Landlord and Tenant - SOE Flashcards
What does ‘time of the essence’ mean?
If time is of the essence, the timescales in the lease must be strictly adhered to.
When is time of the essence?
Time is of the essence when:
a) the lease explicitly states it
b) lease makes it clear that the time limits are strict
c) tenant serves notice making time of the essence
d) there are deeming provisions.
What happens if the lease does not expressly state that time is of the essence?
Time is not of the essence, as held in the Burnley and Cheapside cases.
What are the usual assumptions for a rent review?
a) premises is fit for immediate use and occupation
b) market rent will be payable after any incentives/rent free
c) tenant has complied with existing lease covenants
d) no work has been carried out by the tenant that has reduced the rental value
e) if the property has been damaged or destroyed then it has been reinstated.
What are the usual disregards in a rent review?
a) tenants’ previous occupation
b) any goodwill
c) certain improvements
d) any licence to sell intoxicating liquor belonging to the tenant.
What are examples of special assumptions in a rent review?
a) planning permission has or will be granted
b) if vacant then let on defined terms
c) if let then vacant
d) any redevelopment or works have been carried out according to plans.
What is usually included in Terms of Engagement?
• Identify parties
• Date
• Fee
• Basis of valuation
• Investigations and limitations
• Assumptions and special assumptions.
What is a Calderbank offer in relation to a rent review?
A party may seek to settle and protect themselves against liability for costs by making an unconditional offer to settle on specified terms, expressly stating the right to refer the offer to the arbitrator after he has made his award except for costs.
What options for resolution exist if a rent review could not be agreed?
Independent expert or arbitrator, depending on what is stated in the rent review clause of the lease.
What are some differences between an independent expert and an arbitrator?
• Independent expert has a duty of investigation, can be liable for damages through negligence, cannot award costs (usually), and their determination is binding.
• Arbitrator is governed by Arbitration Act 1996, relies on submitted evidence, has the power to award costs, final award must lie between the two parties’ extremes, not liable for negligence, can be referred to Court on a point of law.
What should a S25 notice include?
• Landlord
• Tenant
• Property
• Date of Notice
• Date of Termination
• Friendly/Hostile.
When was the LL&T Act 1954 last amended?
1st June 2004.
What notice should be served to contract out of the LL&T Act 1954 at lease renewal?
• S38 notice to contract out before a fixed tenancy starts.
• The LL must serve a notice under the Regulatory Reform (Business Tenancies) England and Wales Order 2003.
What is the difference between a lease and a licence?
A lease gives exclusive possession of property, whereas a licence gives the right to use property in a certain way for a certain period of time that would otherwise constitute trespass.
In what circumstances might you grant a licence?
Car park, external seating, grazing, telecoms.
What is the general aim of the LL&T Act 1954?
Gives security of tenure to the tenant and outlines procedures for terminating a tenancy, and the grounds upon which a landlord may oppose a new tenancy.
What does it mean if a tenant’s lease is within the Landlord and Tenant Act 1954?
They have security of tenure – tenant can remain in occupation on the agreed terms of the lease at the end of the term until the tenancy is terminated in accordance with the act.
What would you expect to happen to the rent if a tenant agreed to be outside the Act?
Lower rent to reflect higher risk.
What should a landlord do if they want to regain possession at lease expiry?
Serve a S25 notice opposing a new tenancy based on one or more of the 7 Grounds listed in S30.
What are the 7 grounds under section 30?
• A) Breach in repairing obligations
• B) Tenant persistently late in paying rent
• C) Substantial breach of another covenant
• D) Suitable alternative accommodation offered
• E) Uneconomic sub-tenancy
• F) Landlord intends to demolish/reconstruct
• G) Landlord intends to occupy the premises.
Why would you advise a tenant to take a lease that was outside the act?
• Rent would be cheaper
• Could negotiate more favourable terms
• Would likely be granted a more flexible lease.
How long before the end of tenancy did you serve the section 25 at Coxbridge Business Park?
6-12 months prior to lease expiry.
When would you advise your client to serve a S25 if the unit is overrented?
