2.8 Leases - Security of Tenure under Commercial Lease

Question 1

What is security of tenure?

Answer 1

Tenant can stay on premises even after lease term expires

Question 2

When may Landlord and Tenant Act 1954 Part II apply?

Answer 2

Leases

• In premises
• NOT excluded tenancies (tenancy at will/T no longer in occupation/fixed term less than 6 months and no renewal/employees lease/agricultural or mining lease

Occupation

• Q of fact
• Degree of physical control
• UNLESS sublease

Business purposes

• Charities
• Sports clubs
• At premises/elsewhere
• With controlling interest
• Group sharing

Question 3

What is the effect of Landlord and Tenant Act 1954 Part II?

Answer 3

Lease continues

• NOT expire
• Fixed term continues (NO periodic tenancy deemed)
• Termination only by Act
• Forfeiture/Surrender still possible

T’s right to new lease

• Court can order + fix new terms
• L can oppose only on statute

Compensation to T

• L opposes new lease > ‘Non-fault’ grounds
• Based on > Rateable value of property, length of T’s occupation

Question 4

How may Tenant contract out using security provisions?

Answer 4

LTA protects commercial Tenant

T’s signature

• If lease completed before 14 days’ notice => ‘Statutory declaration’
• If lease completed after 14 days’ notice => ‘Simple declaration’

Annexed to lease

Completed before T bound to enter lease

Question 5

What is required for Tenants to renew their leases?

Answer 5

Section 26 request
1) Existing fixed tenancy => New fixed tenancy
- NOT periodic tenancy
2) Form
- Starting date (after expiry) > Within 6-12 months after request
- Main terms
3) Either;
L opposes => Counter notice (within 2 months)
L NOT oppose => Negotiations (extend statutory deadline);
- New lease agreed
- T vacates
- T issues court proceedings
4) Termination of tenancy by statutory deadline (1 day before renewal date)
UNLESS T wants to remain after statutory deadline;
- Agree in writing w L
- Agree new lease in writing
- Issue court proceedings requesting new lease

Question 6

What is required for Landlord to renew the lease?

Answer 6

Section 25 notice

1) Specify statutory deadline (within 6-12 months)
2) Comply w other provisions
3) Negotiations > Parties agree + T vacates
4) Court proceedings issued
5) Prescribed form

L opposes renewal => Issues court proceedings (rare)

L NOT oppose renewal

• L sets out proposed terms
• Negotiations > Extend statutory deadline + New lease + T vacates

Question 7

How may Landlord oppose renewal based on LTA statutory grounds?

Answer 7

L’s notice
- NOT reckless/dishonest

Mandatory
- Court must refuse T’s renewal

Discretionary
- Court may grant T’s renewal

Ground A (disrepair)

• Discretionary
• Lease contains repair covenant
• Property in disrepair at hearing date
• Substantial + diminishes L’s reversion value

Ground B (rent arrears)

• Discretionary
• At least one rental payment delayed

Ground C (breach other covenants)
- Discretionary

Ground D (L offered suitable alternative accommodation)

• Mandatory
• Before L sought to rely on Ground D
• Allow T to move from unit to unit

Ground E (sublease)

• Discretionary
• Compensation > L
• Rent < Whole lease
• Stops L’s income reduced by T’s subleases

Ground F (redevelopment)

• Mandatory
• Most relied on ground
• L has firm settled intent > Demolish/Reconstruct

Ground G (L’s occupation)

• Mandatory
• L owns reversionary interest > 5 years
• L intends to occupy whole/part for business purpose

Question 8

How may statutory periods be extended?

Answer 8

1) L + T agree in writing
- NOT court

2) L + T apply to court by strict deadlines

Question 9

What new terms may be added to the new lease? Who decides?

Answer 9

New terms created by;

• Parties’ agreement
• Court (parties application)

Premises

• Same as sublease entitlements
• L can force T to take part of lease
• Ground F > T to occupy separable rent NOT required for works > L must show intent/reasonable prospect of achieving intent/genuine and unconditional intent to redevelop

Term

• Max. 15 years
• Based on previous term, hold over period, L + T’s interests

Rent

• Open market rent
• Valuation assumptions

Other terms

• Court’s discretion
• Change if reasonable

Question 10

What compensation must Landlord pay to Tenant if court refuses new lease?

Answer 10

Grounds A-D

• T occupied < 14 years => Zero
• T occupied > 14 years => None

Grounds E-G

• T occupied < 14 years => Rateable value
• T occupied > 14 years => Rateable value x2