Landlord and tenant

Question 1

What are the principles of property law?

Answer 1

English law:
criminal law (crime and punishment)
civil law (disputes and compensation)

Civic law:
law of tort (liability for loss or harm) /
law of contract (enforcing agreements)
land law (real property rights)
L&T law comes under law of contract/land law

Sources:
statute
case law
(bylaws)

Courts:
County courts (civil cases)
Court of Appeal

Question 2

Which Landlord and Tenant Acts govern commercial property?

Answer 2

LTA54 business tenancies

LTA27 alterations, dilapidations
LTA88 LL consents
LTA95 AGAs

LPA25 estates/interests, breach, notices

Question 3

What does the Landlord and Tenant Act 1954 Part II relate to?

Answer 3

s23: defines a tenancy to which the Act applies
- Businesses: widely defined to inc a trade of profession, and “any activity carried on by a body of persons, whether corporate or unincorporated”
Business tenancy if fixed term is:
- More than 6 months or tenant has been in occupation for more than 12 months
- Exclusive occupation
- The exclusion of others
- For the purpose of a business

s24: security of tenure
s38: contracting out

s25: LL renewal or termination
s26: T renewal
s27: T termination
s28: by agreement
s29/s31-36: court granting of new tenancy

s30: grounds for regaining possession
s37: compensation on no-fault grounds

s40: duty to give information

Question 4

What are the main aspects of the Law of Property Act 1925?

Answer 4

freehold/leasehold

deed:
intended
validly executed (signed and witnessed)
delivered as deed (served/handed other party)

5 interests:
easement or right over land
rentcharge
charge by mortgage
other charge
rights of entry
(“third party rights”, binding on purchaser)

s146 breach other than non-payment of rent

s196 notices

Question 5

What does LT54 s23 relate to?

Answer 5

s23: defines a tenancy to which the Act applies
- Businesses: widely defined to inc a trade of profession, and “any activity carried on by a body of persons, whether corporate or unincorporated”
Business tenancy if fixed term is:
- More than 6 months or tenant has been in occupation for more than 12 months
- Exclusive occupation
- The exclusion of others
- For the purpose of a business

Question 6

What does LTA54 s24 relate to?

Answer 6

s24: Security of tenure:
- Ts have the right to remain in occ at end of contractual term of lease
- T have the right to apply to court for the grant of a new lease (usually lease renewals by agreement between L&T rather than court)
- Can be excluded by agreement (usually if LL intends to redevelop/v short term lease/underletting in larger bdg)
- If remain, trespassing, LL applies for court order

Question 7

What does LTA54 s25 relate to?

Answer 7

s25:
- “hostile” if not proposing to renew (must specify ground)
- No earlier than 12 months before contractual end
- End date 6 months from date of giving notice or end date of lease (no later than 12 months)
- Proposed terms for renewal (length of term and rent)
- Can’t be served after a T has served s26
- T to serve counter notice within 2 months
- Where T does not respond, tenancy will continue on proposed new terms or, if hostile, end on date specified

Can’t be withdrawn once served (unless change in LL)

Question 8

What does LTA54 s26 relate to?

Answer 8

s26:
- By T to request renewal
- No earlier than 12 months before contractual end
- End date 6 months from notice/end date of lease
- Can’t be served after a s25
- Proposed terms for renewal (length of term, rent)
- If LL wants to oppose must serve counter notice within 2 months giving grounds
- Either party can apply to court for new tenancy/interim rent before termination date set out in notice (can agree to extend)

A request for a new tenancy made under section 26 of the Landlord and Tenant Act 1954 (LTA 1954) cannot be withdrawn once served
Can’t serve S27 after.

Question 9

What does LTA54 s27 relate to?

Answer 9

s27:
- T giving notice
- At least 3 months before tenancy end date
- Or 3 months from notice if holding over
- No right to remain on expiry of notice

Can’t withdraw once served.
Can serve S27 after s25, earlier S27 date will count?

Question 10

What does LTA54 s28 relate to?

Answer 10

s28: renewal of tenancies by agreement (results in existing tenancy losing protection)

Question 11

What does LTA54 s29 relate to?

Answer 11

s29: timescales for application to court

Question 12

What does LTA54 s30 relate to?

Answer 12

s30 grounds for regaining possession:
LLs can only object to lease renewal/regain possession on certain grounds
a) breach of repairing covenant
b) persistent delay in paying rent
c) other substantial breach of lease
d) if LL provides suitable alt accom
e) uneconomic subdivision (if LL could get more rent from letting as whole)
f) demolition/reconstruction (must prove intention)
g) owner occupation (must have owned over 5 years and prove intention)
LL must pay T compensation for e-g:
1 x RV if occupied less than 14 years
2 x RV if occupied more than 14 years

Question 13

What does LTA54 s32 relate to?

Answer 13

s32: property to be comprised in the new tenancy

Question 14

What does LTA54 s33 relate to?

Answer 14

s33: court has power to grant new tenancy for a term not exceeding 15 years

Question 15

What does LTA54 s34 relate to?

Answer 15

s34: assumptions to be made and the matters to be disregarded in assessing the new rent under the new tenancy

market rent
disregarding goodwill, improvements within 21 years

Question 16

What does LTA54 s35 relate to?

Answer 16

s35: other terms of the new tenancy

Question 17

What does LTA54 s36 relate to?

Answer 17

s36: carrying out the order for the new tenancy

Question 18

What does LTA54 s37 relate to?

Answer 18

s37: compensation where new tenancy not granted on certain grounds

LL must pay T compensation for e-g:
1 x RV if occupied less than 14 years
2 x RV if occupied more than 14 years

Question 19

What does LTA54 s38 relate to?

Answer 19

s38: contracting out of sections 24 to 28

Question 20

What does LTA54 s40 relate to?

Answer 20

s40: duty to give information
- Sometimes prudent to serve at same time as e.g. s25
- Request info about occupation and sub-tenancies/superior LL

Question 21

What does LTA54 s43 relate to?

Answer 21

s43: defines a tenancy to which the Act does not apply

Question 22

What does LTA54 s44 relate to?

Answer 22

s44: competent landlord

The “competent landlord”, and therefore the party that is entitled to serve such notice on tenants, is the person with the legal estate. If you have completed a property purchase which has not yet been registered, you will not yet be the owner of the legal estate (only the beneficial estate).

freeholder or superior T with unexpired term of over 14 months (CHECK IF CORRECT

Question 23

What is “holding over”?

Answer 23

The LTA1954 Act gives commercial tenants the right to keep occupying a property on the same terms as expressed in the original lease if the statutory renewal process was not triggered by the lease’s expiry date. The lease will become a periodic tenancy and the tenants will need to give 3 months’ notice prior to vacating the premises.

If the landlord wishes to grant a new lease then a separate letter should be sent to the tenant indicating that the landlord is willing to delay possession proceedings for a short time whilst new lease terms are negotiated. It is best to specify a date.

Question 24

How can a lease be surrendered?

Answer 24

By agreement, if in both parties’ interests.
LL doesn’t have to act reasonably.

