Landlord and Tenant Flashcards
What’s the difference between a positive and negative easement?
Positive easement - permits the owner of the dominant land to carry out an act on the land belonging to the servient owner. E.g. right to walk over a footpath, discharge water into watercourse, or run cables and pipes across the servient owners land.
Negative easement - benefits the dominant land by restricting the actions of the servient landowner. An example of a negative easement would be having a right to light or a right to air.
Which covenant runs with the land (positive or restrictive/negative)?
Restrictive/negative
Outline the information required (8) from the client at the commencement of an instruction (LR/RR)
- Agreed terms of engagement
- An understanding of client’s objectives
- A copy of existing lease and any plans attached to the lease or deeds of variation
- Copies of any licences, e.g. for alterations, improvements, subletting/assignments and deeds of variation.
- Copy of rent review memorandums
- Contact details for the tenant to arrange inspection or contact details of landlord/agent. Ensure the competent landlord is identified (check title, Companies House address)
- Confirmation of which party will be responsible for the service of notices.
- A copy of the property management file – check if there is historical rental evidence or relevant background information which could assist in RR.
- Details of comparable rental evidence relating to similar property held by client.
How must TOE be agreed at the outset of an LR/RR instruction, and what 3 things must you check?
• Must be agreed in writing at the start of the instruction. For which you MUST check:
o You are competent
o No personal interest or conflict of interest
o Include confirmation of your complaints handling procedure details
Outline the various ways LR/RR fees can be based/agreed (5).
o A percentage of the new rent agreed
o A percentage on the saving made from the quoting rent
o A fixed fee
o An hourly rate (most often for third party determination)
o Incentive fee
Outline the 10 (1 different at end RR/LR) steps of undertaking a rent review/lease renewal.
- Undertake a conflict of interest and competency check
- Agree terms of engagement with the client (C.I.T)
- Understand your client’s objectives (very important) and obtain all information from client (as detailed above)
- Read lease packet and any licences and understand
o the rent review clause (check whether
time of essence)
o or
o check that the lease is not contracted
out of the security of tenure provisions of the
L&T Act 1954 (section 24-28) in the case of a
lease renewal. If silent, then inside act. - Undertake a site inspection and measure the property in accordance with RICS guidance – RICS Surveying Safely 2011 & RICS Property Measurement 2018.
- Undertake a market rent valuation, having regard to the terms of the lease.
- Prepare a report to you client setting out your recommendations.
- Agree your strategy with your client and confirm who is serving the relevant notices (always instruct a solicitor to serve 1954 act lease renewal notices).
- Upon receipt of instructions, open negotiations and check that any notice received is valid.
- Conclude negotiations and document:
o The rent review in the memorandum
o /
o Instruct a solicitor to prepare the new
lease in accordance with the heads of terms
prepared for new lease.
What does without prejudice and subject to contract mean and how does it make a document ‘privileged’ in a rent review?
• Subject to contract – means it is not binding unless contract is signed.
• Without prejudice - during negotiations opposing party cannot rely upon document/discussions labelled ‘without prejudice’ at 3rd party.
Therefore ‘privileged’- cannot be used as evidence against party that sent.
What are the 4 requirements of a lease?
- Exclusive right of possession (occupation)
- Rent or periodic payment is made in return for possession
- Specific duration (can be periodic)
- If more than 3 years, the term must be in writing, signed and registered
Define a licence, and what arrangement it constitutes/rights it creates (3).
o A right to enter a property (that would otherwise constitute trespass)
o A personal arrangement between licensor and licensee
o The licensee acquires no interest in the property
o It is merely a personal right which can be terminated by either party.
How did Street v Mountford (1985) establish the difference between a lease and a licence, and what is the important lesson therein?
o A “licence” to occupy a furnished room in a house
o The agreement conferred exclusive possession at a rent
o The owner provided neither attendance nor services
o House of Lords ruled that this constituted a tenancy
o It does not matter what the document calls itself on the cover sheet (e.g. Licence) – if, in all other respects, the document looks like a lease then it probably is.
