Buy to Let Landlord Escapes Liability to Tenant
Thu 20 Oct 2016
The Supreme Court’s judgement in Edwards v Kumarasamy (2016) UK SC 40 is a warning to buy to let landlords and their tenants alike.
The case concerns a common situation where a buy to let investor holds a flat on a long lease which obliges its own landlord, the freeholder, to maintain the building as a whole along with its external parts. In turn, the buy to let investor lets the flat to a tenant via an assured shorthold tenancy agreement.
Unfortunately, the tenant tripped over an uneven paving stone while he was taking rubbish from the flat to the communal dustbins and suffered an injury as a result. The question was whether he had a right to make a claim against the buy to let investor as a consequence.
As is unfortunately common with leasehold issues, the answer to the question was not apparent from the face of the Assured Tenancy Agreement. Section 11 of the Landlord and Tenant Act 1985 implies onto such a letting an obligation on the buy to let investor’s part as landlord to keep in repair the structure and exterior of the dwelling house and the amendment to it made by the Housing Act 1988 which extended this liability to any part of the building in which the buy to let investor has an estate of interest.
Commercially, the tenant had most to lose as if the buy to let investor were found to be liable, then it may well be able to pass the buck to the freeholder and no doubt they hold relevant insurance.
For the tenant to succeed, he needed the Supreme Court to find in his favour three issues. First, that the paved area could be described as part of the exterior of the front fall. Secondly, whether the buy to let investor had an “estate or interest” in the front fall. Thirdly, whether he could be liable if he hadn’t received notice of the disrepair from his tenant.
The front fall was the starting point because the investor’s repair obligation was limited to the building in which the buy to let investor had an interest. That was given its ordinary dictionary meaning of “structure with a roof and walls” and did not include external parts also used by the other occupants of the flats. So the tenant fell at the first hurdle as “the fact that a piece of property is a necessary means of access to a building cannot be sufficient for it to constitute part of the exterior. Steps separated from the outside of a building by a two metre path cannot as a matter of ordinary English be said to be part of the exterior…”. So in this case, the tenant was left without a remedy which may be seen as unfair in view of the likelihood that the buy to let landlord could have passed on the liability up the hierarchy of leasehold interest to the freeholder.
In view of the significance of the issue, the Court continued to consider the other questions.
The buy to let investor’s lease granted him a right of way over the paved area amongst other parts. That constitutes an interest but not an estate and so the tenant won on this point.
Notice of disrepair is required to trigger the investor’s repair obligation. This was the express position as between the buy to let investor and its landlord, the freeholder. So the tenant needed to have given notice to the buy to let landlord and if it wished to have the prospect of the risk of the claim made in the future it needed to have passed on notification to the freeholder.
In view of the potential public policy concern here, it is conceivable that the terms of the implied repair obligation would be amended to enable a tenant to claim in respect of damage caused as a result of disrepair affecting paths outside the building.
Until then, both buy to let landlords and their tenants need to tread carefully. Tenants need to scrupulously report items of disrepair to their buy to let landlord. Those investors in turn need to be efficient in notifying their own landlord (if they hold a leasehold interest as will usually be the case with a flat) or else they might be stuck with liability.
Buy to let investors acquiring flats for rental will need to be careful to ensure that the lease terms enable them to pass on liability to the freeholder and ensure they have a management system in place to comply with the lease terms in this regard. Those with whom the buck stops will want to ensure they have valid insurance on risk to meet this potential liability.
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