Landlord and Tenant

Question 1

Can you explain the purpose of the Landlord and Tenant Act 1954?

Answer 1

It provides security of tenure to commercial tenants and allows them to remain in occupation after the lease expiry. It gives the tenant right to apply for a new tenancy unless the landlord can oppose it on specific grounds.

Question 2

Can you list and explain the seven grounds for opposition to lease renewal under Section 30?

Answer 2

(a) Tenant has failed to repair the property.

(b) Persistent delay in rent payment.

(c) Breaches of other obligations in the lease.

(d) Availability of suitable alternative accommodation.

(e) Landlord intends to demolish or reconstruct.

(f) Landlord intends to occupy the property.

(g) The tenancy was created by sub-letting only part of a property.

Question 3

What does Section 30 of the Landlord and Tenant Act 1974 relate to?

Answer 3

It related to the 7 grounds of opposition for granting a new tenancy.

Question 4

Under the ground for owner occupation what additional details are needed for the ground to apply?

Answer 4

Must have owned the property for 5 years.
Prove intention to occupy and/or run business.

Question 5

Under the ground for opposing a tenancy renewal for redevelopment, what needs to be in place?

Answer 5

Landlord must prove firm intention, funding and planning, substantial work & necessity to gain vacant possession and an ability to redevelop provided vacant possession is secured.

Question 6

What is the difference between a lease being contracted inside or outside the Act?

Answer 6

A lease inside the Act means the tenant has the right to renew at the end of the term. A lease contracted outside the Act removes this statutory protection.

To contract out, both parties must follow a formal procedure including serving a warning notice and signing a declaration before the lease is completed.

Question 7

What are the main protections provided to tenants under the 1954 Act?

Answer 7

The right to apply for a new lease at the end of the term.

The tenant may remain in the premises under the same lease terms (holding over) until a new agreement is reached or a court decision is made.

Question 8

How does a landlord oppose renewal under the Act?

Answer 8

The landlord can oppose renewal by serving a Section 25 Notice citing one or more of the statutory grounds under Section 30.

Question 9

What is the process for serving a Section 25 Notice and how does it differ from a Section 26 Notice?

Answer 9

A Section 25 Notice is served by the landlord either offering new terms or opposing renewal. A Section 26 Notice is initiated by the tenant, requesting a new lease. Both must be served 6–12 months before the lease end date. A Section 25 Notice cannot be served if a valid Section 26 Notice has already been served.

Question 10

What are the key timeframes involved in the lease renewal process under the 1954 Act?

Answer 10

Notices must be served 6 to 12 months before the lease end date. If either party disputes the terms, court proceedings must begin before the notice expires. If not, the right to renew or oppose may be lost.

Question 11

What does Section 24 of the Landlord and Tenant Act relate to?

Answer 11

Section 24 relates to security of tenure.

If a tenancy is contracted inside the act, and the tenant is in occupation past their expiry date, the tenancy will not come to an end but instead will continue on the same terms of the lease until it is terminated/renewed in accordance with the act.

(A tenant whose protected lease has expired but has not vacated - s.24 covers continuation tenancies)

Question 12

What is a continuation tenancy?

Answer 12

A tenant whose protected lease has expired but they have not vacated (holding over) under the expired lease. The terms of the continuation are the same as the terms of the expired lease.

Question 13

How can you end a continuation tenancy?

Answer 13

The tenancy can only be brought to an end by either:
- The landlord serving a Section 25 notice proposing termination or new terms
- The tenant serving a Section 26 request for a new tenancy
- The tenant choosing to vacate voluntarily
- Or agreement of new lease terms.

Question 14

What is a rent review?

Answer 14

Allow the periodical adjustment of commercial rents to the market level or another specified indexation current at the date of review.

Question 15

What is RPI in the context of a Rent Review?

Question 16

What is CPI with Cap & Collars in the context of a Rent Review?

Answer 16

Rent review completed in line with Consumer Price Index.

Cap & Collars related to the limits on how much the rent can change.

Question 17

What does time is of the essence mean?

Question 18

What are the four usual assumptions of a rent review?

