Proposal D: Notices requiring information
Present position
In order to comply with the Act's requirements, both
parties may need to obtain information about current interests
in the property. Generally the renewal procedure will be conducted
between the occupying tenant and the "competent landlord",
who may not be the immediate landlord. The identity of one of
the parties may not be known to the other. So, for example, the
landlord may need to ascertain whether the tenant occupies the
whole of the property for his business, or whether he has sublet
any part of it. And the tenant may wish to find out who is the
"competent landlord", ie the most immediate reversioner
with a sufficient interest in the property.[56]
Accordingly the Act allows the landlord or tenant
to serve notice on the other requiring him to give the relevant
information within a certain period.[57]
The landlord, by serving notice in the prescribed form, can require
the tenant to notify him within a month about the position regarding
the occupation of the property, and of the existence and terms
of any sub-tenancy. Similarly, the tenant can ask anyone holding
a superior interest in the property or their mortgagee as to ownership
of the freehold, the identity of the superior landlord, and the
duration of his interest.
Problem
The Act does not provide any sanction against the
party who does not respond to a notice. The Law Commission's consultations
indicated that this caused much difficulty; and also that the
scope of the provisions required revision.
Proposals
Accordingly, the changes recommended by the Law Commission
(and adopted by the Department[58]):
- increase the extent of the information for which
either party may ask
- impose a duty to inform the enquirer of any material
changes
- provide for cases where a party transfers his
interest to someone else; and
- provide that the sanction for not complying with
the duty to supply or correct the information will be damages
for breach of the statutory duty.
More specifically, the reform proposals entail re-enacting
and extending the terms of the present provision along the following
lines.
Firstly, in response to
a notice served by the landlord, the tenant should be under a
duty to state:
whether he occupies all or part of the property for
the purposes of a business carried on by him. This follows the
current provision.[59]
details of any sub-letting. This also follows the
current provision, but is to be extended to include information
whether an agreement excludes the statutory renewal provisions
in relation to a sub-tenancy.
who, to the best of his knowledge and belief, is
the reversioner of any part of the property not owned by the person
who served the notice.[60]
This is an extension of the current provision.
Secondly, in response
to a notice served by the tenant, the landlord (or his mortgagee)
should be under a duty to state:
whether he is the freeholder, or the freeholder's
mortgagee, and if not who, to the best of his knowledge and belief,
is his immediate landlord and what is the length of his lease.
This reproduces the current provisions.[61]
whether to the best of his knowledge and belief,
the mortgagee is in possession and, if so, the mortgagee's name
and address.[62]
Again, this reproduces the current provisions.[63]
in the case of a divided reversion (i.e. where distinct
parts of the property comprised in a single lease are owned by
different landlords), who is, to the best of his knowledge and
belief, the reversioner of any other part of the property. This
provision is new.[64]
As at present, the notice by the tenant or landlord
may only be served during the last two years of a lease term,
and the requisite information must given by the recipient within
one month of the service of the notice.
Obviously, information which was correct when it
was given in response to a statutory notice can become inaccurate
later on; so it is proposed to impose a duty on the recipient
of the notice to keep the information up to date for a relatively
short period. Thirdly, therefore, the person giving the
information in response to a notice must correct any material
change in it during the period of 6 months from the date of service
of the notice requiring the information.[65]
This would be a new provision.
The remaining proposals follow upon the preceding
proposal and deal with cases where the recipient of a notice transfers
his interest in the property. The duty to revise information would
not continue to bind a person who has parted with his interest
in the property, provided he gave the other party notice of the
change of ownership. More specifically, they are to the following
effect:[66]
- If the recipient notifies the person serving
the notice that he has transferred his interest and of the new
owner's name and address, the duty to notify changes in the information
would cease. A fresh notice can be served on the transferee. If,
however, the recipient only transferred his interest in part of
the property, the duty would continue in relation to the part
he retains.
- If the person who gave the notice requiring
information subsequently transfers his interest in the property,
the recipient's obligation becomes one to supply the information
to the transferee if either the transferor or the transferee gives
the recipient notice of the transfer and the transferee's name
and address. If notice of the transfer is not given, the duty
to provide information can be performed by giving it either to
the transferor or transferee.