What rule did Appah v Parncliffe Investments (1964) establish re. lease v licence?
No exclusivity = no lease. Landlord stated (in ‘lease’) he could come and enter as he pleases. The arrangement was held to be licence, as landlord access had to be on reasonable terms (with re. hours and manner), and therefore could not be called a lease
Can leases be made orally?
Yes, but if 3+ years it must be in writing, signed and registered as a deed.
What 2 letting options are available for a property that will be redeveloped at an unknown future date?
o Licence (keep under 6 months importantly) o Contracted out lease.
What is Mesne Profit?
It is a sum of money paid for the occupation of land to a person with right of immediate occupation, where no permission has been given for that occupation.
Used where you do not want to create an interest in the property by ‘demanding’ a rent. Money to be collected in arrears.
It is a grey area and legal advice should be taken.
Define a tenancy at will and when usually used (2)?
- Form of a licence created by written agreement for an unspecified time in which the landlord may evict the tenant at any time (a right of use). Not a legal interest in land with no renewal right.
- Used for allowing a tenant early entry for fit out works or whilst a tenant is agreeing a new contracted out lease after lease expiry.
Define a Tenancy at Sufferance/how it works.
• Where a tenant stays in a property/possession of land without the landlords consent after lease expiry. The tenant continues to hold this definition until either eviction or some arrangement is accepted by the landlord allowing them to stay.
Define a periodic tenancy/tenants terms/rights and when they occur.
- Very few leases start out periodic, it is a consequence of holding over.
- The tenant has the right to continue occupying on the same terms (inc. rent) as was agreed under the previous fixed term.
What is a reversionary lease, when/why created, how created and subject to what potential risk?
o Vary the existing lease in such a way that an implied surrender is triggered and a new lease is immediately re-granted, missing out not just agency fees, but also taxes, land registry payments etc.
o The new lease is on the same terms as previously, bar the rent (new lease can require a rent review on the first day of the new term)
o Ideal if the tenants business is thriving, and always a good payer.
o The landlord avoids agency re-letting fees and void periods.
o Could be an issue if future expectations are not met.
What is a concurrent lease, and outline a typical example/why.
• When two leases are granted out of the same interest, a common example being:
o Developer grants lease to electricity provider for a substation necessary to provide power for the development
o Developer then grants a lease of the same land to a retailer, which by consequence is subject to the terms of the substation lease
o The developer does it this way round so if the more risky tenant (retailer) has to forfeit their lease, the substation lease does not come to an end (known as overriding lease).
What is a wayleave,
What sort of arrangement is it, and with what consequence?
- This is a temporary right and receives an annual payment – such as it provides a right for an electricity company to install and retain their apparatus.
- It is personal to the company and cannot be automatically transferred to a new owner (contractual licence)
- It is not compulsorily registrable (i.e. you may not find it during your due diligence)
What is an easement,
What are typical examples
And how prescriptive and permissive rights obtained?
- This is a permanent right and receives a capital payment
- It is capable of being registered at the Land Registry
- It allows a right enjoyed by one party over the land of another (a right of the dominant land over the servient land)
- A prescriptive right of way or prescriptive easement can be obtained because of continuous and uninterrupted use being proven over a period of more than 20 years.
- A permissive right can be granted by a landowner to allow access over the land. They are not public rights of way and the public do not have a right to use them. There is usually signage in place to confirm that there is a permissive right of way.
What are typical rental patterns, grace periods and arrears additional to the rent?
- Tenants often prefer monthly rental payments to help with cash flow, quarterly is often still the norm.
- Grace period (for rent arrears) is usually 7 to 14 days, with interest added to any rent arrears beyond that timeframe.
What is adverse possession, and what different rules apply if
Registered pre-2003
Registered post-2003
Not registered
- The process by which a person who is not the legal land owner can become the legal owner through possession of the land for a specified period of time, without the owners permission.
