10. Lease Termination and Security of Tenure under a Business Lease

Question 1

Four ways leases can be terminated at common law

Answer 1

1. Time is up
2. Notice to quit
3. surrender
4. Merger

Question 2

When will a fixed-term lease terminate according to the common law rules

Answer 2

When the contractual term ends (effluxion of time)

Question 3

When does a periodic tenancy end?

Answer 3

when appropriate period’s notice is given by the landlord to the tenant
- generally, one term (except yearly tenancy, which is 6 months) with notice expiring at the end of the period

Question 4

Requirements for surrender of a commercial lease to be legal?

Answer 4

To be legal, surrender must be by deed (LPA 1925, s 52)

Question 5

Methods of termination of a lease: Merger

Answer 5

• tenant acquires landlord’s estate in land (or third party acquires lease and reversion)
• lease automatically merged with reversion and is extinguished

Question 6

When will ‘merger’ not be effective / not merge the reversion with the lease and extinguish?

Answer 6

If the tenant/third party expressly preserves the lease in the documentation

Question 7

If a tenancy is ‘protected’ by the 1954 act, do the normal common law rules for termination still apply?

Answer 7

Not necessarily (but they can - tenant’s choice)

Question 8

What types of tenancies are COVERED by the 1954 act

Answer 8

Tenancies of properties occupied by tenant for business purposes

Question 9

To satisfy the definition of ‘business’ in the 1954 act: what must be evidenced?

Answer 9

That the purpose is a trade, profession or employment and in the case of a body of persons - any activity carried on by them (activity itself need not be commercial)

Question 10

Business Tenancies NOT protected by the 1954 act:

Answer 10

1. tenancies at will
2. fixed-term tenancies not exceeding 6 months (if tenant has not already been in occupation for more than 12 months)
3. agricultural holdings
4. farm business tenancies
5. mining leases
6. fixed-term tenancies ‘contracted out’ of the 1954 act

Question 11

Impact of a tenancy being ‘protected’ by the 1952 Act

Answer 11

The common law methods of termination may not apply - leaving only methods of termination outlines in the act

Question 12

Will a 6 month business tenancy with a provision allowing renewal / extension past this point be protected by the 1954 act?

Answer 12

Yes

Question 13

Procedure for ‘contracting out’ to be effective

Answer 13

1. Landlord must give tenant notice in prescribed form and tell them to obtain professional advice
2. tenant makes declaration they have received the notice (in the prescribed form) and agree
3. A reference to the service of the notice and tenant’s declaration must be contained / endorsed in the lease itself

Question 14

If a landlord gives the tenant less than 14 days before the grant of the lease that they wish for it to be contracted out - how does this alter the procedure for agreement?

Answer 14

If the tenant is given less than 14 days notice before grant of the lease, the tenant’s declaration can be made in the form of a statutory declaration before an independent solicitor

Question 15

Methods of termination provided for in the 1954 Act

Answer 15

1. by the service of a landlord’s notice under s 25
2. by the service of a tenant’s request for a new tenancy under s 26
3. forfeiture
4. surrender
5. in the case of a periodic tenancy, by the tenant giving the landlord a notice to quit
6. in the case of a fixed- term lease, by the tenant serving three months’ written notice on the landlord under s 27, so long as the notice does not expire before the contractual expiry date
7. in the case of a fixed- term lease, by the tenant ceasing to be in occupation for business purposes at the end of the lease under s 27(1A).

Question 16

If a tenant protected by the 1954 act wants to end their tenancy, what options do they have? Fixed v Periodic tenancy?

Answer 16

1. Serve s 27 Notice (fixed term lease)
2. Serve notice to quit (periodic tenancy)
3. Move out / cease to be in occupation for business purposes

Question 17

If a landlord wants to terminate a lease protected by the 1954 act, what options do they have

Answer 17

1. Forfeiture
2. Negotiate a surrender
3. Issue a s 25 notice (fixed or periodic tenancy)

Question 18

Outline of serving a s 25 notice (1954 act)

Answer 18

1. Landlord must serve a s 25 notice on the tenant (served whether landlord wants property back or whether it wants to grant a new lease)
2. Landlord must indicate its proposals as to terms of the new lease in s 25 notice (if applicable)
3. If landlord opposes renewing tenancy, must state the s 30 grounds in the s 25 notice
4. Notice must state date on which the landlord wants the tenancy to end (cannot be earlier than the date the tenant could have been terminated under the common law)

Question 19

If a landlord is serving a s25 notice to a protected tenant to terminate the lease - what restrictions are there for the timing of serving and the specified termination date?

