedings, to take any necessary steps to relet the property.
However, the cost of pursuing an action for renewal may be significant and landlords have been concerned that they may be unable to recover their costs if a tenant asks for the landlord’s application to be dismissed. This is because section 29(5) of the 1954 Act, which requires the court to dismiss the landlord’s application if the tenant so requests, makes no provision as to costs. The landlord would have “lost” the case and, in court proceedings, costs usually “follow the event”.
The decision in Lay and others (as Trustees of the Portman Estate) v Drexler [2007] EWCA Civ 464; [2007] PLSCS 105 will reassure landlords that their costs will be recoverable if a tenant acknowledges service of the landlord’s proceedings, indicating an intention to take a new lease, but subsequently applies to have the proceedings dismissed because it has changed its mind.
The Court of Appeal ruled that, by filing an acknowledgement of service indicating an intention to renew the lease, the tenants were, in effect, commencing their own proceedings for a new lease on terms more favourable than the landlord was prepared to offer. The landlord had not acted prematurely and the tenants’ unilateral decision to move to alternative premises had rendered the proceedings abortive. Consequently, the tenants were liable to pay the costs of the renewal proceedings in the county court.
The court did not address the issue of who is liable for abortive costs if a landlord applies to renew a lease (having received no response to correspondence) and the tenant acts immediately to have the application dismissed, without ever adopting the proceedings for itself.
Allyson Colby, Property Law Consultant