Answer 18

• OPEN MARKET - Property is available to let on open market by willing tenant to a willing landlord for a term of years as stated (can be notional or hypothetical term)
• IMMEDIATE OCCUPATION - property is fit and available for immediate occupation and use
• COVENANTS - All covenants observed by landlord and tenant
• USE SET OUT - property may be used for the purpose set out in the lease.

Question 19

What are the three usual disregards of a rent review?

Answer 19

• Any effect of goodwill on the tenant occupation
• Ignore goodwill attached to the property
• Tenants improvements if landlord consent has been granted for the works
• Some modern leases also provide an additional assumption or disregard rent free for fit out.

Question 20

What is a Headline rent review?

Answer 20

A headline rent ignores all incentives/concessions granted on a letting, whether they be for fitting out, pure incentive, or in lieu of dilapidations/works.

Question 21

What is an assignment?

Question 22

In your example, Café Lease Chasetown, you outline the tenant is holding over. Can you explain what holding over is?

Answer 22

Holding over is where a tenancy contracted inside the Landlord and Tenant Act 1954 has expired, but the tenant has remained in occupation on a continuation lease.

Question 23

What are the methods of Lease Termination?

Answer 23

• Forfeiture
• Surrender and negotiation
• Merger
• Disclaimer (due to insolvency)
• Break Clauses
• Lease Expiry

Question 24

Which Sections of the Landlord & Tenant Act relate to terms of a new lease?

Answer 24

Sections 32 - 35.

Question 25

What are the four requirements of a lease?

Answer 25

1. Exclusive occupation 2. Payment of rent 3. Duration for a specified term 4. If more than for 3 years, the terms must be in writing, signed as a deed.

Question 26

What are the three main differences between a lease and a license?

Answer 26

1. A lease provides an occupier with an estate in relevant land. 2. A lease can be assigned - a license normally is a personal right and cannot be assigned. 3. A lease cannot be terminated until it expires (or at break option) - a license can usually be revoked.

Question 27

What is a Competent Landlord?

Answer 27

Defined under Section 44 of LTA 1954 as the person/body whom a notice should be served or who should serve the notice. They must be a **freeholder or superior tenant with an unexpired term of over 14 months.** (Essentially, it is the person with the legal right to extend or grant a lease)

Question 28

Why is it important to identify a Competent Landlord?

Answer 28

- It is crucial as a Section 25 notice (served by the landlord) or a Section 26 request (served by the tenant) must be served by or on the competent landlord. - If served incorrectly (on the wrong party), the notice may be invalid, potentially impacting the security of tenure and statutory rights under the Act. - If served incorrectly this could cause delayed proceedings or miss a service date and prejudice the parties position.

Question 29

What factors are considered when serving a notice?

Answer 29

The validity of a notice is crucial, and it should always be checked that the notice serviced is valid, in the prescribed form required in accordance with the Act, and on the correct named party.

Question 30

What does Section 25 of the Landlord and Tenant Act relate to?

Answer 30

Section 25 relates to the Landlord's notice to end the lease or seek a new lease. The notice must be served between 12 months and 6 months before the termination date to be specified. This cannot be before the contractual term end.

Question 31

What are the notice requirements to serve a Section 25 Notice?

Answer 31

Must be: - Served by a competent landlord and be given to the tenant - State the tenancy termination date - Be in the correct form and inform the tenant of their rights - Where non-hostile, the proposed lease terms including the rent must be included. - Where hostile, the grounds of opposition must be stated - Parties can extend time limits by agreement - Maximum term of 15 years can be granted by the County Court but the parties are free to agree a longer term if they wish. I’m

Question 32

What is a hostile notice?

Answer 32

Where the landlord opposed a new lease. They will need to support this with a ground for opposition in Section 30.

Question 33

What is a non-hostile notice?

Answer 33

Where the landlord is prepared to grant a new lease.

Question 34

You are undertaking lease renewal negotiations. The date that was outlined in the Section 25 notice for the new lease to commence / existing lease terminates has now passed. What is the position of the tenant?

Answer 34

The tenant loses their security of tenure unless: - there is a new lease in place - either party has applied to court, or - the parties have agreed in writing an extension to the deadline to apply for court for a new tenancy.