- If the land is registered and a squatter has clocked-up 12 years of possession before the Land Registration Act came into effect in 2003, then the claim can be successful. If it is after 2003, the new rules apply and 10 years occupation is required.
- If the land is not registered, then the 12 years rule applies
What is a trigger notice, and what action does it usually prescribe of the tenant?
Trigger notice: the legal expression to begin, notice to start the rent review machinery (generally landlord must propose rent by a certain date to the tenant’s registered office) (could also be served by T though)
o Tenant to be given a certain period within which to object
What 2 potentially serious consequences could missing a trigger notice have (L/T)?
o Landlord could miss a review
o Tenant could be stuck with rent proposed by Landlord
When might a trigger notice not be necessary?
• Occasionally the lease provides for automatic rent reviews (no need for a notice to be served)
Usual rent review basis, and other 3 potential bases?
o Normally upwards only to the open market rent using standard assumptions.
o Other bases of rent review include
indexation (often RPI or CPI caps and collars), upwards only
• Traditionally been linked to RPI,
emerging trend for tenants seeking CPI basis,
which is lower than RPI
turnover (only) rents (not usually subject to review – the % turnover is usually set at the outset)
stepped increases (again unusual to have rent review procedure)
Is time usually of the essence, what case law (2 cases) established this principle, and in what 4 (potentially separate circumstances) will time be of the essence?
o Time is not normally of the essence unless - the Burnley and Cheapside cases:
o (United Scientific Holdings Ltd v Burnley Borough Council 1977) (Cheapside Land & Development Co Ltd v Messels Services Ltd 1977)
Time is of the essence where:
• The lease says so
• The lease makes it clear that time limits are strict (e.g. linked to Ts option to break)
• There are deeming provisions
• Tenant serves notice making time of the essence (Barclays bank case, research)
What are the 4 usual assumptions in a rent review?
o Property available to let (e.g. vacant possession) on open market by willing tenant and willing landlord for a term of years as stated at the market rent (the notional or hypothetical tenant) without a fine or premium
o Property is fit and available for immediate occupation and use (if damaged, it has been reinstated)
o All covenants observed by landlord and tenant (i.e. no works undertaken by tenant that could diminished rental value)
o Property may be used for purposes set out in lease (i.e. lawful use)
What are the 4 usual disregards in a rent review, and where are they originally from?
• FOUR usual disregards (those matters in S34 LTA 1954, commonly referred to as ‘the usual disregards’):
o Any effect on goodwill (the rent) (due to) on tenant’s occupation
o Ignore goodwill attached to the property
o Any increase in rental value caused by tenant’s improvements (if landlord consent been granted for the works i.e. would be unfair to penalise the tenant for their investments, unless they did so without consent)
o Liqour licence (any licences (such as alcohol) that is personal to the Tenant)
If there are tenant improvements should you include them at rent review?
o Depends on the wording of the review clause however usually they are disregarded if they are carried out in the last 21 years and documented appropriately (i.e. registered under the 1927 Act)
Could you explain how an assumed term assumption should be considered in a rent review clause?
May warrant adjustment, depending on comparable evidence
Could you explain how a user clause (restriction) assumption should be considered in a rent review clause?
o User as stated in lease (Plint Properties v Mott Hay & Anderson – use restricted to hypothetical term consulting engineers, -32% reduction)
o The user assumption in RR provisions takes precedence over lease user provisions
o User Clause – are there any restrictions? In the interests of good estate management the Landlord may incorporate a tight user clause but, this may reduce the rent obtainable on review
The more restrictive the user clause:
• Then the greater the case for a reduction, and
• The higher the reduction
A restrictive user clause does not automatically result in a reduction.
Could you explain how an alienation assumption should be considered in a rent review clause?
Differences between leases that may justify an adjustment are restrictions on assignment / sub-letting and AGA’s (authorised guarantee agreements)
Could you explain how a rent review pattern assumption should be considered in a rent review clause?
Normally 5 years but the longer the review period the HIGHER the rent. Usual adjustments are 1% to 2% for every year.
Could you explain how a repairing obligation assumption should be considered in a rent review clause?
