Possession in PRS: A landlord’s right to unpaid rent

An important question to be considered in respect of landlord and tenant law is whether a landlord can seek recovery of all the rent due under a tenancy i.e the remaining fixed term period, when a tenancy is brought to an end early.  As solicitor Chris McGrath explains, the landlord’s right to unpaid rent depends on how the tenancy ended.

Tenant leaves before contract expires

It is an established principle of contract law that any party to a contract will be required to mitigate any losses they experience due to the other party’s failure to fulfil their contractual obligations. This position is conveyed in British Westinghouse Electric Coy v Underground Electric Railways Coy [1912] AC 673.

As a result of this contractual principle, it is apparent that it remains incumbent on the landlord to attempt to mitigate their loss and rent the property again at the earliest opportunity if a tenant ends their tenancy early and the landlord retakes possession.  Contractual law holds that a landlord should not simply let a property remain empty and subsequently make a claim for future rent. However, the English Court of Appeal decision in Reichman and Anor v Beveridge and Anor [2006] EWCA Civ 1659, concerning rent owed for a commercial tenancy, may be relevant where a landlord has failed to mitigate his or her loss.  

Where a landlord has ended the tenancy, he or she would still remain able to claim for expenses, such as advertising costs, and loss of income in the intervening period.

Importantly, it is worth noting that the burden of proof will be on the tenant to prove that the landlord has failed to mitigate loss.

Landlord issues notice to quit and regains possession of the property

If a tenant has breached a term of their tenancy agreement, such failing to pay rent, the landlord can issue a notice to quit in order to regain possession of the property. In such instances, a landlord may become entitled to re-enter the property following due process of the law.

Under these circumstances, a question may arise as to the landlord’s entitlement to make a claim for all rent due under the terms of the original agreement, after possession has been taken.

The landlord, by electing to take back possession of the property, has forfeited his or her rights under the other terms of the tenancy i.e the tenant’s continued obligation to pay rent. This position was established in the case of O’Reilly v Gleeson [1975] IR 258. It therefore follows that a landlord can no longer rely upon the terms of the tenancy. As a consequence, a landlord cannot make a claim for rent due after possession of the property has been taken.

It should be noted that a landlord’s right to claim rent does not extinguish merely on the issuing of a notice to quit. Rent shall remain payable until the actual recovery of possession, whether that is through voluntary handover or enforcement following a court order. Ivory Gate Ltd v Spetale [1998] EGCS 69 and McIlvenny v McKeever [1931] NI 161

Rainey Brothers Ltd v Kearney [1990] NI 18 holds that the landlord may be entitled to make a claim for damages and compensation if, on attempting to re-let the property after regaining possession, he incurs expenses, such as agent or solicitor fees, or has to re-let the property at a reduced rent.

Mitigation where landlord does not take possession

The above case law applies where a landlord has taken action to end a tenancy once the tenants have ceased to pay rent, but the landlord may not necessarily take this action.  The English Court of Appeal decision in Reichman and Anor v Beveridge and Anor [2006] EWCA Civ 1659 is an important decision when considering a landlord’s obligation to mitigate his or her loss.  Although the case relates to a commercial tenancy, it may be reasonable to assume that the findings would apply to private residential tenancies.

The tenants of a commercial property vacated the premises 3 years into a 5 year contract, and ceased payment of rent. The landlord did not take steps to take possession of the property and simply proceeded to make a claim to the court for outstanding rent, a money only claim as opposed to a claim for possession. The tenants argued that the landlord, by neglecting to remarket the property, had failed to mitigate his or her loss.

The questions for the court were whether the landlord should have accepted the surrender and re-let the premises in order to mitigate his loss and was his failure to do so unreasonable. The defence position was that had the landlord relet the property, he could have subsequently sued the tenant for additional losses and expenses in accordance with Rainey Brothers Ltd v Kearney [1990]

The Court found that there was no requirement on the landlord to accept the tenants surrender and it was permissible for him to maintain the tenancy and seek recovery of the outstanding rent. In considering this matter the Court referred to the fact that there is:

“…no case in English law that shows that a landlord can recover damages from a former tenant in respect of loss of future rent after termination, and there is at least one case which decides that he cannot”.   Lord Justice Lloyd

The court held that the landlord’s decision not to terminate the tenancy was the best course of action available to him. As noted, although this is a decision in respect of commercial lease, the facts would indicate that it may indeed be applicable in respect of residential dwellings also.

Find out more about the Private Rented Sector

Housing Rights will be running the popular Housing Advice Training Programme in Belfast in May and Derry/Londonderry in June 2016. This 4 day course covers all aspects of housing advice including the private rented sector.

We also have a range of  Professional Resources relating to the private rented sector.

• Renting Privately in NI: The definitive guide. 
• Money Matters in the Private Rented Sector
• Tenancy Deposit Scheme