When you are renewing a commercial lease, what could possibly go wrong?
This was a question that we recently answered for a landlord who got stuck with a service charge clause capped at 2007 levels.
Background
The landlord entered a lease in 2007. The lease included an upper limit on the service charge they could recover from the tenant. This was fine as they did not anticipate spending more than the service charge cap.
In 2019, the landlord instructed a national firm of solicitors to act for them in the lease renewal. On most lease terms, the renewal lease referred to the 2007 lease, with various items such as rent updated.
However, their solicitors should have ensured the service charge cap was updated or removed. Instead, the same provisions took effect, with no account of the landlord’s anticipated future expenditure, with the cap fixed at the 2007 level.
This failure caused the landlord financial loss. They could not recover a fair proportion of the annual expenditure incurred from their tenant. This was particularly problematic since the landlord was by then required to carry out substantial repair works under the lease. Had the old cap been updated or removed, the landlord would have been able to recover a greater percentage of this expenditure from the tenants under the service charge provisions.
Pre-Action Protocol for Professional Negligence
The landlord instructed Napthens.
We corresponded with their former solicitors pre-action under the Civil Procedure Rules Pre-Action Protocol for Professional Negligence.
We secured a favourable settlement for our client without even issuing proceedings. Our client is now in the position they would have been had their former solicitors ensured the service charge cap in the 2007 lease was updated or removed.
Comment
The consequences of negligent lease renewal can be enormous.
When renewing old leases, it is essential to carefully check the service charge provisions and other terms in the previous lease.
Remember: Mind the cap!
For more information about this article or any other aspect of professional negligence in property, contact your Napthens Solicitors in Preston, Blackburn, Liverpool, and across the North West today.