Finally, the Law Commission
recommended that the statutory duties to provide information should
be supported by an express sanction. Accordingly, the Department
proposes that the Act be amended to allow civil proceedings for
breach of statutory duty in respect of any failure to supply or
revise information in response to a statutory notice.[67]
The court would also be able to ensure compliance with the duty.[68]
Imposition of new burden/re-enactment of existing
burden
These provisions would re-enact existing burdens
on landlords and on tenants regarding the information required
to be given by the recipient of a notice served under the relevant
provisions of the Act. They would also impose new burdens by:
- extending the information required
- requiring the recipient of such a notice to keep
the information up to date by requiring a party to notify the
other that he has transferred his interest in the property; and
- expressly providing that civil proceedings for
breach of statutory duty may be brought in respect of any failure
to supply or update the information concerned, and that the court
can ensure compliance with the duty.[69]
Proportionality
The burdens so imposed would have the benefit of
facilitating the smoother operation of the renewal and termination
procedures. We are satisfied that they are proportionate to that
benefit (but see below). We are also content that the provision
allowing civil proceedings for breach of the relevant duties,
and enabling the court to ensure compliance, is proportionate
to the benefit of ensuring that parties may receive the necessary
information, or obtain compensation if they do not.
A number of consultees were unhappy about this aspect
of the proposal, arguing that the requirement to keep the information
up to date for a period of six months would represent a disproportionately
large burden on recipients, and particularly those landlords who
have a large number of tenants. It was suggested that provision
should be made for recipients of notices to be reminded of their
obligations. The Department's response was:
While the obligation to keep information uptodate
for six months could be onerous, the other party's rights could
be in jeopardy if this does not happen. The Department does not
consider that it would be sufficient for parties to respond only
when they have received reminder notices. If for any reason,
the reminder notice did not reach the intended recipient, the
other party might be unable to operate the statutory procedures.[70]
This response is unconvincing. The Department's argument
against reminder notices might equally well apply to the original
statutory notice which required the information in the first place.
Nevertheless, the importance for a party's ability to operate
the renewal procedures of ensuring that the information is up
to date is not in doubt. A party is likely to be prejudiced, and
the smooth operation of the Act hindered, if no duty were imposed
on the recipient of the notice to update the information. Given
that the updating obligation is for a limited period only (6 months),
and that the obligation will cease once the recipient of the notice
transfers interest in the property and notifies the person who
served the notice of the transfer, we are therefore satisfied
that this burden is not disproportionate to the benefit which
is likely to result.
Necessary protection
The provisions of the Act requiring parties to give
information requested in due form are designed to protect the
parties concerned by enabling them to obtain the information necessary
for them to exercise their rights under the Act effectively. That
protection is not reduced; rather, it is extended, as the extent
of the information which may be obtained in this way is increased.
We are satisfied that this proposal would not remove any necessary
protection.
56 The competent landlord is the owner of the fee simple
or the a leasehold interest which will not come to an end within
14 months by effluxion of time or in respect of which notice to
terminate has been served under the Act: s 44(1). If the immediate
landlord does not fulfil these conditions, the competent landlord
will be the next superior landlord who does. The reason for this
provision stems from the fact that the immediate landlord of the
tenant carrying on the business may himself only hold a leasehold
interest. If that landlord's interest is shortly about to expire,
there is little point in requiring him to grant a new tenancy.
So, the Act disregards for the renewal purposes a landlord who
has only a short leasehold interest. Back
57
S 40 Back
58
Proposed order, articles 23 and 24. Back
59
But the provision will have an extended scope in the light of
the proposals as to companies and their controlling shareholders:
see paras 85-102 above. Back
60
Under another proposal, where there is a divided reversion, the
landlords would have to act collectively (see paras 174-177 below),
but there could be circumstances where one reversioner did not
know the identity of another reversioner. Back
61
S 40(2)(a)(b) Back
62
If there is mortgagee in possession, he is the person with whom
the tenant must conduct the renewal procedure. Back
63
S 40(3) Back
64
This is intended to help a tenant who wanted a new tenancy and
who would have to serve his request on all the landlords: see
paras 174-177 below. Back
65
A duty to update information for a long period would be to impose
an unduly onerous burden, particularly since the breach of the
duty could result in the payment of damages. Back
66
Article 24. Back
67
Proposed order, article 24 (new section 40B). Back
68
This would confirm what appears to be the present position. Back
69
The Department considers the inclusion of a sanction for breach
of statutory duty to be the removal of an anomaly rather than
the creation of a new burden; and therefore do not address the
question of proportionality. However, under s 2(1)(a) of the Regulatory
Reform Act, creation of a sanction represents the imposition of
a burden. Back
70
Explanatory statement, Annex B1, para 26. Back
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