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Consent Order Upheld - Despite landlord's failure to serve a s17 notice

If a landlord wishes to pursue a former tenant or a former guarantor for payment of any fixed charge (including rent and service charge) reserved by the lease, the landlord must serve a notice setting out details of the claim. The notice must be served within six months of the fixed charge becoming due otherwise the landlord will lose its right to recover the arrears. These notices are referred to as section 17 notices as the requirement arises pursuant to Section 17 of the Landlord and Tenant (Covenants) Act 1995.

Last month the High Court refused to set aside a consent order agreed between a landlord and a former tenant in respect of rent arrears despite the fact that the landlord had failed to serve a section 17 notice.

In this case the landlord called upon the former tenant to honour its guarantee under an authorised guarantee agreement. The former tenant instructed lawyers who settled a defence on its client’s behalf. Unfortunately, the former tenant’s lawyers did not plead the failure to serve a section 17 notice. If they had done so, it was common ground that this would be a full defence to the claim under the guarantee for rent.

A consent order was then agreed between the landlord and the former tenant. It was only when the former tenant instructed a new firm of lawyers that it became clear that the landlord had failed to serve a section 17 notice. This resulted in further court proceedings whereby the former tenant asked for the consent order to be declared void and of no effect and for it to be set aside. The Recorder refused to do so. The High Court agreed that the Recorder was correct not to set aside the consent order.

This judgment is a reminder for landlords in similar circumstances to serve the section 17 notice. However, it also reminds former tenants and former guarantors to check whether this has been done as the guarantee may be unenforceable if no notice has been served.

Lee v Sommer [2015] EWHC 3889

Posted on 02/01/2016 by Ortolan

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