Landlord and Tenant - Summary of Experience Flashcards
What do you understand a conditional break clause to be?
- T can only break if pre-conditions are met e.g. rent, vacant possession, notice given
What is section 39?
Saving for compulsory acquisitions
What aspects of a property need to be kept in repair?
Those stated within the tenant’s lease
What is standard amount of assignee business profit LL will look for before giving consent to assign?
3X annual rent and other payments due under lease (SC, RATES, INSURANCE)
What does the LL and T Covenants Act 1995 do?
Provides Authorised Guarantee Agreements
- Abolished privity of contract
Section 17 - Serve on guarantor within 6 months of non-payment of rent and guarantor has to pay arrears and can take overriding lease
In what situation would a tenant be recommended to serve a section 26 notice?
- If T believed lease was overrented to get lower rent on new lease
- To sign a new lease (even if overrented) - To renew
How long is a calderbank offer available for acceptance?
21 days (Unless another Calderbank offer is made)
What could have been the options available to you under the L and T act 1954 at Garratt Lane?
- To serve an interim schedule of dilapidations as more than 3 years left on the lease (claim damages)
- Forfeit the lease S.146
- Exercise right of entry to repair (Jervis v Harris)
When was the Landlord and Tenant Act 1954 last amended?
1st June 2004
Is the hypothetical term more advantageous to the LL or T?
Depends on length of hypothetical term
- Longer is better for tenant as = lower rent
- Shorter is better for landlord as = Higher rent (More like today’s market)
How is interim rent assessed?
Under Section 24(a) - It is the market rent for period from expiry of S.25/2.26 notice (Market rent 6-12 months ago)
Rent under new tenancy unless stated so and under same terms as prior tenancy
Which lease terms affect the rent at review?
- Rent review clause (Definition of rent + assumptions/disregards
- Review frequency (more frequent = lower rent)
- Repairing liability, user/alienation restrictions, insurance provision
- More flexible lease is higher rent (in general)
- Tenancies in 1954 act higher rent as T has security upon lease expiry
Why would a LL give 12 months notice for s.25 when they can give 6 months?
- If the unit is overrented as you get 6 months extra rent
- If you are confident the tenant is leaving it gives more time to find a new tenant
What does Jervis v Harris case mean?
- LL undertakes repairs in prop and LL can recharge T (Dilapidations)
- T say LL should have served with s.146 notice rather than suing for damages
- Claim for debt not damages - avoids legislation
A lease of a shop property is due to expire 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?
1) Confirmed with my client 12 months before expiry - They noted that they would like to proceed conversations re renewal
2) Initially reviewed lease and inspected the unit - Confirmed no breaches evident
3) Serve friendly notice (prop, rent, terms)
4) Enter negotiation - Confirm on this
5) Sign new lease (start date year after) - Agree with solicitors
What is included within a Calderbank letter/offer?
- Unconditional written offer to settle RR
- Reasonable proposal regarding costs incurred up to date of the offer
- Time within which the other party must accept the offer by (Usually 21 days)
- Statement that is made ‘without prejudice save as to costs’
What is meant by the term ‘time of the essence’
Although generally not the case, it states strict timescales that need to be adhered to
What is the hypothetical term?
Term to be valued in the rent review clause
EITHER
1) Term equal to unexpired term at review
OR
2) Assumed hypothetical term
Valuer must decide whether a tenant would pay higher or lower rent based on hypothetical lease
If you manage a property that is going to be redeveloped soon, which options are available to you to generate some rental income?
Depends on letting length (2 options)
1) Can grant short-term tenancy under S.43 (Not protected by act)
2) Can grant 1+ year tenancy and contract our from S.24-28
What is section 40?
Duty to give information
- L or T can request info within last 2 years of term
- Replies must be within a month
What is the deeming provision in a rent review clause?
Sets out what should happen if a counter-notice is not served within time limits prescribed by the lease.