Unusual obligations on the tenant? Is it FRI? A wider than normal repairing liability can reduce the rental value
Adjustments may need to be made where the differences between the comparables and the subject property are:
• IR/Full Repair
• Full Repair / Fair wear and tear excepted
• Full Repair / Repair, renew, rebuild
Could you explain how an insurance liability assumption should be considered in a rent review clause?
Usually easy to quantify – the annual cost of the building insurance
Can you describe a rent review rent as the Market Rent?
The lease dictates the rental definition, therefore you cannot describe rent review rent as Market Rent (difference assumptions)
What did the Court consider re. rent review clauses in British Gas Corp v Universities Superannuation Scheme Ltd (1986), and what decision was held/established?
o The Court considered whether a hypothetical lease at rent review would contain a rent review clause.
o It was held that in the absence of clear wording that could be interpreted otherwise, future rent reviews in the actual lease should be considered in the hypothetical lease in agreeing the market rent.
(Normally 5 years but the longer the review period the HIGHER the rent. Usual adjustments are 1% to 2% for every year.)
RR clauses – define what the notional term of the lease means, and what should you assume if silent (and what case law established)?
This is length of term to be valued (also known as the hypothetical term).
If silent, assume the residue of the term (Basingstoke and Deane Borough Council v Host Group 1987).
RR clauses – what are deeming provisions, and why is the issue comparatively less for modern rent reviews?
Some rent reviews clauses in older leases require the landlord to specify the rent in the trigger notice. The clause will state that if the tenant does not serve the appropriate counter-notice within a specified time, the tenant will have deemed to accept the new rent.
Therefore (I assume, check) in modern RRs if you do not accept, the Landlord would have to go to 3rd party, and therefore no risk of accepting a ridiculous rent proposal?
RRs – how is post-dated evidence typically treated and adjusted for?
The courts have held that this is admissible provided it supports circumstances which could have been known about the effective rent. A timeline can be used to devalue post-dated evidence.
What are headline rent review clauses?
This is when the basis of valuation cannot consider any incentives agreed when analysing a comparable of a letting to arrive at a net effective rent. These are normally now not agreed.
I assume were historically useful for larger landlords wanting to get increasingly higher headline rents.
What is the hierarchy of evidence, and what is the common weighting (6 main, 1 potentially)?
o open market lettings (POTENTIALLY SUBLETTING, DEPENDENT ON LEASE TERMS)
o rent reviews & lease renewals (independent expert then arbitrator)
o hearsay evidence
o sale and leasebacks
o surrender & renewals
o inter-company arrangements
What case established Calderbank letters,
What use can they serve/why are they are useful negotiating tool/why should they be used carefully?
- Calderbank v Calderbank 1975 – divorce case that established.
- The use of a Calderbank offer can achieve an early resolution of a dispute and prevent costs from the escalating (NOT avoid costs, but mitigate them)
- A tool for influencing costs and negotiations in rent reviews as the losing party will have to pay the other side recoverable costs.
- Avoids the equal awarding of costs (arbitrator is obliged to make an award for costs).
- It must be a genuine offer to settle and not simply used as a mechanism to influence costs and/or pressure the other party. Costs usually awarded to successful party – need to be confident.
- Letter serves must be headed
What must a Calderbank letter be headed with, and what 3 things must the letter set out?
• Letter serves must be headed ‘without prejudice save as to costs’ (i.e. ‘save as to costs’ means only revealed to dispute resolver once decision made, then used to determine costs)
For a calderbank offer to be effective it must contain
a) An unconditional written offer to settle the rent review
b) A reasonable proposal regarding costs incurred up to the date of the offer (normally this would be that each party bears their own costs plus 50% of the Arbitrators fees)
c) A time within which the other party may accept the offer (usually 21 days)
What mechanism similar to a Calderbank letter is available for lease renewals, and what format/time limit must the letter be delivered?
• For lease renewals, there is a similar mechanism – (under part 36 of the Civil Procedure Rules 1998) must be made in writing and remain open for acceptance for a minimum of 21 days.