1. Express surrender in writing.
   If lease by deed (3 years or more must be), deed of surrender.
   Lease comes to an end on date of surrender deed. Can enter Agreement to Surrender to fix date in future.
   Set out conditions e.g. premium.
   May need to check mortgage (has to be cleared before surrender).
   Alternatives inc break, assignment/sub-letting.
2. Implied surrender by conduct.
   Surrender by operation of law.
   Both T hands back property (e.g. keys), LL accepts. (T can’t just send back keys).
   LL accepts by e.g. enter property and taking control (but securing/changing locks doesn’t count).
   Inferred by LL grants TaW to existing T.

Rights of undertenants with security under LTA54 survive, even if underlease was in breach, undertenant becomes T of LL and pays rent and performs covenants in underlease.

Outgoing T and guarantor remain liable for breaches up to date of surrender, inc dilaps.
Commonly, surrender deed inc premium in exchange for being released from liabilities.

If T sends back keys, LL should take legal advice quickly and make clear immediately lease not surrendered.

Question 25

If a landlord stops invoices, but continues to accept rent, could a contracted out tenant gain business tenancy rights?

Answer 25

In some cases, as long as the tenant is paying rent and has a good history with the landlord, courts may rule that the lease has become a periodic lease. This is particularly likely if there are ongoing negotiations with the landlord regarding a potential lease renewal. Tenants who are in rental negotiations should be cautious of signing written tenancy at will which would prevent them from being able to make a claim to periodic tenancy and protection from the Act while allowing the landlord to keep taking rent.

The landlord can also consider referring to s1 of the Landlord and Tenant Act 1730 (yes, really!) which entitles the landlord to claim twice the current rent from a tenant who remains in occupation after the lease has expired.

Question 26

How would you deal with a business tenant who didn’t vacate on notice expiry?

Answer 26

If hostile s25 notice served, apply to court. Make sure invoices stopped and rent not accepted.

Question 27

How would you deal with a contracted out tenant who didn’t vacate at the end of the lease despite being given notice?

Answer 27

If an unprotected tenant remains in occupation, then the landlord will have the right to take back possession, including re-entering peaceably by changing the locks.

If an unprotected tenant was asked to leave the premises by the landlord and refuses, the landlord should have put in place a rent stop. However, the landlord will be able to claim for what are known as “mesne” profits for the duration that the tenant remains in the property after the lease expires in circumstances that do not create a tenancy at will or periodic tenancy. Mesne profits would equate to the letting value of the premises, so could exceed what a tenant was paying in rent. Tenants can also be held liable for losses incurred by the landlord during their post-lease occupation as well as the cost of any damages to the property.

The landlord can also consider referring to s1 of the Landlord and Tenant Act 1730 (yes, really!) which entitles the landlord to claim twice the current rent from a tenant who remains in occupation after the lease has expired.

Question 28

Can you forfeit a lease which is “holding over”?

Answer 28

If within LTA54, continues on same terms. If forfeiture clause, yes.

If there is no forfeiture clause, then the landlord will have to rely on the Common Law right to forfeiture, which is only available for the non-payment of rent.

If contracted out, if new lease being negotiated, T “tenancy at will” - no right to forfeit but TaW can be terminated by either party at any time.

If parties cannot agree new lease terms, court has right to determine - there is a holding over until agreed/determined.

If contracted out and no negotiations, e.g. continue to pay rent, effectively a new lease and terms of old lease inc forfeiture clause will no longer apply. The Landlord may still forfeit the lease but only for non-payment of rent and on the basis of the common law right to forfeit.

Question 29

What is the structure of leases and other agreements e.g. licences?

Answer 29

Date, Landlord, Tenant, Property

Summary

Definitions

T obligations
LL obligations

Schedules

Plans

Question 30

How do you carry out a lease renewal?

Answer 30

Clarify instruction/strategy

Conflict of interest & AML checks on client and T
ToE

Read lease docs inc licence for alterations/SoC,
premises/fixtures
within LTA54?, diarise timescales
Check if in arrears, Companies House, Google

Research inc comps
Inspection, check for breaches, improvements (disregard within 21 years and goodwill s34)
discuss renewal with T
Valuation,

recommend lease terms and rent and alternatives
Client approval

Issue HoTs/serve s25 6-12 months
Contact T, refer to Code and pro advice
T to respond within 2 months
Negotiate, update client

If approaching expiry, advise client on risks
if contracted out, TaW and “mesne profits”
if protected, consider court interim rent

Agree terms
Client approval
Instruct sols
See to completion
Update records inc finance
Diarise next milestone

Question 31

How do you carry out a rent review?

Answer 31

Clarify instruction/strategy

Conflict of interest & AML checks on client and T
ToE

Read lease docs inc licence for alterations/SoC,
premises/fixtures
basis, assumptions, disregards, time of essence
diarise timescales
ADR if cannot agree
Check if in arrears, Companies House, Google

Research inc comps
Issue RR notice to inspect
Inspection, check for breaches, improvements
discuss review with T
Valuation, recommend rent and ADR
Client approval

Issue RR notice with proposed rent
Contact T, encourage pro advice
Negotiate, update client
Consider Calderbank/ADR

Agree terms
Client approval
Complete RR memo
inc in lease docs
Update records inc finance
Diarise next milestone

Question 32

How would you advise on a Calderbank letter?

Answer 32

Calderbank v Calderbank 1975
- A party to an arbitration may seek to protect himself against liability for costs by making an unconditional offer to settle on specified terms, and expressly reserving the right to refer the offer to the arbitrator after he has made his award except for costs
- For a Calderbank offer to be effective it must contain:
an unconditional written offer to settle the rent review;
a reasonable proposal regarding costs incurred up to the date of the offer (usual to propose that each party bears own costs plus 50% of arbitrator’s fees);
a statement that is made “without prejudice save as to costs”
- Either or both parties may make an offer
- The party making the offer or both parties should ask the arbitrator to make an award which will be final except for costs
- If the LL makes a Calderbank offer that the T does not accept and the arbitrator determines a rent equal to or higher than the LL’s offer then the arbitrator should award that the T pays LL’s costs and the arbitrator’s fees from the date the offer ought reasonably to have been excepted, and vice versa

Can use for independent expert

Question 33

Name some case law on lease/licence.

Answer 33

Street v Mountford, 1985 (the Test Case)
- Agreement conferred exclusive permission at a rent
“licence” to occupy furnished room

Cowell v Rosehill Racecourse Co 1937 (lease/licence)
“50,000 people who pay to see a football match do not acquire 50,000 interests in the football ground”

Clear Channel v MCC 2006 (lease/licence)
- 13 hoardings “grants to the Contractor permission to erect and maintain the Ad. Display at the Sites for the Term”
- Payment of “rent” and termination on 14 days’ notice
- Ruled constituted a licence

Question 34

Name some case law on tenancy at will.