If over rented; it depends how risk adverse your client is.
• If risk adverse then serve 12 months prior and secure a fixed term at a lower rent.
• If not, could look to hold over but accept risk of tenant leaving on lease expiry or serving S27.
What would you have done if the tenant had served a section 26 before you served the 25?
Confirm the notice has been correctly served, if oppose must respond within 2 months, respond and begin negotiations.
What makes up the contents of the section 25?
• Name and address of landlord and tenant
• Address of property
• Notice to end tenancy - either friendly or hostile
• Notice of date a response is required by
• Landlord proposals for new tenancy if friendly
• Landlord ground(s) for opposition if hostile
• Recommendation to tenant to seek professional advice.
What are the usual contents of a rent review clause?
• Normally upwards only and time is not normally of the essence.
• Assumptions:
• Premises are fit for immediate use and occupation
• Market Rent will be payable after any rent-free period for fit-out works
• No work has been carried out by tenant that has reduced the rental value
• If premises have been destroyed/damaged, they have been reinstated
• Tenant has complied with covenants in the lease.
What are the usual disregards in a rent review clause?
• Tenant previous occupation
• Any goodwill
• Certain improvements
• Any licence to sell intoxicating liquor if that licence belongs to the tenant.
What are the three main factors to be covered within a rent review clause?
• Machinery for effecting the rent review
• Basis of valuation
• Means of settling a dispute.
What would you do if the tenant had not completed repair works?
Give tenant a timeframe to complete the works.
What options would be available to the landlord if the disrepair was serious?
• Jervis and Harris clause to re-enter the property (if stated within the lease)
• Alternatively, landlord serves a section 146 notice specifying the breach.
What constitutes a business tenancy?
Property occupied for the purpose of trade, profession or employment.
What tenancies does the LTA 1954 not apply?
• Agricultural
• Mining
• Residential
• Tenancies not exceeding 6 months.
What should you do on receipt of a request to alter?
• Read the lease, do alterations require landlord consent?
• Ask for a full set of plans and a specification
• Obtain an undertaking
• Check the long-term impact on the property
• Consider whether reinstatement is required
• Check planning consent and building regulations
• Check Equality Act 2010 and CDM 2015 compliance
• Provide recommendation to client and obtain instructions
• Instruct solicitors to prepare Licence to Alter
• Inspect completed works.
What is the process of lease renewal?
• Served friendly S25 knowing tenant was going to remain in occupation.
How did you get to the rent and terms at lease renewal?
Terms remained the same as the old lease, and rent was agreed as per S34 of the 1954 Act.
What would you do if your client wanted to terminate the tenancy?
Service a hostile S25 notice outlining the ground for opposition under S30.
What are the landlord’s grounds for opposition to a new tenancy under S30?
• Breach of repairing covenant
• Non-payment of rent
• Other substantial breach
• Landlord provides suitable alternative accommodation
• Uneconomic sub-division
• Demolition or reconstruction
• Landlord wants to occupy for own purposes.
What compensation is payable under S30?
• If the tenant has been in occupation for 14 years + = 2x rateable value
• If the tenant has been in occupation less than 14 years = 1x rateable value.
What advice would you give the landlord in lease renewal negotitions if the property was significantly overrented?
Can either serve a S25 and agree a new lease at a lower rent, or do nothing and the tenant is able to serve a S27 notice to leave within 3 months.
What forms of Alternate Dispute Resolution could you use for lease renewal dispute?
Professional Arbitration on Court Terms (PACT) is available for lease renewal dispute.
What is in a Rent Review memo?
• Name of both parties and company registration numbers
• Address of property
• Date of lease and rent review
• Confirmation of new rent
• Signed and dated by both parties.
What do you understand by the notional/hypothetical term?
Length of the term to be valued – if this is silent assume the residue of the term.
What is the process of contracting out of the LL&T Act 1954?
Landlord must serve notice on Tenant under Regulatory Reform Order 2003.
• If notice served minimum of 14 days before lease agreement/lease start date then Tenant signs simple declaration.
• If lease is due to commence within 14 days of the notice then Tenant signs statutory declaration before a solicitor.