What must you ask the Arbitrator to do if you have served a Calderbank letter?
• The party making the offer or both parties should ask the Arbitrator to make an award which will be final except for costs (too late to produce a Calderbank after an award with costs)
What happens if a Landlord makes a Calderbank offer that the Tenant does not accept, and importantly, from what date?
If the Arbitrator determines a rate equal to or higher than the Landlords offer
o Then the Arbitrator should award that the Tenant pays Landlords costs and the Arbitrator’s fees from the date the offer ought reasonably to have been accepted.
What is the purpose of serving a Calderbank?
The purpose is not to avoid costs, but to mitigate costs.
What act governs the RR procedure,
What is the procedural code for Court applications?
And what other law informs and governs the procedure?
- Arbitration Act 1996 governs the rent review procedure, and the procedural code for court applications (e.g. appeals, or claims to set aside an expert determination, claims of negligence) is CPR 1998
- The other, and greater part of the law is case law, which has developed since the 1970s
What must you first do to establish the review determination method?
• Read the lease (RTL) to establish the method of determination within the rent review clause.
What RICS guidance is there for RR arbitration, and what 2 main things does it cover/clarify?
• RICS Guidance Note – ‘surveyors acting as arbitrators in commercial property rent reviews’ (2013) clarifies how to deal with conflicts and the duty of an arbitrator.
What is the cost of application to 3rd party RR?
• The cost of the application for third party determination by the President of the RICS is currently £425
What RICS doc provides guidance on dealing with conflicts when acting as arb/ind. Exp?
RICS Conflicts of Interest Guidance Note (2012).
What is RR backdating, and how is it calculated?
Upon the determination of the new rent the balance of any increased you will be payable from the review date to the quarter date after determination
interest is payable: unfair if any higher than the base rate
What is the 6-step process of 3rd party (rent review)?
o A or IE will be appointed and write to both parties
o The A will set out directions, written submission of hearing, statement of agreed facts and timeline for submissions.
o Parties will confirm acceptance.
o Written reports are submitted.
o Award.
o Then settlement for costs.
What RICS guidance is available for independent experts?
• RICS Guidance Note on Independent Expert Determination 2016
Independent Expert
What expertise is required?
Who appoints?
Bound by lease or judicial rules, and with potential consequence?
Can you appeal or sue for negligence?
2 procedures used for carrying out the process?
Useful in what comparable evidence circumstances?
Powers to order disclosure?
Powers over costs?
Outcome?
- Has detailed knowledge of the market as a valuer
- Appointed by the President of the RICS by the Dispute Resolution Service but not bound by the judicial rules.
- Bound by terms of the lease, may be binding, depends on contract
- No judicial function
- No appeal against the decision (other than in very rare circumstances (incorrect interpretation)) but can sue for negligence (very rare)
- There is no relevant legislation so acts with an informal procedural timetable - can involve a hearing or dealt with by written representations
- Good when lack of market comparables and need to be up to date
- No power to order disclosure
- Orders costs as set out in lease but only has power over their own costs
- Outcome - called a determination
Why was the decision made in Level Properties Ltd v Balls Brothers Ltd 2007 notable re. expert determination?
o A rare example of an expert’s determination of a rent review case not being held to be binding
o It was held that this decision was based upon incorrect interpretation of rent review clause.
Arbitrator
Governed by what judicial doc?
Who appoints?
Power over procedure? Typical format of the procedure?
Powers over costs?
Useful in what comparable evidence circumstances?
Powers to order disclosure, and under what Section?
Can you appeal or sue for negligence?
Outcome?
Two main practical downsides compared to independent expert?
- 1996 Arbitrator Act – quasi-judicial process
- Arbitrators can be appointed by RICS President using the Dispute Resolution Service and be a member of the Charted Institute of Arbitrators. (i.e. if it is not possible to agreed on the 3rd party)
- Format decided by arbitrator to include an agreed statement of facts & timetable for submission. The statement of agreed facts is a summary of the points agreed between both parties, such as relating to the lease terms, floor arears and comparable evidence.