Answer 34

Erimus Housing Limited v Barclays Wealth Trustees (Jersey) Ltd 2014
- The Landlord granted a 5-year Lease to the Tenant. Shortly after the expiry of the Lease the Tenant continued to remain in occupation of the premises and paid rent to the Landlord. Moreover, the Lease was contracted out of the Landlord and Tenant Act 1954.
- Negotiations were on-going between both parties, although no documents had been signed. However, the Tenant intended to leave the premises and notified the Landlord of his intentions. Nonetheless, the Landlord contended that the Tenant was remaining in the premises under a periodic tenancy and that this could not be terminated without providing at least six months’ notice to the Landlord.
- the Court of Appeal held that there was a tenancy at will. Furthermore, the fact that the negotiations were on-going indicated that the Tenant could leave the premises without providing any notice to the Landlord.

Question 35

Name some case law on lease renewal.

Answer 35

O’May & Others v City of London Real Property Co Ltd 1982
- Either party wishing to change the terms of the lease will have to satisfy the 4 tests:
1. has the party demanding the change shown good reason
2. will the party resisting the change be adequately compensated?
3. will the adjustments materially impair the conduct of T’s business?
4. is the variation fair and reasonable between the parties?

Single Horse Properties v Surrey CC 2002
- L served s25 correctly
- T served counter-notice and applied to court for new tenancy
- Prior to lease expiry, T vacated and returned keys
- Ruled T correct as ceased occupation before end of tenancy and s25 of no effect

Question 36

Name some case law on using ground F redevelopment.

Answer 36

Cunliffe v Goodman 1950
- A provisional desire is not enough. The landlord must have made a definite decision as well as having a reasonable prospect of being able to implement that decision without there being too many hurdles to overcome. ‘Intention’ will not be proved, if the person professing it has too many hurdles to overcome, or has little control of events.
- The court held that the project must have ‘moved out of the zone of contemplation - out of the sphere of the tentative, the provisional and exploratory - into the valley of decision’.

Betty’s Café Ltd v Phillips Furnishing Stores Ltd 1959
- T served s26 and requested new 14-year tenancy
- LL provided counter-notice refusing proposal
- LL’s claimed reason for refusal based on ground that repair works had to be completed on the premises at the end of the current tenancy therefore needed to possess the property
- Court held in favour of LL as LL intended to repair premises under s30 ground f of LTA54 and intention was present at time of hearing
- Motives irrelevant if can show have necessary intention but intention must be genuine and must exist at date of hearing (need not have existed when s25 notice given)

S Frances Ltd v Cavendish Hotel (London) Ltd 2018
- The Landlord demonstrated that if it needed to carry the works out to obtain vacant possession it would definitely do so: its intention was genuine, firm and settled in that regard.
- The Landlord’s sole purpose in carrying out the works was to get the Tenant out. This was not a case where the works themselves had any benefit. They were purely a mechanism to secure vacant possession.
- The Landlord’s intention was conditional upon the works being necessary to obtain vacant possession. If the Tenant vacated voluntarily the works would not be carried out.
- The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily

Question 37

Name some case law on rent review.

Answer 37

United Scientific Holdings v Burnley Borough Council 1977
Cheapside Land and Dev Co Ltd v Messels Services 1977
- For both appeals, judge found time not of the essence as timetable not “the essence of the contract”

Plinth Property v Mott Hay 1979
- Restrictive use reduced rent
- LL argued consent to change use would be given but this was rejected
- -32%

Starmark Enterprises v CPL Distribution 2001 (deeming provisions)
where the parties have agreed a timetable for the service of notice and counter notice, failure to serve the counter-notice in time means that the figure stated in the landlord’s initial notice will stand
- (LL could be deemed to accept T’s counter-proposal if lease states so)

Barclays Bank plc v Savile Estates Ltd 2002 (Barclays bank letter – tenant notice)
- This involved a rent review where a tenant served notice upon his landlord giving 28 days to implement a review, which had been due some years previously. The landlord ignored the tenant’s request and the Court of Appeal held that the landlord had lost his right to implement the review and that time can be made of the essence by reasonable notice.

Question 38

Name some case law on break clause.

Answer 38

M&S V BNP 2015 (overpaid rent)
- The tenant, Marks & Spencer, had to pay rent quarterly in advance and also insurance charge and a car parking licence in advance. They also had to pay monetary payments owed to the landlord as a condition precedent for exercising their break clause. There was also a premium payable in relation to exercise of the break. The break did not correspond with a quarter day. The tenant paid the rent and other monetary payments in advance and then claimed that it must be implied that they could recover back money relating to the period beyond the break date
- There is no scope for implication of such a term, especially as the parties had agreed in great detail the terms of the lease and not expressly included anything.
(Ellis v Rowbottom [1900] 2QB 740. Was correct in that the Apportionment Act 1870 applied to rent payments in arrears but not in advance)

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd 1997 (valid notice)
- Held that a reasonable recipient of the notice would not have been perplexed by the minor error (i.e. one day difference)
- Judge suggested “How’s Mary?” noticed valid

Osborne Assets Ltd v Britannia Life Ltd 1997 (decoration)
- Break ineffective
- Subject to compliance with covenants up to expiry date
- Covenanted to paint internally “with 3 coats of good quality paint” every 5 years
- Invoices showed only 2 coats of paint

Fitzroy House Epworth St Ltd v Financial Times 2005 (minor repairs)
- T could break as long as had materially complied with obligations under lease
- T undertook substantial renovation
- LL contended break ineffective as still a breach of repairing covenant
- T won as breaches minor/trivial and overall damage to reversion negligible/nil

Question 39

Name some case law on vacant possession.

Answer 39

Capital Park Leeds plc v Global Radio Services 2020 (vacant possession)
- A tenant who handed back an empty shell of a building had complied with a condition of its break option to give vacant possession of the property.
- not concerned with the physical state of the unit but with whether the landlord was recovering it free of the conventional trilogy of “people, chattels and interests”.
- The fact that the break clause made no mention of repair or condition, when the yield up covenant did, added support to the tenant’s case that the break clause was not concerned with such matters.
- Whilst the building had been left in a dire state, that did not preclude valid exercise of the break clause and the landlord’s remedy was to seek compensation for whatever loss it may have suffered.

Question 40

What are the advantages of including a clause for arbitration or independent expert on leases?

Answer 40

Tendency for modern lease to provide for an Independent Expert to determine the rent rather than an Arbitrator.

An Expert is charged with deciding the rent based upon their own professional experience.
Arbitrator can only reach a decision based upon the evidence put before them.

Expert pro:
- not constrained simply to deciding the case on the basis of the information provided by the parties, but can call the market where it is either rising or falling and the evidence is yet to catch up
- quick and cheap
- very useful in determining disputes where there is a single issue which a particular professional is well qualified to determine
- can be less adversarial

Expert con:
- lease may provide for parties to bear half costs / even where lease grants expert discretion to award costs, usually expert’s cost, parties still bear other pro fees - may be better to settle
- may be wrong

Arbitrator pro:
- backed by the Arbitration Act 1996.
- empowered to decide all matters under dispute, unless the parties agree to the contrary, including the costs of the arbitration (both arbitration and pro costs) - worthwhile to objecting to spurious case
- power of disclosure, can order opposing party to disclose docs helpful to own case which would otherwise be concealed e.g. where T thinks LL has agreed concessions with other occupiers of office bdg/ind est
- suitable for disputes where the evidence is less straight forward or legal issues are more complex

Arbitrator con:
- can be expensive, longer process

Question 41

What is your understanding of the contractual relationship between a landlord and tenant?