What is the purpose of a Calderbank letter/offer?
Procedure to save client costs (ONLY used when there is an arbitrator)
‘unequivocal offer to settle save as to costs;
Give some examples of where it was held in court that a break notice was invalid?
Osborne Assets Ltd v Britannia Life Ltd 1997
- T due to paint X3 coats every 5 years
- Invoices showed only X2 coats
- Couldn’t break
Riverside Park vs NHS Services
- 10 year lease - break conditional on vacant possession
- T didn’t remove demountable office partitions
- Break notice invalid
What makes a S.146 notice valid?
- Specify breach of covenant
- Require tenant to remedy breach
- Give tenant reasonable time to remedy the breach
- Require tenant to monetise the breach if necessary
Which assumptions are usually made at rent review?
- Vacant Possession
- Property fit for immediate occupation and use
- T has complied with terms of existing lease
- Property is available to let on open market by willing LL and willing T at market rent
- Property may be used for any purpose permitted under the terms of the lease
Explain what action a tenant should take if there are 6 months of the lease remaining and they want to vacate at expiry (no s.25 has been served)?
- T can hand back keys on last day of term
- T can also stay (hold over) as per act
- T should ideally give minimum 3 months notice
- If T in occupation 1 day after expiry also must give 3 months notice
What is a section 25 notice?
Notice serviced by LL to tenant to terminate the lease at its contractual expiry:
- LL may want possession
- LL may want new tenancy (Serve notice with certain terms or s.30 served to object tenant having new lease)
How is compensation for Ts improvements calculated?
Lower value of:
- Addition in value as a result of improvement
- Cost of doing repairs MINUS costs of disrepair
What is section 36?
Carrying out of order for new tenancy
- LL bound to grant new lease on terms determined by court
- T can apply to have court order revoked within 14 days
What are the usual disregards?
- T previous occupation
- Goodwill
- Certain improvements carried out by T
- Licence to sell intoxicating liquor if licence belongs to tenant
What factors affect value in a lease?
- rent
- term
- L and T act 1954 or not
- Repairing clause - e.g. more repair = lower value
- Alienation provision
What are the key elements of a rent review clause?
1) Who can instigate RR (LL or T or either)
2) May mention LL is to give notice and T may be able to serve counter-notice
3) If agreement isn’t made, it will state how rent can be determined
4) Machinery, basis of value, means of settling dispute (ALL OF ABOVE)
5) If time is of the essence (it isnt if its not mentioned)
What can a licence be granted for?
- Car park
- Food van
- Pavement licence (outside pubs)
- Outside seating (restaurants)
- Grazing horses in field
How can a rent review be resolved if both LL and T can’t agree?
3rd party - Arbitrator or Independent Expert (Depending on what lease says)
What is the difference between a lease and a licence?
Lease = Fixed term/periodic and gives T exclusive right of possession
Licence = Gives permission for someone to do something on owners land which would otherwise constitute as trespass
Please can you take me through the receiving of the break notice at Unit 6, Merton Road and the steps you undertook once it was received?
1) Break notice was received by LL
2) Reviewed lease - check conditions required for validity (all payments to be made/vacant possession) - Confirmed position with solicitors
4) Findings relayed to my client and I confirmed the break should be accepted subject to the preconditions being met
3) I attended on the break date and confirmed conditions had been satisfied - Took keys from tenant and break was activated
Can you take me through your rent review at Croxley Park?
1) Received instruction
2) Analysed rent review clause + other lease terms (repairing obligation, insurance etc) - OPEN MARKET
3) Inspect and measure unit in line with GIA
4) Comparables gathered to determine MR
5) Presented to client - approved
6) Presented to T with rationale - Negotiated
7) Agreed with sols RR memorandum then signed
What is an authorised guarantee agreement?
Agreement placing obligations on the outgoing tenant to guarantee performance of covenants
When is the best time to serve the section 25 notice: 12 months or 6 months before lease expiry?