- Can decide how to hear the case and order costs.
- Will provide a reasoned award unless agreed otherwise with parties (i.e. award must always contain full reasoning, therefore you are able to comment on the other sides submission)
- Can only use evidence submitted by the parties (evidence of fact, hearsay and/or form an expert witness)
- Immunity from negligence and can order disclosure (OTHER THAN privileged documents) - guarantee to show your evidence (CPR governs + s34 Arb Act, entitles parties to obtain details of other side’s evidence, secure witness attendance or production of documents by third party, when they would otherwise prefer to only show the most favourable evidence)
- Award
o More costly and generally slower than independent expert determination.
For what value properties would you prefer to have an arb. or ind. exp?
o Rent disputes under £50,000 (i.e. smaller properties) – use Independent Expert
o As it gets more expensive, perhaps use Arbitrator
When would an arbitrator/independent expert be preferable (market and landlord/tenant considerations)?
- In a falling market, when acting for a landlord, an arbitrator would be preferable. (as the information provided may be stronger)
- In a rising market, when acting for a landlord, an independent expert would be preferable and vice versa for a tenant.
Arbitration – what 3 grounds of appeal are available, and to whom/timescale do you have to make an appeal?
You can only Appeal to the High Court within 28 days of the award on THREE specific grounds:
- A challenge to the tribunal’s jurisdiction
- On a point of law
- Serious irregularity
Who does an advocate represent, how must one act, who is their duty to/what must they disclose, and what is their input for at 3rd party?
RICS key doc?
- An advocate represents their client at a hearing or in court
- RICS Professional Statement & Guidance Note ‘Surveyors Acting as Advocates 2017’
- It applies to evidence given to arbitration and independent expert hearings where the advocate represents their client.
- Needs only to disclose all matters which they wish to do so
- Duty is to act in the best interest of their client
- Must act with integrity.
Key RICS doc covering expert witnesses, and what 3rd party resolution mechanisms does it apply to?
- RICS Practice Statement and Guidance Note ‘Surveyors Acting as Expert Witnesses (4th edition) 2014
- It applies to evidence given to arbitrators and independent experts
What are the 4 key points stated in RICS Practice Statement and Guidance Note ‘Surveyors Acting as Expert Witnesses (4th edition) 2014 re Ethical responsibilities Duty Independence Honesty
- The experts evidence provided by a charted surveyor must be, and must be seen to be impartial and objective.
- The duty of the surveyors is to the court and this will override any obligations to the client
- The evidence must be the independent work of the surveyor
- The surveyor must also believe that the facts upon which they are rely are complete and true and their opinions are correct.
What fees are prohibited when acting as an Expert Witness,
how must the fee basis be stated,
where are the principles also stated (other than RICS GN),
and what must the expert witness sign before putting forward their evidence?
- Contingency incentives are not allowed
- The fee basis must be clearly stated in terms of engagement
- These principles are also stated within the Civil Procedure Rules, 1998
- The expert witness must sign a Statement of Truth at the commencement of their evidence
Dispute resolution methods for LR or RR?
- Rent review: independent expert or arbitrator
* Lease renewal: Court or PACT
What 5 main areas of breaches do you look for during a lease renewal inspection?
• Looking for breaches of Ts Covenant:
o Repairs o Unauthorised alterations/improvements o Unauthorised assignment/subletting o Breach of user o Breach of legislation
What are the 6 requirements of S.23 LTA 1954 for a business tenancy to gain protection under the Act?