Question 35

What information should you include in a Section 25 notice?

Answer 35

- Name and address of the landlord and tenant - Address of the property - Notice of the date to end the tenancy (a hostile or friendly notice) - Confirmation of if a new lease is to be opposed or granted - Confirmation of the date by which the tenant must ask the court for a new tenancy (unless extended by both parties in writing) - If friendly - Landlord proposal for the new tenancy including rent - If hostile - the ground for opposition - A strong recommendation to seek professional advise.

Question 36

What is Section 26 of the Landlord & Tenant Act 1954?

Answer 36

This relates to the tenant serving a notice on the landlord requesting a new tenancy. The notice must be served not more than 12 months and not less than 6 months of the proposed tenancy commencement date and cannot be before the contractual expiry of the existing lease.

Question 37

What must a Section 26 Notice include?

Answer 37

It must be in the prescribed form, outline the tenant's proposal for a new lease, and include the proposed rent. It must be served between 12 and 6 months prior to the proposed commencement date.

Question 38

You are acting on behalf of the landlord. They receive a Section 26 notice but wish to oppose. How long do they have to respond?

Answer 38

A counter notice must be served within 2 months of receiving the Section 26 notice.

Question 39

What do you understand by leases being Contracted In or Contracted Out?

Answer 39

This relates to whether a tenancy is protected by the Landlord and Tenant Act 1954. - Contracted In - Means the Act applies and security of tenure is present. - Contracted Out - Sections 24-28 are excluded from the tenancy, so they do not have security of tenure.

Question 40

Are you aware of any new updates on contracting in/out?

Answer 40

The Law Commission is currently reviewing Pat II of the Landlord and Tenant Act. They announced in March 2023 that they were reviewing the document to ensure it works for today's commercial leasehold market. They published their first Consultation Paper on Business Tenancies: the right to renew on the 19th of November 2024, where they proposed four different models.

Question 41

How do you contract out?

Question 42

What does The Law Commission's Consultation Paper on "Business Tenancies: the right to renew" 2024 document outline?

Answer 42

It asks the question of whether Part II of the Landlord and Tenant Act 1954 is fit for purpose and outlines four potential new models relating to security of tenure: - No security of tenure (abolish the 54 Act) - A "contracting in" regime - A "contracting out" regime - Mandatory security of tenure. The law commission invites all interested parties to provide their comments by 19th February. The second paper is yet to be published.

Question 43

When is compensation applicable for the tenant?

Answer 43

If the Landlord serves a Section 25 notice opposing a renewal under ground e, f, or g. The tenant may be entitled to compensation depending on the period of occupation prior to the termination of the tenancy. They would not be entitled to compensation if they vacated the premises ahead of the end of the tenancy.

Question 44

How is the compensation calculated if applicable?

Answer 44

- 14 years + of occupation is 2 x Rateable Value - Less than 14 years of occupation is 1 x Rateable Value Rateable Value is the RV in force at the date of the hostile S.25 or Counter S.26.

Question 45

When is the tenant entitled to compensation relating to Tenants Improvements?

Answer 45

Under Part 1 of the Landlord and Tenant Act 1927, the tenant could obtain compensation for their improvements if: - The improvement adds value to the premises - Was carried out during the tenancy term - The tenant got written consent from the landlord prior to carrying out the works (not to be unreasonably withheld) - The tenancy is for more than 1 year and has certain periodic terms.

Question 46

A tenant is planning to complete some improvements to the property, and has requested consent from the landlord, so far with no response. What can the tenant consider?

Answer 46

If the landlord is considered to be unreasonably withholding consent, then the tenant can apply to the court. If the court finds the improvement reasonable, it can grant consent in place of the landlord.

Question 47

If a tenant would like to receive compensation from the landlord relating to their improvements, what must they do?

Answer 47

Serve a compensation claim notice within 3 months of the end of the tenancy. Compensation is usually assessed as the increase in the property's value due to the improvement at the end of the tenancy.

Question 48

When is it not possible for the tenant to obtain compensation for their improvements?

