The House of Lords has reversed an earlier Court of Appeal decision that forced Solicitors, and possibly Commercial Agents, from having to serve potential default notices on tenants, and even guarantors and former tenants, in order to protect a Landlord where there was an outstanding rent review just in case a situation arose whereby arrears arose and it became necessary to commence proceedings for recovery as, without service of a notice within six months of sums ‘becoming due’ recovery would fail. So tenants were receiving notices even for ‘nil’ amounts just to protect Landlords in such situations and this will now no longer be necessary.

Below is a summary of the points that arose and the decision of the House of Lords:

• In Scottish & Newcastle plc v Raguz [2008] UKHL 65 the Lords held that, for the purposes of recovering sums from former tenants, the date that the additional rent under a rent review clause “becomes due” is the date when the increase has been agreed or determined, not the ‘Rent Review Date’ in the lease to which payment will be backdated.

• The opposite conclusion reached by the Court of Appeal meant that where a rent review had not been determined by the relevant rent review date, a landlord had, as a precautionary measure, to serve a section 17 notice on former tenant(s) (and any guarantors of those tenants) who remained liable for the payment of fixed charges. The notice had to be served within six months of each rent payment date until the rent review had been determined.

• The House of Lords considered that it was hard to attribute to Parliament the intention that landlords had to serve a section 17 notice within six months after every rent payment date specifying the amount due as “nil” if they wanted to preserve their rights against former tenants pending a rent review. In this case, the original tenant was legally bound to pay the sums demanded to the landlord and the original tenant was entitled to reclaim the amount from its assignee under the implied indemnity given under section 24 of the Land Registration Act 1925.

Landlords will be hugely relieved by this decision. The need to give precautionary notices to former tenants, even where there was no default by the current tenant, was administratively burdensome and imposed an unwelcome additional property management task on landlords. Landlords will no longer have to serve a succession of section 17 notices within six months of each successive quarter day so as to preserve their rights against former tenants.

The decision will also make it easier for sellers of properties subject to tenancies and for buyers carrying out due diligence exercises.