- It is a tenancy
- The premises must be used for a business (i.e. must be occupied by T for business purposes, business includes trade, profession or employment)
- There must be occupation of at least part of the premises by the tenant
- There must be occupancy of more than 6 months
- It must not be an exempted or excluded tenancy (such as a tenancy at will or service (i.e. mining/agricultural) tenancy)
- There must be a competent landlord (freeholder or superior tenant with more than 14 months to run), (S.44)
What 5 tenancies (S43 LTA 1954) cannot get Act protection?
o Agricultural holdings
o Mining leases
o Residential tenancies
o Tenancies granted as a condition of employment (think about what this means)
o Tenancies not exceeding 6 months unless there is a provision for extension or, T has been in occupation for more than 12 months
What does security of tenure mean (re. Landlords procedural obligations, tenants protections)?
o (a) Ts on annual tenancies can remain in occupation on the agreed terms until the tenancy is terminated in accordance with the Act. L must terminate the tenancy in accordance with the provisions of the Act if he wishes to increase the rent, or change some other term of the tenancy,
o (b) L can only make T leave the premises (other than by obtaining a Court Order for forfeiture of the lease) if he terminates the tenancy in accordance with the Act, and can prove to the Court one or more of the seven grounds listed in the Act.
What does S24 LTA 1954 make clear re. ‘holding over’?
o Tenancy will continue until L or T serves a notice.
o ‘holding over’ until either the landlord or the tenant serves a notice to terminate the lease in accordance with the provisions of the Act.
What 4 ways can a Act protected tenancy be brought to an end? (think wanting to stay, or not, or amicably)
o 1. The Landlord serves a notice of termination under Section 25
i) Time is of the essence. Must be served between 12 months and 6 months before contractual expiry of the tenancy OR the date specified in the notice. If the Landlord objects to a new tenancy then a separate notice must be served stating reasons (s.30)
o 2. The Tenant requests a new tenancy under Section 26
i) IF the tenant has not received a Section 25 notice. Again, within 6 to 12 months. The tenant can request a new tenancy after this period. The tenant may propose the date, property, rent and other terms in this notice
o 3. The Tenant serves a notice of termination under Section 27
i) Must be served by the tenant within the last 3 months of lease but not later than end of tenancy
o 4. The Landlord and Tenant agree the terms of new lease under Section 28
What is an S25 notice, when can it be served, and what 2 messages can the notice send?
- Landlord’s notice served with a date not more than 12 months and not less than 6 months before the date for the termination of the tenancy to be specified. It does not have to be served on a quarter day.
- This can be taken two ways: the landlord wishes to bring the current tenancy to an end and grant a new tenancy on renegotiated terms (friendly) or terminate the tenancy (hostile).
Under what circumstances could you serve an S26 over an S25?
• You can’t serve a Section 26 notice over a Section 25 notice, unless the Section 25 notice has been served incorrectly (i.e. not in format prescribed by Act, set by Law Society)
Who must serve an S25 notice? Are time limits fixed following serving? What is the max term the Court can grant?
o Given by a competent landlord and to be given to the tenant
o Parties can extend time limits by agreement
o Maximum term of 15 years can be granted by the court
If the set S25/S26 date elapses, the tenant loses security of tenure other than if (3)?
• If you undertake a lease renewal negotiation and you pass the date for a new lease/termination as specified in S25/S26 notice, the tenant loses their security of tenure unless:
o There is a new lease in place
o Either party has applied to court
o The parties have agreed in writing to an extension of their statutory period (stay)
What information/contents must be included in an S25 notice (6), and if friendly/hostile?
o Name and address of the landlord and tenant
o Address of the property
o Notice of the date to end the tenancy (a ‘hostile’ or ‘friendly’ notice)
o Confirmation on whether a new lease is opposed or granted
o Confirmation of the date of response required
o Landlord’s proposals for a new tenancy to include the proposed rent if ‘friendly’ notice
o If the landlord opposes a new tenancy (hostile notice), the ground(s) for opposition must be stated
o A strong recommendation to seek professional advice
Best time to serve the S25 notice; 12 months or 6 months before lease expiry?
Depends: it gives the Landlord more time to find a new Tenant, therefore advantageous because it may push the Tenant for an early answer.