Answer 41

contract law (terms of lease)
land law (leasehold interest, exclusive possession)

Question 42

How can a landlord and tenant relationship break down? How do you manage this?

Answer 42

breaches, perceived breaches
unable to reach agreement
personalities

understand both parties’ perspectives
communication, negotiation
internal escalation
advise on options if can’t agree e.g. ADR, litigation with legal advice

Question 43

How do you deal with a tenant breach other than rent?

Answer 43

Law of Property Act 1925
- If a breach of a covenant in the lease other than the payment of rent, LL must first serve a s146
- Notifies a T in breach of covenant that the LL intends to forfeit the lease
- Must clearly specify what the breach is and allow the T to remedy it together with appropriate financial compensation
- Some LLs may simply change locks without a court order, risky
- May result in T making application to court for relief from forfeiture by T plus poss damaged claim for loss of business or damage to business

Question 44

How do you deal with a tenant breach of repair? During/at the end of a lease?

Answer 44

check lease/SoC, inspect property
reasonableness depends on lease term, location, nature, use, and wording in clause
(put / keep in good condition / in repair / in good repair and condition)

communication/negotiation

advise client on options:
- ADR
- if lease contains Jervis v Harris clause LL to enter and repair and reclaim costs as debt, usually requires LL to serve notice first, if T fails to remedy within time period
- Law of Property Act 1925 s146 notice forfeiture, clearly specify breach and remedy with appropriate financial compensation,
forfeiture peaceable re-entry or Court order
(LL right to forfeit waived if LL aware of breach and continues to treat lease as ongoing i.e. by accepting rent)
- Leasehold Property Repairs Act 1938 s1 forfeiture or damages,
lease terms of 7 years or more with 3 to run
must serve s1 or s146 notice 1 month prior,
notices must inc T’s right to counter-notice within 28 days,
if T serves counter-notice must secure Court leave to forfeit or bring claim for damages
Court award on grounds inc:
the immediate remedying of the breach is necessary to prevent substantial diminution in the value of the landlord’s reversion or its value has already been substantially diminished;
the tenant is not occupying the whole of the premises affected and the immediate remedying of the breach is necessary in the interests of the other occupier(s);
the cost of immediately remedying the breach is small relative to the likely cost occasioned by postponement
(Court may impose conditions on LL/R
LL application can be registered under Land Charges Act 1972 as a pending land action)
- Landlord and Tenant Act 1927 s18 dilaps
damages available to the landlord for the tenant’s breach of repair covenants are limited to the diminution in the value of reversion caused by the tenant’s breach, whether that claim is brought during the lease or upon its expiry
as a result, interim damages claims may not be as effective as other interim remedies
- Court:
specific performance works (useful if urgent and LL cannot or has no right under lease to enter),
injunction (if damages not adequate remedy)

Question 45

How do you deal with a landlord breach of repair?

Answer 45

communication/negotiation

• self-help
  do the work and deduct the cost from money due to the landlord, not always possible because a commercial lease will often restrict the tenant’s right to withhold money in this way, also runs risk of the landlord challenging the standard of work or the amount withheld
• ADR
  parties who refuse, judge less willing
• Court
  declaration if dispute over whether LL in breach and what action is required, or what the tenant can do by way of self-help,
  can be combined with a court application for a damages claim to compensate the tenant for the LL’s failure or a specific performance to make the LL comply with its covenants (if damages not adequate remedy)

The Pre-Action Protocol for Claims to Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy (known as the ‘Dilapidations Protocol‘) should be followed before a legal claim is made. Section 8 of the Dilapidations Protocol encourages the use of Alternative Dispute Resolution

Question 46

How would you advise a tenant where the landlord is claiming breach of repair? During/at end of lease?

Answer 46

Repair the property

Legal arguments:
- Betterment
often not possible to repair without some level of improvement to the premises so frame argument carefully
- Section 18, LTA 1927
diminution in value
- Relief from forfeiture
may apply for relief as soon as LL served s146 and at any time while the landlord ‘is proceeding’ to enforce the right of re-entry,
apply promptly and ordinarily no later than 6 months after forfeiture effected

Question 47

Name case law on landlord entering to repair and recharging?

Answer 47

Jervis v Harris 1996
Where a landlord is entitled to serve a schedule of wants of repair on the tenant and enter the property and carry out the works in default of the tenant doing so, the debt that is then claimed in respect of the cost of the works undertaken by the landlord does not have to be pursued in a manner that complies with the Leasehold Property (Repairs) Act 1938.

Question 48

What are different was tenants can go “bust”? How do you manage this?

Answer 48

Administration:
- LL must apply to court to forfeit (best to agree a surrender)
- due to be paid rent while business still using premises, but may be approached and asked to reduce or forgo rent to ensure business can continue trading/to assist sale
- if company in debt and can’t pay money it owes, can put into admin
- protected from legal action from creditors
- noone can apply to wind up company during admin
- but company can still be wound up
- administrator writes to creditors, Companies House, The Gazette
- can negotiate a CVA, sell business as going concern, sell assets and close company, close company if nothing to sell (has 8 weeks to create plan)
- legally obliged to act in best interests of creditors

Compulsory liquidation:
- can forfeit by peaceable re-entry?
- “winding up”
- company stops doing business and employing people, no longer exists when “struck off” Companies House
- when your company cannot pay its debts and you apply to the courts to liquidate it

Voluntary liquidation:
- no bar on forfeiture by peaceable re-entry
- where company cannot pay debts and you involve creditors = “creditors’ voluntary liquidation”
- where your company can pay its debts but you want to close it = “members’ voluntary liquidation”

Receivership:
- no bar on forfeiture
- banks and secured creditors take priority and will be paid first
- LLs unsecured creditors and paid from remaining assets
- where a creditor, in response to the non-payment of a secured loan, appoints a receiver to 1 or more of company’s assets to give best chance of recovering amounts owed (if stipulated in the secured loan agreement)
- a “receiver” or trustee can step in to manage the entire company; the director’s directors remain in place but authority limited (in the case of a restructure or company in financial distress)

CVA:
- creditors’ voluntary arrangement?
- can come to a deal where you receive a proportion of the rent owed to you
- Company can enter when insolvent but believe business has future and can continue trading
- Company can agree a deal with creditors to pay back a % of the debt as long as 75% of the creditors agree

Question 49

How do you establish whether fixtures and fittings belong to a tenant or a landlord?

