Hazel v Akhtar & Anor

Where a landlord has accepted a tenant’s established practice of making slightly late rent payments by cheque, it is estopped from insisting on strict compliance with the rent covenant unless it gives reasonable and clear notice. An assignee of the landlord’s interest is subject to the same restraint.

For the purposes of section 30(1)(b) of the Landlord and Tenant Act 1954, earlier payments made under that accepted practice cannot be treated as persistent delay. The court must instead assess conduct after effective notice requiring strict compliance. A material error about the content and effect of alleged notice may justify an appellate court in setting aside and re-exercising the statutory discretion.

The tenant sought a new business tenancy of shop premises under Part 2 of the Landlord and Tenant Act 1954. The landlords opposed renewal on the grounds of want of repair and persistent delay in paying rent under section 30(1)(a) and (b).

His Honour Judge Simpson in the Mayor’s and City of London County Court refused renewal on 19 February 2001. He treated the tenant’s long history of slightly late rent payments as persistent disregard of the lease and also took account of breaches of the repairing covenant and the tenant’s financial position.

The tenant appealed, contending that previous landlords had accepted the payment practice and that the new landlords had not given effective notice requiring punctual payment. The Court of Appeal also received limited further evidence about the tenant’s finances and repairs.

Sir Anthony Evans LJ, with whom Henry LJ agreed, allowed the appeal. The county court’s refusal to grant a new tenancy was set aside and the application for a new tenancy was granted.

1. The previous landlords and their agents had accepted the tenant’s recurring practice of paying slightly late by cheque. Although this did not vary the lease, it gave rise to an estoppel. The landlords could not require the tenant to resume strict compliance without reasonable notice, and the respondent landlords, as assignees of the reversion, were subject to that restraint.

2. The July 1999 solicitors’ letters did not provide effective notice. They pursued a mistaken demand for two earlier quarters’ rent, rather than requiring punctual future payment. The tenant was entitled to disregard their threats. No subsequent clear notice requiring payment on or before quarter days was identified.

3. The judge therefore erred in law by treating the whole history of payments as persistent delay relevant under section 30(1)(b) of the Landlord and Tenant Act 1954. He also made a serious factual error about the July correspondence. Those errors materially affected the exercise of discretion, so the Court of Appeal could exercise it afresh.

4. The tenant remained in breach of his repairing obligations, but the evidence showed that substantial remedial work had been done and that the position concerning dry rot required further consideration. Taking account of the prior accepted payment practice, the absence of effective notice, the repairs undertaken and the tenant’s stated future intentions, refusal of renewal was unduly harsh. The tenant’s offers of security for future payments did not influence the result and were not imposed as conditions of renewal.

• Court of Appeal (Civil Division) — allowed the tenant’s appeal and granted the application for a new tenancy: [2001] EWCA Civ 1883.
• Mayor’s and City of London County Court — His Honour Judge Simpson refused the tenant’s application for a new business tenancy on 19 February 2001.