12 months
- Maximum time for both parties - Good if T is going but if they are likely to stay you would have to agree rent far in advance (unsure of rent in 12 months time)
6 months
- Negotiating terms close to renewal date
- Risk tenant may not reply for a few months and then leave on the last day of the tenancy
What are the key elements of the Landlord and Tenant Act 1927?
Section 3 - Relates to ability for tenants to undertake works that are allowed for in lease and improve letting value of premises
Section 18 - Limits amount LL can claim for damages when T fails to fulfil repairing obligation under lease (diminuition in value e.g amount to which disrepair has reduced the value of the landlord’s interest in the property)
Section 19 - States that tenants assignments and alterations are not to be reasonable witheld - This is the case even if it is not explicitly stated in lesae
Are you aware of any other acts relating to Landlord and Tenant?
Landlord and Tenant Act 1927
Landlord and Tenant Act 1985 (Security of tenure for residential tenants)
When are tenants improvements disregarded at a lease renewal?
- If improvements carried out within last 21 years (any time during tenancy)
- If it is an alteration (not improvement)
- If improvements were a lease obligation
When is a tenant not responsible for external repairs?
Internal Repairing and Insuring Lease
In what circumstances is it appropriate to have restrictive user clauses in leases?
Tenant mix (e.g. pub next to pub or pub next to residential)
- too much competition in area
- protect value of investment
What must a section 25 notice contain?
- Landlord name
- Tenant name
- Property name (but notice is served on T)
- Date of notice
- Date of tenancy termination
- Friendly OR hostile notice
- Recommendation to seek professional advice
What action should a landlord take if they require possession of a property at the end of a lease?
Serve a S.25 to terminate tenancy and object to new tenancy under ground(s) of section 30
What is section 27?
Tenant’s notice to quit upon lease expiry
To be served not later than 3 month before lease end
What advice would you give to a landlord client in respect of a lease renewal where a property is significantly overrented?
Tell client what you think the rent would be for a new tenant
1) Do nothing - Carry on getting rent as tenant is holding over. T could terminate by giving 3 months or serve S.26 to request new tenant
2) Serve S.25 - Enter new lease at lower rent (value of prop would still be high as unit is let)
Tenant could apply to court for interim rent if giving 12 months notice (As T would have to pay high level of rent for 12 months) - T would suggest paying for 6 months as this is the minimum time LL could have given
No right answer - depends on landlords aims
What is the response deadline for a section 26?
2 months
What is a hostile notice?
Under s.25 LL is stating they are not willing to give a new tenancy when it expires
What is section 29?
Time-scales for application to court
- T must apply to court before expiry of S25
- LL and T May agree to extend date for court application S.29(B)
- L can apply to court
For the application of a new tenancy (court has power to grant)
How is T compensation assessed under 1954 Act?
Section 37
- 2 X Rateable Value for occupation of 14+ years
- 1 X Rateable Value for occupation of less than 14 years
Court can award compensation for damage or loss
Is a calderbank offer binding?
Yes in writing, bound by it if not
Why can a court only grant a lease up to 15 years?
Typical term for a hypothetical lease - falls in line with 5 year rent reviews
What are reasonable grounds for refusing to consent to assign?
- If tenant is weak covenant
- Effect on rental or capital value (weaker covenant = reduced rental value)
- If T accounts don’t match expectations
What is difference between interim and terminal schedule of dilaps? (KEY FOR GARRATT LANE)
Interim served when MORE than 3 years left on lease
Terminal served in last 3 years
- Leasehold Property Repairs Act 1938 - If LL serves s.146 notice, T can get relief from forfeiture under the act
What is an implied covenant?
RELATES TO RESIDENTIAL PREMISES
Relates to business premises if there are no EXPRESS covenants
Use property in a tenant like manner
Name three situations where licences are appropriate
- Licence to alter
- Licence to assign
- Licence to sublet
What do you understand as the term interim rent?