Answer 49

Fixtures = attached to property
Fittings = chattels, not attached

LL fixtures = fixtures which are not T’s
because in situ on grant of lease /
installed or paid for by LL /
unreasonably to allow T to remove

T fixture must have been attached to premises by T e.g. trade fixtures with intention of removing it
T generally has right to remove during lease term
(must make good)
however if leaves behind become part of premises

Sometimes express provision in lease obliging T to remove fixtures and fittings at end of term,
if lease renewal obligation needs to be expressly carried forward otherwise fixtures become part of premises
(LL cannot force T to remove, T no right to remove)

Once lease ended, T loses right to remove fixtures
LL must give T reasonable time to remove fittings (CHECK APPLIES TO S25?)
If forfeiting, becomes involuntary bailee of goods (CHECK JUST FOR FORFEITURE?)

Question 50

How would you deal with a request to sub-let?

Answer 50

T details: whole or part?, T application form
business details, change of use/alterations?
Is assignment better than sub-lease?
Opportunity to re-negotiate terms e.g. lease renewal?

check lease alienation clause - prohibits, with consent, not to be unreasonably withheld, silent
can only object on basis of non-payment of rent or serious breach?
check lease term - if holding over, 6 months max
sub-leases should be contracted out?
Guarantors - If the lease has been properly drawn, the guarantor is on the hook for every liability of the tenant to the head lessor. So, if a sublease is created, the obligations of the original tenant remain unchanged. So the guarantor stays on the hook.

However, it may be part of the deal in the round that the new subtenant finds a new guarantor, and the old guarantor is released. For a subletting of all of the property, the release could be complete. If only part of the property is sublet, then the new guarantor would guarantee only the sub tenant’s obligations for that part.

conflict of interest and AML checks on sub-T
research: T arrears

Inspection, site meeting, T breaches?, operation
Review sub-lease terms
If part, need terms around shared areas etc.
If head-lease, in line with head-lease terms? (usual to agree rent no less than T proportion)

Agree terms Licence to Sub-let, any conditions e.g. arrears payment
(subject to head LL consent if applicable)
T to bear LL pro costs
Client approval
Instruct sols

See to completion
Update records inc business rates
Diarise next milestone

Question 51

How would you deal with a request to assign?

Answer 51

T details: whole or part?, T application form
assignee business details, references, consider AGA?
change of use/alterations?

check lease alienation clause - prohibits, with consent, not to be unreasonably withheld, silent

conflict of interest and AML checks on assignee
research: T arrears

Inspection, site meeting, T breaches?, operation

Agree terms Licence to Assign, any conditions e.g. arrears payment, AGA
(subject to head LL consent if applicable)
T to bear LL pro costs
Client approval
Instruct sols

See to completion
Update records inc finance, business rates
Diarise next milestone

Question 52

Can you serve a s25 to renew a lease for a smaller demise?

Answer 52

yes, if follows O’May principles:
O’May & Others v City of London Real Property Co Ltd 1982
- Either party wishing to change the terms of the lease will have to satisfy the 4 tests:
1. has the party demanding the change shown good reason
2. will the party resisting the change be adequately compensated?
3. will the adjustments materially impair the conduct of T’s business?
4. is the variation fair and reasonable between the parties?

T may dispute

Question 53

What does vacant possession mean?

Answer 53

the property must be “free of people, chattels and interests”

Question 54

What if a tenant doesn’t deliver VP?

Answer 54

if T termination/break notice served, arguably invalid and lease continues, need to serve new notice

if LL termination, if contracted out can re-enter and change locks, if within LTA54 apply to court (make sure rent stopped/not accepted)

Question 55

How would you deal with ending a contracted out lease where the tenant doesn’t return the keys?

Answer 55

If an unprotected tenant remains in occupation, then the landlord will have the right to take back possession, including re-entering peaceably by changing the locks.

Question 56

How would your advice have changed if the telecoms lease had been a Code agreement?

Answer 56

The Electronic Communications Code, part of the Digital Economy Act 2017
Typically, the Code supports services such as television and radio (both analogue and digital), fixed broadband connections to premises, mobile broadband, voice and text services, cable television and landlines. It provides the legal framework for the roll-out, operation, maintenance and removal of physical electronic communications apparatus and infrastructure to support the provision of these, and any other electronic communications services, across the UK.

Competent to accept instruction?
Rules of Conduct
Conflicts of interest

Ofcom code of practice, importance of positive and productive engagement between all parties.

Termination:
- on expiry of Code agreement, continues until determined in acc with Code
- termination by landowner:
not less than 18 months’ notice
specifying
substantial breach
persistent delay in payment
landowner proposes to develop
operator does not meet para 21 test
(prejudice caused can be adequately compensated in money and public benefit outweighs prejudice caused)
- will end on expiry of landowner’s notice unless
within 3 months operator serves counter-notice
and within 3 months applies court order para 34
- if court decides landowner made one of grounds and Code agreement must end, if operator does not remove apparatus, must apply to court to enforce removal
- if landowner unsuccessful, Court to order that
existing agreement continues/
agreement continues with modifications/
parties enter new agreement

Question 57

How would you apply RICS guidance on Code agreements?

Answer 57

“Surveyors advising in respect of the Electronic Communications Code”, 2019
GN, 1st ed

Competent to accept instruction?
Rules of Conduct
Conflicts of interest

Ofcom code of practice, importance of positive and productive engagement between all parties.

Agreement:
Term (consider future development)
Break options (consider investment in site and potential redevelopment / lift and shift)
Payment (should be all-inclusive; consideration, value of right to use land, and compensation, recompense for loss or damage)
Consideration (landowners should be paid appropriately, but “no scheme” likely nominal; starting point is Red Book, see statutory requirements PS1 s4; market rent defined in Code; not an assessment under a compulsory purchase regime; can be recurring payment or capital sum)

Valuation approach: “no scheme2, willing seller, may have regard to alternative uses

Question 58

What are the Jackson Reforms?

Answer 58

As from 1 April 2013, the Jackson reforms created a new funding regime for court proceedings and made several other changes to litigation procedure.
In order to promote access to justice at proportionate cost.

Proportionality. From 1 April 2013, parties are no longer able to recover costs simply because they are reasonably and necessarily incurred. Costs incurred on or after 1 April 2013 must be “proportionate” to the matters in issue in the claim (except for cases commenced before 1 April 2013 when the proportionality test does not apply). This means that courts are required to deal with cases justly, at proportionate cost i.e. in ways that are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each party

Question 59

What is the presumption of reality?

Answer 59

The “presumption of reality” is a cornerstone of the open market rent review. Unless the specific assumptions and disregards in the lease require otherwise, the rent review valuation should be grounded in reality.

Question 60

What is a turnover rent?
What is a geared rent?
Why are turnover rents becoming increasingly popular? How might this affect future rent reviews and lease renewals?
What was the outcome of the W (No. 3) GP (Nominee A) Ltd & W (No. 3) GP (Nominee B) Ltd v JD Sports Fashion Plc case in relation to turnover rents at a contracted in lease renewal?

Answer 60

Turnover rent is based on a percentage of the tenant’s gross turnover at the rental property. Traditionally, the tenant pays a base rent which represents a discounted market rent (say 75-85%), plus a turnover top up based on a fixed percentage of gross turnover for the year.

As a result, turnover rents are particularly attractive to tenants in difficult trading circumstances, such as those currently facing many high street retailers.