What were the assumptions and disregards in the rent review of 1485 London Road?
Assumptions:
• Space is fit for immediate use and occupation
• Tenant has complied with previous lease terms
• Market Rent will be payable after any rent free
• If damaged or destroyed, property reinstated
• Tenant not completed any works that have reduced rental value.
Disregards:
• Tenant previous occupation
• Any goodwill
• Certain improvements
• Intoxicating liquor licence belonging to tenant.
What would you advise your client if rent review negotiations hadn’t been straightforward?
- Calderbank offer
- Arbitrator/independent expert.
What is the difference between an Arbitrator and an Independent Expert?
• Arbitrator governed by Arbitrators Act 1996; Independent Expert governed by RICS.
• Arbitrator makes award; Independent Expert makes determination.
• Arbitrator can award costs; Independent Expert usually cannot.
• Arbitrator relies on evidence from parties; Independent Expert has a duty of investigation.
• Arbitrator cannot be sued for negligence; Independent Expert can be sued.
What options would be available if the landlord and tenant were unable to agree terms in lease renewal negotiations?
PACT, apply to court.
What power does the court have to determine?
Property comprised, length of lease, rent, other terms, interim rent.
How would you advise if the landlord did not want to renew?
Section 25 Hostile and note reason from S30.
What are the implications of the Landlord and Tenant Act 1988?
Not to be unreasonably delayed.
What tenancies does the 1954 act not apply?
• Mining
• Residential
• Agricultural
• Tenancies granted as condition of employment
• Tenancies of less than 6 months.
What are sections 24-28 of the act?
• S24 is holding over/interim rents
• S25 is landlord termination
• S26 is tenant request
• S27 is tenant termination
• S28 is landlord/tenant agree new lease.
Are leases by definition contracted inside or outside the act when drafted?
Inside and need to contract out.
How would you go about contracting a lease outside of the act?
Landlord serves notice under Regulatory Reform Order 2003.
• Tenant signs either statutory or simple declaration.
What assumptions can you name in a rent review?
• Premises fit for immediate use and occupation
• Market Rent payable after any rent-free period
• Any work carried out by tenant had not reduced rental value of property
• Tenant complied with current lease covenants.
What is the hypothetical term on a rent review?
Something other than remaining term on the lease, e.g., if lease was initially 10 years, it could be this.
Where do they originate from?
S34 of LL and T Act 1954.
When can a section 25 notice be served?
12-6 months before contractual expiry.
What effect did T’s actions have on the rental value of the property?
T’s actions had not reduced the rental value of the property.
What must T comply with?
T must comply with current lease covenants.
What is a hypothetical term on a rent review?
It is something other than the remaining term on the lease, e.g., if the lease was initially 10 years, it could be this.
Where do hypothetical terms originate from?
They originate from Section 34 of the Landlord and Tenant Act 1954.
When can a section 25 notice be served?
A section 25 notice can be served 12-6 months before the contractual expiry of the lease, or any time thereafter.
What details are included in a section 25 notice?
The notice includes details of the landlord, details of the tenant, tenant’s business address, date of notice, and date of contractual expiry.
Is there a requirement for a tenant to serve a counter notice to a section 25 notice?
No, there is no requirement for a tenant to serve a counter notice.
Can you serve a section 25 notice if the tenant is holding over?
Yes, you can serve a section 25 notice if the tenant is holding over.
If acting for the tenant, do you need to serve a counter-notice to a section 25 notice?
No, you do not need to serve a counter-notice.
What must the tenant do to keep protection under section 25?
The tenant must agree to new terms before the expiry of the section 25 notice.
What needs to be done if the section 25 notice is about to expire?
The tenant must agree to terms or get provision for extension to apply to Court.
What if the landlord says no to a section 25 extension?
The tenant should agree to the terms or apply to Court.
What’s the difference between the Lease Renewal and Rent Review procedure?
A lease renewal is a statutory procedure.
A rent review is a contractual procedure.
How is an unopposed lease renewal settled?