Answer 19

1. Notice must be served no less than 6 months and no more than 12 months before the termination date specified in the notice
2. Termination date cannot be sooner than the lease could otherwise have ended under the common law - but it does not have to coincide with exact date a fixed term lease expires

Question 20

If a landlord serves a s 25 notice to terminate 5 months before a protected tenancy is set to end - will the tenant still have to vacate?

Answer 20

No, the tenancy would continue for the extra month as notice of 6 months is required

Question 21

If a landlord serves a s 25 notice for termination (saying it would oppose the grant of a new tenancy) and a tenant WANTS a new tenancy with this landlord - what options do they have

Answer 21

The tenant must apply to the court before the end of the expiry of the s 25 notice or risk losing its 1954 Act rights
- need to apply before the landlord applies for a court order to terminate the lease (because at that point, opposition will be determined in court)

Question 22

When can a landlord NOT make a s 25 notice application to terminate a tenancy.

Answer 22

If the tenant has ALREADY applied for a new tenancy

Question 23

If a landlord serves a tenant with a s 25 notice stating they will NOT oppose a new tenancy - and the tenant WANTS a new tenancy - what should they do?

Answer 23

1. If lease can be agreed by termination date of s 25 notice (or agreed extension) then no further action is required
2. if it looks like the lease will NOT be completed by the expiry of the s 25 notice, the tenant should apply to the court for a new lease by the relevant date

Question 24

Can the time limit for the expiry of a s 25 notice be amended by any parties? or the court?

Answer 24

Agreement between landlord and tenant is all that is needed to extend the s 25 time limit for negotiating the new tenancy

Question 25

If a tenant wishes to leave their protected tenancy ON the expiry date - what should they do

Answer 25

1. Either: serve s 27 notice giving landlord 3 months’ prior notice that they will leave
2. ceasing to occupy the flat

Question 26

If a protected tenant wants to terminate a lease AFTER the expiry date of the contract, what are their options?

Answer 26

1. Serving s 27 notice giving landlord 3 months of notice or
2. agreeing to voluntary surrender with the landlord

Question 27

If a tenant (in a protected tenancy) wants to remain in the property after the contractual expiry date - need they take any action or will the 1954 Act protect their tenancy?

Answer 27

1. The tenant IS protected until the landlord serves a s 25 notice SO
2. the tenant should pre-empt this by serving a s 26 notice to bring current tenancy to an end and request a new one

Question 28

Essential inclusions on a s26 notice

Answer 28

s 26 request must state date when tenant wants tenancy to begin and contain tenant’s proposals

Question 29

Time limits for giving a s 26 notice

Answer 29

Must give notice of 6-12 months from when they want the new tenancy to start
- new tenancy cannot start before the date the tenancy COULD have been terminated under common law

Question 30

If a tenant has served a s 26 notice to their landlord, requesting a new tenancy and the landlord does NOT want to grant it - what should they do

Answer 30

1. Serve a counter notice on the tenant within 2 months of service of the s 26 notice stating s 30 ground(s) of opposition
2. This forces the tenant to apply to the court for a new lease or lose their 1954 act rights

Question 31

If a tenant has served a s 26 notice on a landlord, who has served a counter-notice stating their s 30 grounds of opposition - when must the tenant apply to the court for their new lease?

Answer 31

Before the commencement date of the new tenancy the tenant outlined in their s 26 request (unless the landlord agrees to extend this)

Question 32

A tenant serves a s 26 notice to terminate the lease and receive a new tenancy. The landlord serves a counter notice stating their grounds of opposition. If the landlord is adamently against granting a new tenancy - what should they do

Answer 32

The landlord should apply to the court to terminate the lease on the grounds stated in the counter notice
- but they CANNOT do this if the tenant has already APPLIED to the court for their new lease

Question 33

A tenant serves a s 26 request on their landlord. the landlord does not respond by serving a counter-notice. Is the tenant safe in their new tenancy or should they take further action?