Many in the industry are forecasting that turnover rents will become more common as tenants try to find ways of reducing overheads and surviving the economic impacts of the pandemic.

W (No. 3) GP (Nominee A) Ltd & W (No. 3) GP (Nominee B) Ltd v JD Sports Fashion Plc
a turnover rent in the renewal Lease (54 Act) was not appropriate given it would far exceed the rental value of the Premises
Given the rise in online shopping, the effects of the pandemic, and the size and configuration of the Premises, the Judge decided that there would be limited interest in the Premises and any hypothetical tenant would have an extremely strong negotiating position.

Geared rent
Under the terms of a geared rent review, the Tenant will pay a basic ground rent to the Superior Landlord as well as a share of the income received from the underleases.
This type of rent review is becoming increasingly unattractive due to potential Stamp Duty Land Tax (SDLT) consequences once the “share of income” part of the rent is calculated. On the grant of the lease, the SDLT liability will be based on the estimated rent payable for each of the first five years of the lease term. Once the actual rent is known, further SDLT Returns may need to be submitted to HMRC by the Tenant and, indeed, more SDLT may be payable by the Tenant if the actual rent significantly differs from the estimated rent.
Sometimes a valuation of market rent is required. For example, there may be a provision that if any lettable part of the property is unlet, that part of the property shall be deemed to be let at its market rent.
The review clause should make it clear whether the rental income to which the gearing formula applies includes sums paid by subtenants for insurance, service charges, VAT, etc. In cases where the tenant may sublet parts on inclusive rents, it should make it clear whether the rental income is to be assessed after deducting an amount for those items.
The lease should specify the dates on which the geared rent is to be calculated and there should be provisions for the tenant to furnish the landlord with full details of the information needed to carry out the necessary calculations.
Geared rents are common in long leases. These are usually ground leases, in which the landowner supplies the land and the developer supplies the capital and expertise to erect a new building. A long lease is granted to allow the developer an adequate return on their outlay, often for 125 or 150 years.
The rent received from the occupier is then shared between the landlord and developer in a pre-agreed proportion that reflects the value of their respective inputs. The basis of valuation is usually to the open-market rental value.

Question 61

How do you treat tenant’s improvements at rent review?
How would this differ at lease renewal?

Question 62

What timings apply to a dilapidations claim?
What is quantified demand?
What is a Scott Schedule?
What is a diminution valuation?
What legislation relates to diminution valuations?
What would you find in a schedule of dilapidations?

Question 63

Explain the precedent set in WH Smith Retail Holdings v Commerz RI mbH (2021) relating to pandemic rent suspension clauses.

Answer 63

The trigger should be the forced closure of non-essential retailers. Otherwise, the rent suspension clause would be very unlikely to have any effect. As it contained a post office, WHS’s store had not been forced to close in the lockdowns to date and there was no reason to suppose that would change if there were to be further lockdowns. Matters might be different on the high street, but the reality in this shopping centre was that if non-essential retailers surrounding WHS were closed, there was no advantage to WHS in remaining open.

There should be no uplift because of the rent suspension clause. It was not the case (as L had argued) that WHS was, in effect, benefiting twice over from the pandemic. Any discount in rent as a result of the pandemic reflects a consensus about the general fall in the rental market. It is not providing the same thing as a pandemic rent suspension clause, which is an attempt to share the burden of the loss caused by the impact of compulsory closure of non-essential retailers. Pandemic rent suspension clauses have become something that all tenants want and the market has now priced them in.

Question 64

How would you advise on the SDLT liability between a surrender and regrant and a reversionary lease?

Answer 64

there are alternatives to a surrender & regrant, including:
- Waiting until lease expiry to modify the lease terms (lease renewal)
- Agreeing a reversionary lease, i.e., a lease with a future commencement date, which is agreed now – so it could, for example, commence in 5 years’ time upon expiry of the current lease with a day 1 rent review. These have been the preferred option in recent years
- Varying the lease mid-term by way of a deed of variation (lease re-gear or lease re-engineering)

SDLT replaced stamp duty in 2003, which meant that a historic barrier to utilising surrender & regrants was removed.

Where the existing lease is subject to SDLT, if the lease is surrendered then overlap relief applies upon grant of a new lease (of substantially the same premises). This does not apply if the existing lease was not subject to SDLT.
Overlap relief applies because the two lease terms overlap so SDLT would otherwise be double counted (and overpaid).

SDLT for non-residential (i.e., commercial) leasehold properties is based on the sum of the:
Lease premium
Net present value (NPV) (of the total rent over the lease term)

NPV is banded for SDLT purposes:
NPV of £0 - £150,000 0%
£150,001 - £5,000,000 1%
Over £5,000,000 2%

If the existing lease was subject to stamp duty, rather than SDLT, however, the liability would be much higher and a surrender & regrant may not be the right strategy to pursue.
Furthermore, the SDLT calculation is not revisited for a surrender & regrant if a rent review is undertaken during the new lease term, e.g., at year 5 in the above 10 year lease example.
By comparison, the SDLT calculation for a reversionary lease is revisited when any day 1 rent review is agreed, which can further increase the liability and creates uncertainty over the total SDLT payment.

What are the benefits of a surrender & renewal?
Apart from the reduced SDLT liability due to overlap relief, a surrender & regrant may be preferable as it creates a simple lease structure and clear documentation. A reversionary lease, on the other hand, creates an additional document which needs to be referred to during the term of the existing and new leases.

Question 65

What is the ‘Chartbrook’ principle on index linked rent reviews?
Following the Chartbrook case, what was the outcome of the Monsolar IQ Ltd v Woden Park Ltd case?

Answer 65

The Court of Appeal has dismissed an appeal against a High Court decision which went against the unambiguous literal meaning of the clause: MonSolar IQ Ltd v Woden Park Ltd [2021]

This is an application of what the court referred to as the Chartbrook principle, by which clear mistakes in the drafting of a document can be corrected as a matter of construction (as exemplified by Chartbrook Ltd v Persimmon Homes Ltd [2009]). For this principle to apply, the court said, it must be clear both that the drafting contains a mistake and how it should be corrected. If either of these requirements is not satisfied, the contract can only be corrected by a claim for rectification, which was not pleaded in this case.
Where the language of a clause is clear and unambiguous it is likely to take something fairly dramatic to persuade the court that its proper interpretation is something different

leading Supreme Court authority on contractual interpretation, Wood v Capita Insurance Services Limited [2017]:
interpretation is a unitary exercise, in which the court must strike a balance between considering the language used (textualism) and its commercial implications (contextualism) – and that it does not matter which tool is deployed first, so long as the court balances the indications given by each.

Question 66

What does S19 1a of the LTA95 say?

Answer 66

The Landlord and Tenant (Covenants) Act (LTCA 1995) inserted into s19 of the LTA 1927 a new subsection 19(1A) which provides that, in new tenancies, the parties can set out in the lease, or by other documentation, the circumstances in which consent to an assignment can be withheld and/or conditions subject to which consent may be given.