Through Professional Arbitration on Court Terms (PACT), provided by the RICS and the Law Society.
In the event of a non-agreement for a lease renewal, how is this to be settled?
If only disputing rent, its better to settle this through PACT as arguments will be heard by a RICS approved valuer.
If there are legal disputes and terms need changing than it is better to go to court.
In the event of a non-agreement for a rent review, how is this to be settled?
The matter is to be settled in accordance with the rent review clause in the lease - usually an Arbitrator or Independent Expert.
The matter can be referred to court on a point of law.
What is an Independent Expert?
Someone appointed by parties to resolve the dispute; they make a determination.
What is an Arbitrator?
Someone who evaluates evidence put forward by Parties; they make an award.
When was the Landlord and Tenant Act 1954 last amended?
1st June 2004
What sections are in part 1 of the Landlord and Tenant Act 1954?
Section 1 to 22
What sections are in part 2 of the Landlord and Tenant Act 1954?
Sections 23 to 43
What does section 23 of the Landlord and Tenant Act 1954 outline?
Tenancies to which the Act applies.
What does section 43 of the Landlord and Tenant Act 1954 outline?
Tenancies to which the Act doesn’t apply to.
Name the tenancies to which the 1954 Act does not apply
- Agricultural holdings
- mining leases
- residential tenancies
- tenancies granted as a condition of employment
- tenancies not exceeding 6 months unless:
a) there is a provision for extension or;
b) T has been in occupation for more than 12 months
What does security of tenure mean?
Tenants can remain in occupation on the agreed terms of their lease until the tenancy is terminated in accordance with the act.
What does ‘holding over’ mean?
A tenant who remains in occupation after the end of their tenancy, under the protection of S24, is known as ‘holding over’.
Name the different ways in that a tenancy within the Act may come to an end?
- Tenant vacated the unit on the last day of the lease term.
- Landlord serves notice of termination (S25)
- Tenant requests a new tenancy (S26)
- Tenant serves notice of termination (S27)
- Landlord and Tenant agree terms for a new tenancy (S28)
What is a s25 notice?
- A notice served by the Landlord to the Tenant so that they can terminate lease at its contractual expiry
- LL may want possession or a new tenancy
–> You can’t terminate the tenancy before the contractual expiry
–> LL would serve this notice and say a) you can have a new tenancy and these are the terms, or b) i object to you having a new lease under s30
When can a LL serve a s25 notice?
- With a minimum of 6 months notice, but not more than 12 months
- 12 to 6 months before contractual expiry, or any time thereafter (notice has got to be for at least 6 months)
What must a LL s25 notice contain?
- The landlord, the tenant and the property (notice is served on the tenant, not on the property), the date of the notice and the date of the termination of the tenancy
- Also a) friendly or b) hostile notice
What is a friendly S25?
If the Landlord does not oppose to a new tenancy.
What is a hostile S25?
If the landlord does oppose a new tenancy.
–> Must state the grounds under S30(1) upon which they would oppose a new tenancy.
What advice would you give a LL in respect of a lease renewal where a property is significantly over rented?
- You’d tell the client what you think the rent would be if you were to get a new tenant - PM job is to optimize rent and maximize market value
a) you do nothing and carry on getting rent, as tenant holds over. But T could terminate by giving 3 months notice or they could serve s26 to request new tenancy (would take 12 months to get a new tenant if the T left, and LL would be liable for void rates)
b) serve s25 notice, enter into a new lease at a lower rent (would get higher market value by accepting lower rent)
- no right answer to this as we just advise and then it’s up to our client what they want to do
- Would be a good investment if had tenant of good covenant, paying the market rent - depends how risky the client is feeling!
- Clearly explain both options
NOTE - tenant could apply to court for rent if giving 12 months notice (as T would have to pay full over-rented amount for another 12 months) and would ask court if they could actually pay interim rent from 6 months after date notice was served (as LL could have opted for 6 rather than 12 months) - this is the earliest date of termination that could have been specified
When is the best time to serve the s25 notice: 12months or 6months before lease expiry?