Rent payable between end of old lease and start of new lease
- Used when negotiations regarding lease are ongoing (tenant paying old lease during this time)
To what tenancies does the 1954 act apply?
All tenancies occupied for business purposes (MORE THAN 6 MONTHS)
How long does a tenant have to serve a section 27 notice prior to expiry?
No shorter than 3 months before lease expiry
What is the legal case in the matter of a lease or a licence?
Street v Mountford 1985
- Licence to occupy room in a house (neither attendance nor services were provided e.g. cleaning or meal provision)
- House of Lords stated it was a lease as the tenant had exclusive possession
What is a part 36 offer?
Lease renewal Calderbank - Offer to settle dispute save as to costs (Without prejudice)
What is section 33?
Court has power to grant new tenancy for a term (not exceeding 15 years)
What is section 28?
Agreement for new tenancy (old tenancy loses protective status) - Contracted out
A lease of a property is due to expire in 12 months time. You are instructed for the first time by the LL to negotiate a new lease with the T after a s.26 notice is received. How would you deal with this instruction? (This is my Staines Road Lease Renewal example)
1) Notice received from T - Check validity
2) Undertook an inspection to check for any grounds of objection under section30 (e.g. breach of covenant/lease terms)
3) Confirmed no breaches evident
4) Commenced negotiations of lease terms (S.32,34,35)
5) Terms agreed - Lease to start on expiry of the current lease
6) Documented with solicitors and signed
What can a LL do if they can’t get a response from T to friendly section 25 notice?
- Write to tenant mentioned if they don’t hear in number of days, client will be applying to court to determine terms of new tenancy (+ T liable for costs)
- Court will advise mediation to meet an agreement
Which legislation relates to lease assignments?
L and T Act 1927
What are the preconditions for an assignment?
- Arrears paid
- Complied with lease obligations
- Check financial strength
What is section 38?
Contracting out of S.24-28
- Landlord must serve: Regulatory Reform (Business Tenancies - England and Wales) order 2003 (HEALTH WARNING)
- If notice served at least 14 days before lease starts = T must sign simple declaration
- If lease starting within 14 days - T must sign stat dec before a solicitor
What are the main differences between an independent expert and an arbitrator?
Arbitrator
- Governed by Arbitration Act 1995
- Reasoned award MUST be given unless otherwise agreed
- Award must be between the 2 offers
- Cannot be sued for negligence unless proven they acted in bad faith
- Can’t delegate
Independent Expert
- Governed by lease
- Can use own knowledge and judgement to determine rent
- No right of appeal
- Can be sued for negligence
- A reasoned award CAN be given depending wording of lease
- Can seek assistance
What is goodwill?
Benefit and advantage of an established brand reputation or which brings in custom
What is section 24?
Gives the tenant security of tenure, and that the tenancy should not end unless terminated by the provisions of the act
Is rent review or RPI more valuable currently?
Rent review - Retail not currently doing well and high although retail parks flourishing
What is section 31?
Court dismissing T’s application when LL opposes new tenancy
What are the non fault grounds?
- Landlord intents to occupy premises
- Landlord intends to demolish
- Tenancy created by sub-tenancy
Explain the power of the court in ordering a new lease
Section 32, 33, 34 and 35 - Court determines these
S.32 - What property is comprised in new tenancy
S.33 - Term
S.34 - Rent + (S.24a) interim rent
S.35 - Other terms
What is a friendly notice?
Under s.25 LL is stating they are willing to give a new tenancy when it expires and sets out terms the landlord would accept
Which legal cases relate to ‘time of the essence’
Burnley and Cheapside
- Mention that essence is that rent is reviewed from that specific date
- Although their are strict times, these do not need to be kept to (not the essence of the contract)
What is section 35?
