L&T - Lease Renewals

Question 1

What is Section 23?

Answer 1

States that to gain protection there must be a business tenancy with 6 basic elements:

1. It is a tenancy
2. Premises must be used for business
3. Must be occupation of at least part by the tenant
4. Occupancy of more than 6 months
5. Must not be exempted or excluded tenancy (e.g. tenancy at will)
6. Must be a competent landlord - freeholder or superior tenant with more than 14 months.

Question 2

What is Section 24?

Answer 2

The Act does not expire just because its passed the contract end date - only when one party serves notice

Question 3

What is Section 25?

Answer 3

Landlords notice (served 12-6 months before the date for the termination of the tenancy)

Question 4

What must the Section 25 notice have? (6)

Answer 4

1. A competent landlord
2. Relate to the whole property of the tenancy
3. State date of termination
4. Be in the prescribed form
5. Friendly - contain terms of new lease
6. Hostile - contain grounds for opposition

Question 5

What happens if you serve a s.25 or s.26 notice but pass the date with out agreeing a new lease?

Answer 5

The tenant loses their security of tenure

unless parties have agreed to extend or one has applied to court

Question 6

What is section 26?

Answer 6

A tenants notice to request a new tenancy. Must be in prescribed form and contain proposals for new lease.

Question 7

How long does a landlord have to respond to tenants s.26 notice?

Answer 7

2 months

Question 8

What is section 27?

Answer 8

Notice to be served by tenant if they want to leave within 3 months after expiry date

If the tenant has already vacated no notice needs to be served.

Question 9

What is section 30?

Answer 9

Landlord grounds for opposition of new lease.

a) Breach of repairing covenant
b) Persistent delay in paying rent
c) Other substantial breach
d) Landlord provides suitable alternative occupation
e) Uneconomic subdivision
f) Redevelopment
g) Owner Occupation

Question 10

Which s. 30 grounds get compensation? How much is the compensation?

Answer 10

e) Uneconomic Subdivision
f) Redevelopment
g) Owner Occupation

Less than 14 yrs = 1* RV, More than 14 yrs = 2* RV

Question 11

Which case law supports S.30 (f) grounds for compensation?

Answer 11

S Franses Ltd. v Cavendish Hotel (2017) - landlord must prove firm intent to carry out redevelopment works.

Question 12

Which case law supports S.30 (g) grounds for compensation?

Answer 12

Patel v Keles (2009) - landlord cannot oppose where it only intends to occupy for a short time, particuarly where there is evidence of intended sale or re-letting.

Question 13

What is section 37?

Answer 13

Details compensation due to tenant due to S.30 grounds e-g.

Tenants can also get compensation under Part 1 of LTA 1927.

Question 14

What is in Sections 32-35?

Answer 14

Outlines terms of a new lease.

Question 15

What sections outline the terms for a new lease, and what must be included?

Answer 15

Sections 32-35 - must be market rent, max. 15 yrs awarded by court, must ignore previous occupation, goodwill and any landlord improvements carried out by the tenant in past 21yrs.

Question 16

What case law gives 4 principles to consider whether new lease terms count as modernisation? What are the 4 terms?

Answer 16

O’May vs City of London Real Property co. (1982).

1. Estate Management Grounds
2. Change could be compensated by change in rent
3. Should not materially impact security of tenure
4. Must be reasonable

Question 17

What are the 4 assumptions for Market Rent?

Answer 17

1. Agreed between willing landlord and tenant
2. Unit ready for immediate occupation
3. Used for the purpose on the lease
4. Any effect of L+T (covenants) Act 1995 should be considered.

Question 18

What are 3 main disregards for Market Rent?

Answer 18

1. Ignore Goodwill provided by tenant
2. Ignore goodwill provided by premises
3. Ignore tenant improvement works given landlord consent

Question 19

What is Section 24A?

Answer 19

Sets our Interim rents - was changed in 2004”

Question 20

What are the rules around interim rents?

Answer 20

1. Either party may apply from date of s.25 or s.26 notice
2. Rent assumes annual tenancy and Market rent
3. Can be decided using PACT
4. Paid until new rent starts

Question 21

What is Section 40?

Answer 21

Request for information from either landlord or tenant. Can be served from 2yrs before expiry and be served multiple times.

Question 22

What is Section 38A?

Answer 22

Sets out procedure for Contracting out the Act.

Question 23

What are some reasons for Contracting out the Act?

Answer 23

1. Requirement of Headlease
2. Landlord wishes to redevelop
3. Landlord wishes to occupy
4. Rent may be lower
5. Landlord wants future flexibility

Question 24

What is the consequence of Contracting out?

Answer 24

The tenant has no statutory right to remain or seek compensation.

Question 25

How could a protected tenancy arise?

Answer 25

1. Tenancy not within the Act | 2. No new lease but tenant remains in occupation after expiry AND/OR continues to pay rent

Question 26

How could a protected tenancy be avoided?

Answer 26

Granting a tenancy at will

Question 27

What is the process for contracting out?

Answer 27

1. Landlord serves notice warning the lease wont be protected (Health Warning) 2. Tenant must make a declaration confirming they have received and accept terms 3. Must be completed before lease is signed

Question 28

What are two types of declaration under S.38A?

Answer 28

Simple - at least 14 days before lease starts, Statutory - less than 14 days. Is in front of an independent solicitor.

Question 29

What are some ways of terminating a lease?

Answer 29

1. Forfeiture 2. Surrender and negotiation 3. Merger 4. Disclaimer (due to insolvency) 5. Break Clauses 6. Lease expiry and serving of notices under LTA 1954.

Question 30

What are 2 ways of 3rd party determination?

Answer 30

County Court or PACT (Professional Arbitration on Court Terms)

Question 31

What is County Court 3rd part determination?

Answer 31

Part 36 offer - Similar to Calderbank. Encourages parties to settle. Open for 21 days or offering party can withdraw it.

Question 32

What is PACT?

Answer 32

Professional Arbitration on Court terms - it is an Alternative Dispute Resolution: In-court PACT is designed to be used for an unopposed new tenancy where one party has already made an application to court to fix the terms of the new tenancy Out-of-court PACT should be used when no court application has been made by either party and the parties agree to a postponement of such application pending an out of court PACT resolution

Question 33

What are the advantages of PACT? (5)

Answer 33

- Faster - No full court hearing - Greater flexibility and control - Less expensive - Decision by surveyor acting as arbitrator and not a judge.