Acquiring a Hotel

Two businessmen formed a company for the purpose of acquiring a hotel the south of England and eventually redeveloping it. The company took a long lease of the hotel from the owner and the two businessmen gave personal guarantees to cover the company’s rental liabilities under the lease.

Prior to redevelopment the company ran the hotel successfully. However, because of the structural defect a significant part of the hotel had to be closed down and shored up with steel supporting structures. The effect of this was to kill the hotel’s business. Before the hotel could be redeveloped the company went into administration and the proposed redevelopment did not take place.

The landlord demanded from the guarantors the unpaid rent that was allegedly due from the company a arrears having built up over a number of years. In correspondence on behalf of the Guarantors it was argued that the defects in the property were so fundamental that they fell outside the scope of the tenan’ts repairing covenant and were so severe that the company was entitled to claim an abatement of rent. Accordingly, there was no debt owed by the company to the landlord.
Notwithstanding these arguments having been clearly advanced in correspondence the landlord issued Statutory Demands against the Guarantors for the company’s alleged rental liability.

On hearing of the applications the Court was directed to this correspondence and the arguments were made again in witness statements. It was clear that such arguments were genuine and could only be resolved after expert structural evidence as to the nature of the defects in the property. The Statutory Demands were set aside and indemnity costs were awarded to the Guarantors.

The landlord’s claim for unpaid rent against the Guarantors then proceeded by way of a County Court claim. After exchange of expert structural evidence the matter settled.

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Patrick Selley. Keystone Law, 48 Chancery Lane, London, WC2A 1JF.

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