Other terms of new tenancy
- Court has regard to old tenancy and relevant circumstances
Name the grounds under section 30(1) of the 1954 act under which landlord can obtain possession
- T not paid rent
- T not met repairing obligations
- T not met other obligations
- Providing suitable accommodation
- Plans to demolish
- LL occupation
- Uneconomic sub-letting (can let as whole)
What are deeming provisions?
Where lease states:
- L to give notice proposing a new rent
- T to serve counter-notice with proposal in stated period of time
- If T doesn’t serve counter notice in time they are deemed to have agreed Ls rent
- L could be deemed to accept Ts counter proposal if lease states so
What is section 34 of the act?
New rent for the lease that property might be expected to let at in the open market by willing lessor, disregarding:
1) T’s previous occupation
2) Goodwill
3) Certain improvements
4) Licence to sell intoxicating liquor if licence belongs to tenant
What is the usual amount of an assignees business profit that a LL will look for before giving consent to assign?
3X annual rent and other payments due under lease (SC, insurance, rates)
When can a landlord serve a section 25 notice?
- With a minimum of 6 months notice but no more than 12 months before contractual expiry
What is privity of contract?
Prevents person not a party to a contract from enforcing a term of the contract
What is an express covenant?
Specific order to do something e.g. keep in repair and will breach this covenant if fall out of repair
Leave in repair - short lease
Put in repair - when in state of disrepair
Fair wear and tear - repair covenant limited by exception of dilaps caused by fair wear and tear
When is ‘time of the essence’ likely to be applied?
- If mentioned in lease
- If lease says timelines are strict
- If T makes it so (send letter requesting to organise in specific time period - E.G Barclays case)
- If there are deeming provisions
What is S.146 notice?
Law of Property Act 1925
- Notice served on a tenant when they break a covenant in the lease e.g. unapproved alterations, damages to prop,
Where do the usual disregards originate from?
- Included in many RR clauses
- Originate from S.34 of act (Even though it doesn’t relate to RR - Same wording)
Rent review from 1960s onwards after 1954 Act
Why is a subletting outside the act?
So that the subtenant doesn’t hold over when the tenant’s lease ends
In what circumstances is a T entitled to compensation when a LL successfully opposes a new lease under the 1954 Act?
Section 37- LL succeeding under no fault grounds
What is a trigger notice?
Notice that triggers pre-determined sequence of events.
e.g. First notice by LL or T to trigger rent review
What are standard break clause conditions?
- 6 months notice minimum
- T complied with all lease terms (no breach of lease covenant)
- Fine/Premium to be paid
What does the court have regard to when granting a new lease?
Old lease
What advice would you give to a tenant wanting to take a full repairing and insuring lease of a property in disrepair but suiting his business
Reflect expense of the repair in the rent and agree a specification and repair state
What is the basic difference between a lease renewal and a rent review?
Lease renewal = Statutory procedures laid down by L&T act 1954 (not statutory if not in L&T act)
Rent review = Contractual procedure contained within a lease
Names the tenancies to which the 1954 act does not apply
- Residential tenancies
- Agricultural holdings
- Mining leases
- Tenancies granted as a condition of employment
- Tenancies not exceeding 6 months unless provision for an extension or T has been in occupation for more than 12 months
What is section 23?
Tenancies to which part 2 of the act applies (Business tenancies)
What is another case relating to lease renewal?
Martin Retail Group Ltd v Crawley Borough Council
- Unopposed lease renewal - Existing lease permitted use as newsagents (prohibiting sale of alcohol, groceries and foods)
- County court held that this restriction in breach of anti-competition law
What legislation needs to be considered in an assignment of a lease?
L and T Act 1995 - Privity of contract
L and T Act 1927 - Consent not to be withheld and reasonableness
L and T Act 1988 - Consent not to be delayed
L and T Act 1954 - Security of tenure
What action should the LL take if they require possession of a property at the end of the lease?