- Serving 12 months before gives a maximum amount of time to both parties; as serving s25 may make tenant come to a quick decision about whether they’re staying or going - good if they’re going, but if they’re staying then you have to agree rent far in advance and don’t know what a sensible rent would be for a tenant in 12 months time - uncertainty.
- Advantage of waiting to 6 months, means we are negotiating as close to the renewal date as possible. However, also a risk that the tenant may not respond for a few months and then confirm they’re leaving on the last day of the term.
Why would a LL give 12 months notice when he could give 6 months?
If the T rent is over-rented, you get an extra 6 months of the tenant paying extra rent. Also if you’re confident tenant is going to leave, it gives more time for finding new tenant
What action should LL take if require possession of a property at end of lease?
Serve notice under s25 to terminate tenancy and objecting to tenant having new tenancy under one of more of the grounds listed in s30
What can a LL do if cannot get response from T to friendly s25 notice?
Write to tenant and say unless I hear from you by X time on X date (14 days later is reasonable), my client will be making an application to the court to determine the terms of the new tenancy and you will be liable for the costs
Tenant will unlikely actually end up in Court - good way to get a response!
Court will advise mediation to meet an agreement
What advice would you give a T when a LL s25 notice is due to expire in 2 weeks time and agreement for new lease not yet agreed?
Would advise T that you can approach LL to ask if time extension can be agreed in which either party can apply to Court
LL does not have to agree to an extension
If not agreed, T would have to apply to Court for a new tenancy
Note: If s25 notice expires, then the tenant loses security of tenure - the day after the expiry date, and the LL says these are the terms and if you don’t agree to them then you have to leave
Name grounds under the s30(1) of LL & T Act 1954 under which a LL can obtain possession? - COMMON QUESTION
- 7 grounds:
a) T has failed to carry out repairs
b) T has persistently delayed paying rent
c) T is in substantial breach of some other covenant
d) L offers suitable alternative accommodation (LL doesn’t have to own the property, so long as they can secure another space)
e) Where the tenancy was created by a sub-tenancy and the building let as a whole would produce a higher rent than from separate lettings
f) L intends to demolish or substantially reconstruct the premises and cannot do so without obtaining possession
g) L intends to occupy the premises for his own purposes (LL must have been LL for minimum of 5 years - S30(2))
-NOTE - (last 3 grounds are the no-fault grounds)
When can a tenants S26 notice be served?
12-6 Months before contractual end of tenancy.
How long does a Landlord have to respond to a tenants S26 request?
Landlord can serve counter notice within 2 months of tenant’s request
–> If the landlord fails to serve counter notice, then they lose the right of objecting to a new tenancy but not the right of objecting to certain terms.
How is the process of a lease renewal kicked off?
By either a S25 or a S26 notice being served.
What is a S27 notice?
The S27 notice is served when the tenant wants to leave the premises, and must be served at least 3 months before the end of the tenancy
- Could just hand back keys on last day of the tenancy, but better to be transparent and serve sS27 notice out of politeness.
What can the landlord do if the tenant doesn’t most out/cacate the unit are justifiably being opposed to a new tenancy under S30(1)?
The landlord can double the tenants rent from the date the Landlord gives notice (as per Landlord and Tenant Act 1730).
A lease of a shop property is due to expiry in 12 months time. You are instructed for the first time by the LL to negotiate a new lease with the T. How would you deal with this instruction?
In the following order:
a) Need copy of lease
b) agree terms of engagement - only act for client after that
c) Inspect the property to a) measure, b) carry out rental valuation, c) see if there any breaches of tenants covenants (EG unauthorised alterations, breach of user, unathorised sub-let to another tenant, failure to repair)
d) then serve s25 notice and state the tenant can stay
In what circumstances is a T entitled to compensation when a LL successfully opposes a new lease under the 1954 Act? - COMMON QUESTION
The last three grounds (the no-fault grounds) as the tenant is required to leave through no fault of their own
NOTE: if it is one of these grounds (e, f or g) AND another (a, b or c) then the tenant should not get compensation! Has to be ONLY no-fault grounds
How is T compensation assessed under 1954 Act in relation to the no fault grounds?