Therefore, your first step is to consider the lease and associated documentation to see whether there is any such provision. If there is such a provision in place at the time the request for consent is made, the landlord will not be held to be unreasonable in either refusing consent if the relevant circumstances exist or imposing any of the listed conditions (that is, entering into an Authorised Guarantee Agreement (“AGA”)) as are set out in the agreement entered into under s19(1A) LTA 1927.

CHECK CORRECT

Question 67

What to do if a T serves a s26 and LL objects?

Answer 67

LL to serve counter-notice within 2 months setting out grounds of objection under s30.

Question 68

What is the procedure for going to court once a s25 / s26 notice has been served?

Answer 68

You can apply to court once the Section 25 notice has been served. The application to the court must be made by the date specified as the termination date in the Section 25 notice.

s26:
You can only apply to court after the landlord has served a counter notice or the deadline for doing so has expired. The application to the court must be made by the day before the commencement date specified in the Section 26 request.

The parties can extend the time limit to apply to the court by agreement in writing provided that this is done before the deadline expires. The extension must be to a specified date.

The court will make an order to end the existing tenancy and either:
Determine that the landlord has succeeded on its grounds of opposition, if any, or
Direct the terms of the new tenancy.

Proceedings are issued by lodging papers at court with a fee.

Settlement should be considered at all stages to avoid the costs of litigation and the risk of an adverse costs order e.g. Part 36.

Either party can apply for determination of the interim rent payable during the
statutory continuation of the tenancy until the new lease is completed.

Once proceedings have been issued, the
claimant can delay serving them on the defendant for up to four months. However, the tenant can compel the landlord to serve the proceedings.
The defendant then has 14 days to file an
acknowledgement of service setting out proposals for the new lease.

The court will occasionally take steps to set a timetable for the management of the case. This will usually include directions for exchanging a travelling draft lease, preparing a schedule of terms in dispute, exchange of experts’ reports and
an eventual trial.

It is usual to build into the directions a right for the parties to agree an
adjournment in the litigation where no steps are required to be taken, so time can be taken to negotiate the terms. Where negotiation is unproductive the parties may consider formal mediation or appointing a professional arbitrator.

The new lease will usually commence on the date the landlord or tenant sets out in the Section 25 notice or Section 26 notice. Where there is an application to the court, the date will usually be three to four months after the court decides on the application.

Question 69

What is a part 36 offer?

Answer 69

Civil Procedure Rules Part 36 offer (renewal dispute)

court proceedings may be started by either landlord (usually where it has reasons to accelerate the process) or the tenant (who will wish to avoid losing its security by missing the deadline). In practice, the issue of proceedings is a purely protective measure and terms are agreed between the parties without much further involvement of the court.
Unlike most other forms of litigation (where the claimant is usually the aggrieved party) the claimant in unopposed lease renewal proceedings will be whichever party is the first to make the application to court.

Parties to a court claim may make offers to settle which attract “without prejudice” privilege and therefore will not be seen by the judge deciding the case. It is possible to make an offer which is made without prejudice save as to costs (referred to as a “Calderbank” offer) which means that it is privileged and cannot be referred to, until the substantive decision has been made and the court is deciding the question of costs. Such offers are frequently made by both sides in an unopposed lease renewal

Part 36: Whoever makes the offer, if it is accepted within 21 days (or such longer period as stipulated in the offer) the defendant must pay the claimant’s costs down to the date when the offer is accepted;
however, if a defendant’s offer is not accepted and the defendant goes to trial and “beats” the offer, the defendant will be entitled to his costs of the proceedings from the end of the 21-day period;
Conversely, if the claimant “beats” an offer the defendant has made, the defendant will have to pay all of the claimant’s costs inc those costs from the expiry of the 21-day period on the indemnity basis and penal interests on those costs (at rate of 10%).
Part 36 therefore skewed in favour of claimants; rationale that had to come to court and should be compensated if put to needless expense.
Commonly held that Part 36 offers in lease renewals not appropriate since claim is a negotiation of terms of a new agreement where parties usually pay own costs and never usually a clear “winner”.
(In contrast, Calderbank offers can be made on terms that each party pays its own costs).

Question 70

What are the advantages and disadvantages of a Calderbank offer?

Answer 70

Advantages and Disadvantages of Calderbank Letters

Advantages

In certain types of property disputes (such as rent review arbitrations) Calderbank letters are the only form of offer with potential cost consequences available.
In certain other types of property disputes, Calderbank letters are more advantageous for a particular party.
Can be used if:
a defendant intends to make an offer to pay a sum of money but is not certain it will be able to pay the amount offered within 14 days of the claimant’s acceptance or wishes to pay in instalments (in contrast to the usual situation with Part 36 offers which is that payment of the whole sum is to be made within 14 days of acceptance of the offer); and/or
the offeror wishes to settle on the basis of a cost consequence other than that automatically provided for with a Part 36 offer, i.e. settlement on the basis of each party bearing its own costs.

Disadvantages

The costs consequences of Calderbank letters are not defined. Whilst the letter may be an important consideration for the court or arbitrator in deciding costs, the court or arbitrator can decide what weight to give it.
In light of this (and the fact that a defendant no longer has to follow up a Part 36 offer with a Part 36 payment) Calderbank letters are being used less and less frequently.

Calderbank letters in lease renewal proceedings have potential cost advantages over Part 36 offers for defendant landlords. This is because, as a general rule, acceptance of a Part 36 offer made by the claimant tenant or defendant landlord will result in the defendant landlord incurring liability for the claimant tenant’s costs of the proceedings. Claimant fails to equal or beat its own Part 36 offer, i.e. the defendant does not accept the Part 36 offer and the claimant obtains a less advantageous judgment than the Part 36 offer. The costs will be decided by the court using its discretion under the Civil Procedure Rules.

Furthermore, as mentioned above, the Calderbank letter can specify alternative cost consequences, for example that the offer will be accepted on the basis that each party bears its own costs, which is the more usual situation in lease renewals.

Question 71

What are the advantages and disadvantages of a Part 36 offer?

Answer 71

Advantages and Disadvantages of Part 36 Offers

Advantages

The cost consequences of Part 36 offers are clearly defined by the Civil Procedure Rules.

Disadvantages

The parties cannot specify alternative terms for payment of any sum of money offered, i.e. payment in instalments.
The parties cannot specify that it is a term of the offer that each party bears its own costs of the proceedings.
In certain types of property disputes Part 36 either cannot be used or is particularly disadvantageous to a particular party.

as a general rule, acceptance of a Part 36 offer made by the claimant tenant or defendant landlord will result in the defendant landlord incurring liability for the claimant tenant’s costs of the proceedings. Claimant fails to equal or beat its own Part 36 offer, i.e. the defendant does not accept the Part 36 offer and the claimant obtains a less advantageous judgment than the Part 36 offer. The costs will be decided by the court using its discretion under the Civil Procedure Rules.

Offerors should be wary of the fact that there are frequently multiple issues in dispute in lease renewals. Accordingly, if an offer is not accepted and the claim proceeds to trial, when it comes to the question of costs it may be difficult for the court to ascertain whether or not the offer has been equalled or beaten. This will be a matter for the court’s discretion. Offerors should therefore consider whether it is appropriate to make a number of separate offers to settle single issues or one offer to settle multiple issues.