Answer 33

The tenant should protect their position by applying to the court BEFORE commencement date of their new tenancy specified in the s 26 request

Question 34

When are the s 30 specified grounds of the 1954 Act used

Answer 34

By landlords when opposing a new tenancy under their s 25 notice or counter-notice to a s 26 request
- these MUST be cited

Question 35

Main 7 s 30 grounds in the 1954 Act

Answer 35

1. Tenant’s failure to repair
2. Tenant’s persistent delay in paying rent
3. Tenant’s substantial breach of other obligations
4. Landlord has offered alternative accommodation (which must be suitable to the tenant’s needs and on reasonable terms)
5. Tenancy is an underletting of part (rarely used)
6. Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession
7. Landlord intends to occupy the holding for its own business or as a residence

Question 36

Which s 30 grounds are discretionary - and what does this mean?

Answer 36

1. The court will decide whether or not to allow a new lease
   GROUNDS
   a. tenant’s failure to repair
   b. tenant’s persistent delay in paying rent
   c. tenant’s substantial breach of other obligations
   e. tenancy is an underletting of part

Question 37

Which s 30 grounds in the 1954 Act are mandatory - what does this mean?

Answer 37

1. Landlord simply has to prove them for them to be successful

GROUNDS
d. Landlord has offered alternative accommodation (which must be suitable to the tenant’s needs and on reasonable terms)
f. Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession
g. Landlord intends to occupy the holding for its own business or as a residence

Question 38

If a landlord wants to rely on ground f in s 30 of the 1954 act to oppose a new tenancy - what must they show to be successful?

Ground f:
‘Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession’

Answer 38

• It has firm and settled intention to carry out work (ie. necessary planning permission obtained) and
• it intends to demolish or reconstruct the premises (or a substantial part) or to carry out substantial construction works on holding / part
• it cannot reasonably carry out work without obtaining possession

Question 39

If a landlord wants to rely on ground g in s 30 of the 1954 act to oppose a new tenancy - what must they show to be successful?

Ground g:
‘Landlord intends to occupy the holding for its own business or as a residence’

Answer 39

• landlords cannot rely on this unless they have owned their interest for at least 5 years before the ending of the current tenancy
• Is available if landlord buys property with vacant possession, lets it and seeks possession within 5 years of buying (firm intention requirement and must demonstrate it has considered and taken practical steps to occupy)

Question 40

If a tenant and landlord are in court, determining the new contents of a tenant’s lease - can the landlord request that the tenancy will become a tenancy of the whole property (rather than the part the tenant was previously in)

Answer 40

YES - including those parts underlet

Question 41

New lease terms for 1954 protected tenancies: Duration

Answer 41

Term of new lease has to be reasonable in the circumstances, cannot exceed 15 years

Question 42

New lease terms for 1954 protected tenancies: When will the lease ‘take effect’

Answer 42

Term will not commence until 3 months after proceedings are ‘finally disposed of’ (time limit for appeal has elapsed, 4 weeks after the order) - so 3 months and 4 weeks

Question 43

New lease terms for 1954 protected tenancies: what will the court impose as for rent

Answer 43

Market rent with key disregards:
- Fact that tenant and predecessors have been in occupation
- any goodwill attached to the holding
- any effect on rent of improvements voluntarily carried out by tenant
- in case of licensed premises: any addition in value during tenant’s license

Question 44

If a court is determining the new lease provisions for a tenant protected under the 1954 Act, can they insert a rent review clause if there was NOT one in a previous lease?

Answer 44

Yes

Question 45

If the tenant does not like the terms of the new lease decided by the court (s 1954 protected tenancy) what options do they have? For the landlord?

Answer 45

If the tenant does not like terms of the new lease, they can apply for the order to be revoked, but the landlord cannot (only remedy is to appeal)

Question 46

If a landlord successfully opposes a new tenancy relying on the ‘no fault grounds’ of s 30 1954 Act, - what is the outcome for the tenant

Answer 46

1. No tenancy for the tenant
2. But compensation entitlement for the tenant
   - Compensation = rateable value of the holding (or twice that, if tenant / predecessors in the same business have been in occupation for at least 14 years)

Question 47

Under what conditions will a provision restricting or excluding compensation under the 1954 Act for a protected lease be VOID

Answer 47

If tenant or their predecessors in the same business have been in occupation for 5 years or more
- so only enforceable when occupation is less than 5 years