If tenant has been in occupation for 14 years or more, then get twice RV and if less they get once RV
Explain the power of the court in ordering a new lease
S32, s33 and s34 and s35 and X… - court can determine property comprised, lenght of lease, other terms of the lease, rent and interim rent
S32 = property comprised
S33 = term
S34 = rent
S35 = other terms
S24a = interim rent
Knowing what court can/can’t do can help with negotiations
What do you understand s34 rent to be?
S34 - rent disregarding the tenants previous occupation, any good will, certain improvements and any license to sell intoxicating liquor if the license belongs to the tenant
What do you understand interim rent to be?
Occurs when parties extend time period in which either one of them can apply to court
The interim rent is the rent payable between the end of the old lease and the start of the new lease
In an ideal world, the new lease should start the day after the old lease ends - if negotiations are ongoing and the period in which you can apply to court is extending. The tenant would have been paying the rent under the old lease all this time -a rent for new lease is first agreed, and then then an interim rent is agreed - this could be higher or lower so tenant could owe LL or vice versa
Note: do not have to go to court, can just agree an interim rent between parties
How is the Interim Rent assessed?
It is the market rent at the start of the interim period (EG if the interim period started 12 months ago, it is the market rent as at 12 months ago)
The interim rent is the rent under the new tenancy, unless there are reasons to state otherwise
It is on the terms of the old tenancy
In what circumstances would you recommend a tenant to serve a S26 notice?
If the T believed the current lease was over-rented, it would be worth serving this notice to get a new lease with a lower rent
T may also serve this notice even if rent increases, just to ensure the T still has a lease in place (might be hard to find somewhere else)
Explain when tenant’s improvements are disregarded at lease renewal
If improvements were carried out within the last 21 years, or at any time during the old tenancy
Not all alternations are improvements - an improvement must add value
Note: not disregarded if they were lease obligation
What lease terms affect the rent at review? - COMMON QUESTION
The rent review clause itself - definiton of rent, assumptions we need to make, and matters that are disregarded
The frequency of review (the longer the period between reviews, the higher the rent)
Restrictions on user/alienation, insurance provisions, repairing liability etc
Overall, the more flexible a lease is, the higher the rent
Protected tenancies (inside 1954 act) should demand higher rent - T has security at lease expiry
What are the differences between an intendent expert and an arbitrator? - COMMON QUESTION
Arbitrator acts on evidence and arguments submitted; Experts has duty of investigation but can request evidence from the parties
Arbitrator makes an award; Expert makes a determination
Arbitrator conduct based on Arbitration Act 1996, but Independent Expert is RICS surveyor so governed by RICS Rules of Conduct
You can sue an independent expert for negligence, but you can’t sue an arbitrator
An arbitrator can award costs (EG the ‘wrong’ party pays all costs); an independent expert can’t usually award costs (these costs get met in equal proportions by LL and T - usually stated in lease)
What is the purpose of a Calderbank letter/offer? -COMMON QUESTION
Used to protect against costs liability at arbitration - no point making a calderbank offer if have indepedent expert
What must a Calderbank letter/offer contain? -COMMON QUESTION
An unconditional written offer to settle the rent review
A reasonable proposal regarding costs incurred up to the date of the offer
A time within which the other party must accept the offer by (usually 21 days)
A statement that is made ‘without prejudice save as to costs’
This means this offer can’t be used as evidence unless it comes to arbitrator awarding costs
‘without prejudice’ = does not prejudice anything I am subsequently going to say
Both parties can make Calderbank offers - can make as many as they want
Can make Calderbank offer at any time during negotiations (before or after arbitrator gets appointed)
Paper determination - usually evidence is all in writing and no hearing needs to take place
Offer states that everything is agreed EG size of unit etc
Person A believes comparable evidence suggests rent of £80K per year
Person B believes comparable evidence suggests rent of £100K per year
Arbitrator makes an award (£85k) and says ‘before I award costs, does anyone have anything to show me?’
Person A says - I made Calderbank and would have accepted £80K!
All costs made against Person B from date that offer could have been accepted