Question 72

if a tenant is holding over, can a landlord/tenant serve a break notice?

Question 73

If a tenant is holding over and is in breach, would you recommend to serve a hostile s25 or forfeit the lease?

Question 74

How can you bring a residential lease to an end?

Question 75

What if you serve a s25 and agree lease renewal terms but the lease doesn’t complete by the new commencement date?

Question 76

How can you deal with lease renewal negotiations which are protracted?

Question 77

What if you serve a s25 to renew a lease but cannot reach agreement with the tenant on the new terms?

Question 78

If a tenant is occupying with no lease agreement, can you serve notice for them to leave?

Question 79

What is stated on a s25?

Answer 79

tenancy will come to an end
end date
date need to respond by
need for pro advice

friendly:
terms for new lease

hostile:
grounds to oppose

Question 80

Tell me about the 1954 Act review.

Question 81

What is needed to oppose a new lease on ground F redevelopment?

Answer 81

In terms of what constitutes sufficient evidence of intention, the following have been held to suffice:
* Board minutes documenting its intention, if it is a company.
* Planning permission for the development.
* Plans and drawings for the development.
* Consents from third parties and rights to light issues that may impact the development.
* A building contract.
* Financing.
* Vacant possession of any other part of the development site.
* A business plan for future use.
This is not however a definitive list. I think my best advice to you would be to submit the planning application as soon as possible if this has not already been done, and to collect as much evidence as possible of the Council’s intention to carry out the development - plans, contracts, business/development plan, evidence of acquisition of adjoining land, committee reports. Looking at what you have already, I would say that you have some good evidence, but every bit of evidence will help. As mentioned above, the Court considers each application on its own merits, so I think the more evidence you have the better.

Question 82

How do you deal with landlord’s consent for change of use?

Answer 82

must act reasonably
can argue “good estate management” or unsuitability of property for intended use as being reasonable grounds for refusal

check lease clause

LTA27 s19
If the covenant is qualified (i.e. the tenant cannot change the use of the premises without the landlord’s consent) s.19(3) of the Landlord and Tenant Act 1927 provides that a landlord may not impose a fine in respect of the application.
No other statutory protection applies. Therefore, unless the lease itself provides that the landlord’s consent is not to be unreasonably withheld, there is no statutory provision that will imply such a proviso. The landlord will be able to refuse consent arbitrarily. The 1988 Act does not apply.

Question 83

How do you deal with landlord’s consent for alterations?

Answer 83

• check lease clause
• must act reasonably and in reasonable time
• does LTA88 apply? (consent not to be unreasonably withheld)
• does LTA27 s1 apply? (T notice under s1)
• T spec and plans
• agree undertaking whether completes or not
• consider if affects value, compensation needed? (DOESN’T APPLY IF IMPROVEMENT?)
• bdg surveyor advice if needed
• subject to H&S, planning, bdgs regs
• client approval
• document licence for alterations / letter licence
• clarity on rentalising/reinstatement
• check carried out to standard

if LTA27 s1 applies:
- LL has 3 months to object
- LL may carry out works for increased rent
- LL must pay T compensation at end

if LTA88 applies:
- days not weeks, weeks not months if complex
- refuse only where LL would be in breach of covenant
- onus on the LL to prove:
Any consent given was within reasonable time
Any conditions imposed on that consent were reasonable
If refused, it was reasonable not to give consent
If notice was requested and given, it was within reasonable time period

Under s.19 (2) LTA 1927 (only where qualified or fully qualified covenant), the landlord can require the tenant to:
(DOESN’T APPLY IF IMPROVEMENT?)
- pay its costs
- reinstate; and/or
- pay compensation for the diminution in the value of reversion.
The burden of proof is on the tenant to show that the landlord is unreasonably withholding consent and to establish losses.

Question 84

What are the implications of a lease stating landlord’s consent must not be unreasonably withheld?

Answer 84

LTA88 applies
- must not unreasonably delay
- days not weeks, weeks not months if complex
- refuse only where LL would be in breach of covenant
- onus on the LL to prove:
Any consent given was within reasonable time
Any conditions imposed on that consent were reasonable
If refused, it was reasonable not to give consent
If notice was requested and given, it was within reasonable time period

Question 85

What is the difference between absolute, partially qualified and fully qualified landlord’s consents?

Answer 85

absolute = the tenant cannot make alterations

partially qualified = the tenant cannot make
alterations without the landlord’s consent

fully qualified = the tenant cannot make alterations without the landlord’s consent, such consent not to be unreasonably withheld

If the lease contains no restrictions, the tenant has absolute freedom.

Question 86

How do you deal with tenant improvements?

Answer 86

Under the Landlord and Tenant Act 1927, an improvement is an alteration that goes beyond repair, and from the tenant’s subjective point of view, improves the premises. This will be the case even if the improvement reduces the value of the landlord’s interest.

Lease renewal:
In a renewal under the Landlord and Tenant Act 1954, improvements carried out by the tenant are to be disregarded when establishing the new rent.
Even if the improvements were carried out before the date of the grant of lease, they may still be disregarded provided that they meet the requirements under Section 34 Landlord Tenant Act 1954, which are:-
The improvements were completed no more than 21 years before the application for renewal of the lease
The holding or part of the holding affected by the improvement has at all times since the improvement been comprised in a tenancy to which Section 23(1) applies
At the termination of the tenancy, the tenant did not quit the holding i.e. chain of tenants not broken by LL getting premises back or business activity ceasing
(other than as obligation of the lease or under an agreement for lease as s34 requires a T to have carried out improvements)

Rent review:
Many rent review clauses state that the effect on value of the tenant’s improvements will only be disregarded if they were carried out with the landlord’s consent.
Rent review clauses will usually only disregard the works carried out by the tenant or the tenant’s predecessor in title. The same will also apply if the rent review clause incorporates Section 34 LTA, which refers to improvements as “carried out by a person who at the time was the tenant”.

Question 87

Do you pay VAT on a break premium?

Answer 87

HMRC guidance suggests yes, if opted to tax

Question 88

Do you pay VAT on dilaps?

Answer 88

No, it’s not a service

Question 89

What are the usual assumptions and disregards at rent review?

Answer 89

Assumptions
- The Premises are available to let by willing Landlord and Tenant in open market without a premium paid and with vacant possession;
- Same terms as this lease except initial rent and rent-free period
- hypothetical term from review date / unexpired term
- The covenants have been fully performed and observed;
- No work has been carried out on Premises during term by Tenant that has diminished the rental value of the premises;
- The Premises have already been fitted out at the expense of the incoming Tenant so that they are capable of being used by the Tenant from the beginning;

Disregards
- Any effect on the rent that the Tenant has been in occupation;
- Any goodwill;
- Any increase in rental value of Premises at the review date due to any improvement to the Premises carried out, with consent, apart from as an obligation to the Landlord, by the Tenant before during or after the Term