Answer 48

When they didn't obtain prior written consent from the landlord, or they satisfy the below: - work was not completed in their lease term - the tenancy is less than 12 months or unperiodic. - the improvement doesn't add value to a property.

Question 49

Are short-term / periodic tenancies eligible for compensation for tenants improvements?

Answer 49

Yes, but only if: - the tenancy cannot be ended with less than 12 months notice - the tenant has been in occupation for the last 5 years - the improvement was carried out with the landlords consent.

Question 50

What is a tenancy at will?

Answer 50

It is a form of license created by written agreement for an unspecified time in which the landlord may evict the tenant at any time. (Not a legal interest in the land with no renewal right.) Usually used for allowing a tenant early assess to a property, or when agreeing a new new lease contracted out of the 1954 act.

Question 51

Are you aware of any case law surrounding the tenancy at will concept?

Answer 51

Javad v Aqil 1991.

Question 52

How long before tenant improvements can be included in the rent again?

Answer 52

21 years.

Question 53

What dispute resolution options are you aware of relating to Landlord and Tenant?

Answer 53

Independent Expert and Arbitrator.

Question 54

How is appointment of an Independent Expert or Arbitrator established?

Answer 54

The terms of the lease agreement will usually outline which dispute resolver will need to be appointed, however in some instances the lease my specify the landlord can decide between the two.

Question 55

What is the typical process followed when appointing a dispute resolver?

Answer 55

Typically, a lease will provide for the appointment of the dispute resolver to be made via an application to the Dispute Resolution Service (DRS) of RICS?

Question 56

What is the current cost of an application to the Dispute Resolution Service (DRS) of the RICS?

Answer 56

£425.00

Question 57

What is an Arbitrator?

Answer 57

An Arbitrator is a third-party dispute resolver commonly used for rent review disputes. An Arbitrator is governed by the Arbitration Act 1996 (statute) and provides an award following the evidence and facts submitted for the case.

Question 58

What is a Independent Expert?

Answer 58

An Independent Expert is a third-party dispute resolver commonly used for rent review disputes. They are governed by the contents of the lease (contract) and make their own enquiries for evidence. An Independent Expert must have detailed knowledge of the market/sector/location.

Question 59

What is an Expert Witness?

Answer 59

When an Arbitrator is assigned to a case, the surveyors originally involved become Expert Witness' and have a duty of care to the court, to provide a statement of true facts and evidence, not to be influenced by their clients objectives.

Question 60

What are the differences between an Arbitrator and Independent Expert?

Answer 60

They are both methods of third-party dispute resolution, however, they are governed in different ways, rely on different evidence, and have different powers for disclosure. An arbitrator: - Governed by the Arbitrations Act 1996 (statute) - Evidence is fact and options provided by the Expert Witness' - The outcome is called an Award An Independent Expert: - Governed by the Lease Terms - Evidence is supposed to be via their inquiries (they should have detailed knowledge of the local market/sector) - The outcome is called a Determination

Question 61

What is an Interim Rent?

Answer 61

An Interim Rent is a rent that applies to protected tenancies, after the earliest date it can start has passed, up until the start of the new tenancy.

Question 62

When does an Interim Rent apply?

Answer 62

You can begin to charge an Interim Rent from the earliest date specified in the notice (i.e. 6 months from when the notice was sent) whilst you are negotiating the terms of the new agreement. Typically, the rent that is applied is in line with the new terms of the lease. You can make an interim rent application within 6 months of the start date of the new lease, if you haven't already agreed between parties. You don't have to apply if you can agree, and can backdate it to the "earliest date".

Question 63

What is Interim Rent normally calculated at?

Answer 63

The agreed rent for the new terms is usually the accepted rent. Adjustments are only made if there are material changes to the lease or an observable market shift.

Question 64

What is the Hierarchy of Evidence outlined for Rent Reviews?

Answer 64

O L R I A C H S S I R - "Only Let Rent Inquiries Are Clear, Hopeful Stories Show Interesting Results" Open Market Lettings Lease Renewals Rent Reviews Independent Expert Determinations Arbitrator Awards Court Determinations under L&T 54 Hearsay Evidence Sale and Leaseback Surrender and renewal