Chapter 14: Security for Tenure for Commercial Tenants

Question 1

What statutory protection does the Landlord and Tenant Act 1954 (Part II) give to a commercial tenant?

Answer 1

Gives statutory protection to a commercial tenant at the contractual end of their lease by providing that the tenant does not have to vacate the property unless the landlord uses one of the statutory methods of terminating the lease.

Question 2

What does security of tenure apply to?

Answer 2

Applies to business tenancies, with a few important exclusions.

Question 3

What happens to a tenancy protected by the 1954 Act at the end of its contractual term?

Answer 3

It will automatically continue at the end of the contractual term unless it is brought to an end in one of the following ways:
i. forfeiture by the landlord,
ii. surrender,
iii. the landlord serves a valid ‘Section 25 notice’ on the tenant,
iv. the tenant serves a ‘Section 26 notice’

Question 4

When does the 1954 Act not apply?

Answer 4

Does not apply to certain tenancies, including:
i. fixed term tenancies not exceeding 6 months,
ii. service tenancies, and
iii. contracted out tenancies

Question 5

What is it called if a prospective landlord + tenant agree to exclude the security of tenure provisions from the tenancy?

Answer 5

The process is known as ‘contracting out’ of the 1954 Act.

Question 6

What is needed to contract out of the security of tenure provisions?

Answer 6

The landlord and tenant must satisfy 3 statutory requirements:
1. The landlord’s health warning,
2. The tenant’s declaration, and
3. A reference in the lease to the requirements.

A failure to comply will render the contracting out void, meaning that the tenancy will be protected by the security of tenure provisions.

Question 7

What is a ‘health warning’?

Answer 7

It is a clearly written statutory notice that explains:
i. what the security of tenure is,
ii. that the potential tenant will be giving up these rights under the lease,
iii. the consequences of not having these rights, and
iv. that they should seek professional advice

Question 8

When should the ‘health warning’ be served?

Answer 8

It should be served 14 days before the tenant completes the lease

Question 9

When can the landlord serve the health warning less than 14 days before commencement of the tenancy?

Answer 9

If the tenant signs a formal statutory declaration in front of an independent solicitor confirming waiver of the 14-day notice period

Question 10

What must the tenant do upon receipt of the ‘health warning’?

Answer 10

The tenant must sign a declaration confirming that they have received the health warning + further that they agree to contracting out of the Act and its consequences.

This declaration need not be signed in front of a solicitor

Question 11

What must the lease contain reference to if contracting out of the 1954 Act?

Answer 11

1. the health warning,
2. the tenant’s declaration (or statutory declaration), and
3. the agreement to contract out

Question 12

What is a Section 25 notice?

Answer 12

Given by a landlord who wants to end or enter into a new lease with a tenant protected by security of tenure.

Question 13

What is a Section 26 notice?

Answer 13

Given by a tenant protected by security of tenure who wants to enter into a new lease

Question 14

In relation to both Section 25 & 26 notices, what will be done if the landlord and tenant cannot agree whether the lease should end/the terms of a new tenancy?

Answer 14

A court application will settle the matter between the parties

Question 15

When must a Section 25 notice be served?

Answer 15

The landlord must serve the notice between 6 and 12 months before they wish the existing tenancy to end.

Question 16

What must a Section 25 notice specify?

Answer 16

It must specify one of the statutory grounds upon which possession is claimed.

Question 17

What are the statutory grounds that a landlord can repossess land under through a Section 25 notice?

Answer 17

a. the tenant’s failure to carry out repairing obligations,

b. the tenant’s persistent delay in paying rent,

c. the tenant’s substantial breaches of other obligations,

d. the availability of suitable alternative accommodation for the tenant,

e. (if part of the premises has been sublet by the tenant) - the landlord requires the whole property for subsequent letting

f. the landlord intends to demolish or reconstruct the premises + cannot do so with the tenant in occupation, or

g. the landlord intends to occupy the whole building

Question 18

What Section 25 statutory grounds are only discretionary?

Answer 18

a. the tenant’s failure to carry out repairing obligations,

b. the tenant’s persistent delay in paying rent,

c. the tenant’s substantial breaches of other obligations,

e. (If part of the premises has been sublet by the tenant) The landlord requires the whole property for subsequent letting.

Question 19

What grounds are mandatory under the Section25 notice?

Answer 19

d.the availability of suitable alternative accommodation for the tenant

f. the landlord intends to demolish or reconstruct the premises + cannot do so with the tenant in occupation

g. the landlord intends to occupy the whole building

Question 20

Who must a Section 26 notice be served on?

Answer 20

Must be served on the tenant’s ‘competent landlord’ or agent

Question 21

When must the tenant serve the Section 26 notice?

Answer 21

Between 6 and 12 months before they wish the new tenancy to start

Question 22

What happens upon the landlord’s receipt of a Section 26 notice?

Answer 22

The landlord has 2 months during which to inform the tenant whether they intend to oppose the request.

If the landlord is unwilling to agree to a new lease, they must specify one of the statutory grounds as under Section 25

Question 23

When is the tenant entitled to compensation from the landlord on quitting the premises?

Answer 23

If the landlord establishes on of the so-called ‘no-fault’ grounds (e, f or g)

Question 24

When will the tenant not be able to receive compensation?

Answer 24

If the landlord can provide a suitable accommodation (ground d) - no compensation because the tenant hasn’t suffered any loss.

Question 25

If the landlord terminates the lease on one of the non-fault grounds, what damages is the tenant entitled to?

Answer 25

If the tenant has occupied the premises for at least 14 years - twice the rateable value of the holding, or

If the tenant has occupied the premises for less than 14 year - the rateable value of the holding

Question 26

What is the ratable value of a property?

Answer 26

Set by the UK government Valuation Office Agency

Question 27

When might the court order a new lease?

Answer 27

1. The landlord has failed to establish an opposition ground, or
2. The landlord doesn’t oppose the tenant’s application

Question 28

What will normally be done if a new lease is ordered by the court?

Answer 28

The new lease will normally be negotiated between the landlord + tenants’ solicitors.

Once the new lease is agreed, the landlord + tenant should execute an original and counterpart in the usual way

Question 29

What will be the key provisions of the new lease?

Answer 29

Premises - generally the new lease will comprise the existing premises

Term of the lease - the parties can agree the new term, but if they cannot agree, the maximum fixed term that a court can order is 15 years,

Rent

Question 30

What can be disregarded when determining the new rent price in a new lease?

Answer 30

There are certain things which can be disregarded when determining the new rent, such as a non-required improvement by the tenant to the premises during their existing tenancy

Question 31

What may happen if the parties cannot agree the terms of the new lease?

Answer 31

The court can set the terms of the new lease, though this is rare.

In this event, the new lease will not commence until 3 months after the court proceedings have ended