If the Landlord is laissez-faire, runs the risk of a void as otherwise 3 months notice is all that is necessary towards lease end (will also obviously impact MV)
What advice would you give to a landlord client in respect of a lease renewal where a property is significantly over-rented?
o Potentially do nothing.
o However, Tenant may leave with 3 months notice.
o Doing nothing will also invariably impact Market Value of investment (unsecure term/overrented)
Why would a landlord give 12 months notice when he could give 6 months (post lease expiry)?
o If the property is over rented (impact on Market Value – unsecure term/overrented)
What action should a landlord take if requires possession at lease end?
o S.25 under objection on ground under S30.
What can landlord do if he cannot get a response from the tenant to his friendly S25 notice?
o Write to the Tenant first to threaten to go to Court - require reply by 5pm on date or face paying costs
o Apply to Court
What is an S26 notice and when can it be served?
• Tenant for a term of years certain exceeding one year
o who has not received a Section 25 Notice from L
o may, in the period between 12 months and 6 months before the end of the tenancy, request a new tenancy under this Section
o can also request a new tenancy any time after this 12 to 6 month period
What may a Tenant propose in an S26 notice?
o (i) the commencement date of the new tenancy which may be any time up to 12 months after the date of the notice.
o (ii) the property comprised.
o (iii) the rent payable.
o (iv) the other terms.
What options are available to a landlord if a tenant has served an S25 notice, and with what potential consequence?
• Landlord cannot then serve a Section 25 notice but can serve a counter notice within 2 months specifying ground(s) for opposition to the new tenancy, or opposition to the proposed terms.
Failure to serve the counter notice will result in L/L losing his right to object to a new tenancy but not the right of objection on the new terms.
What 3 changes were made June 2004 re. S26 notices?
o There is no need for the T to serve a counter notice
o Tenants court application with 2-4 extended to expiry (WHAT?)
o L and T may agree to extend date for T’s court application
In what circumstances would you recommend a tenant serve S26 notice?
o If the tenant wants security of tenure certainty (have that anyway, but puts them in the driving seat)
o Or if the property is overrented.
What is an S27 notice, how much notice does the tenant need to give, and what did (Esselte AB Pearl Assurance plc, 1997) establish re. if a tenant moves out prior to expiry?
- This is served within the last 3 months of the tenancy and not later than the end of the tenancy.
- If the tenant moves out prior to the lease expiry date then no notice needs to be served if the property is vacant (i.e. just hand back keys and move out on expiry) (Esselte AB Pearl Assurance plc, 1997)
- It does not have to be served on a quarter day
With regards serving a LR notice, what is the most important thing to check before serving it?
• Validity of the notice - When acting for a client, it is always important to check that the notice served is valid, in the prescribed form required in accordance with the Act, upon the correct named party.
What happens if L and T agree to a new lease under S28?
• If the L & T agree to the terms of the new lease the current tenancy will continue until the commencement of the new tenancy and sections 24-28 will NOT apply
What purpose does an S40 notice serve if a S28 (agreement to lease) is agreed, and subject to what time limits?
• At this point either party can serve a s.40 notice requesting information (this can be served within the last 2 years of the tenancy) and can include
o Landlord requesting details of occupation and/or sub tenancies
o Tenant requests details of superior landlord
• From 1st June 2004 – both parties have 1 month to supply the information when requested
Under S29 LTA 1954, what tenancy terms can the Court determine, and subject to what 4 disregards (‘the usual disregards’)?
o a) The property (usually the same as in the old tenancy)
o b) The length of lease (not exceeding 15 years to reflect common rent review pattern)
o c) The Rent (the rent the property might reasonably be expected to let in the open market disregarding
i) Tenants previous occupation
ii) Any goodwill
iii) Any licences
iv) Improvements if carried out by the tenant other than as a lease obligation or if carried out within last 21 years
Which S30 grounds are fault grounds, and what effect can that have on the Courts decision making?
• A, B and C are fault grounds (i.e. the landlord has to prove the tenant ‘ought to’ have repaired/paid rent/not breached. This results in more strict consideration by Court, and potentially charitable outcome for tenant if can prove a renewal would result in remedy of the issues)