Serve s.25 to terminate tenancy. State objection to tenancy under ground(s) of s.30
What does the Landlord and Tenant Act 1954 do?
Provides security of tenure for business tenant if the lease is inside the act
What is the O’May Case?
Relates to S.35 and lease terms - Either party wishing to change terms has to satisfy 4 tests:
1) Has party demanding change shown good reason?
2) Will the party resisting change be compensated?
3) Will adjustments impact conduct of Ts business?
4) Is the variation fair and reasonable between the parties?
What is section 32?
Property comprised in new tenancy (rarely differs)
What does without prejudice save as to costs mean?
Means the offers can’t be mentioned in court/arbitration, but the court/arbitrator can awards costs
What can tenant do if LL in breach of repairing covenant?
- Request LL undertakes repair
- Injunction from court compelling LL to undertake repair
- T can undertake works and withold rent for value of works (Would have to put in writing and give LL reasonable timeframe + send quotes explaining they are undertaking works)
If the rent was being increased in your rent review and you couldn’t agree the review with the tenant, what would have happened?
Appointed an independent expert to determine the rent and they can award costs
How does the hypothetical term impact value?
If it stated a long lease ie. 15 yrs for example and you had a retail unit unlikely a tenant would go for this term and rent would be adjusted downward, shorter lease would be the other way, depends on property.
What are section 32-35?
- Terms of new lease
- Max 15 yrs
- Must be market rent
- Ignore previous occupation and goodwill and any LL approved works over last 21 years
- Always consider the terms of current tenancy in new tenancy.
What if there is a dispute over lease renewal?
You could go to county court ie. Part 36 which is an offer to settle, open for 21 days or PACT professional arbitration on court terms.
What part of the landlord and tenant act 1954 is forfeiture detailed under?
Section 24 (2) - Contractual right under the lease
How long does a tenant have to serve a counter notice after forfeiture?
28 days - This is for repair of lesae breaches under leasehold property repairs act 1938 (prevents landlord from re-entering the premises and forces them to obtain court judgement)
Types of dilaps?
- Interim
- Terminal
- Final
What is included within a friendly notice (s.25/26)
- Landlord
- Tenant
- Property Address
- Lease terms proposal
- Timescales for applying to court
What is section 43?
Tenancies to which provisions of the act do not apply.
- Agricultural holdings
- Mining leases
- Home business tenancies
- Tenancies of 6 months or less
How are damages assessed when a tenant is in breach of a repairing covenant under S18 of L and T act 1927?
Limited to the diminution of the value in the LL interest (IE reduction in value as a result of tenants breach = cost of works)
- LL can only claim for their loss
Who serves a section 25?
Competent landlord
What is written representation?
An oral or written statement that may be used to refer to one or more statements of case (e.g. documents setting out case to be proved), assertion of facts
How does a tenant apply for automatic relief from forfeiture?
(RENT FORFEITURE UNDER LEASE) - Paying within 5 days - Automatic
What is an onerous lease term?
a contract where the costs of meeting the obligations are greater than the economic benefits expected to be received. This can happen when a company is forced to downsize and can no longer use a property, but is still obligated to pay rent on the lease
What is a section 17 notice?
Section 17 is a notice served on guarantors or former tenants no more than 6 months after the sums become due
- Only for rent and service charge
When would you advise your client to serve a section 25 if the unit is overrented?
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 T leaving on lease expiry or at 3 months’ notice thereafter
Although the tenant undertook the repairs at Garratt Lane, what if the disrepair was more serious and the tenant had not completed the works?
- Jervis v Harris clause to re-enter the property
- LL can also serve s.146 (Law of Property Act 1925)
What is the difference between an expert witness and independent expert?
- Independent expert resolves dispute at rent review
- Expert witness has duty of care to the court and present at a lease renewal dispute
Who pays an expert witness?
The court
What are sections 1-3 of the Landlord and Tenant Act 1927?
Relate to registering tenant’s improvements
When is time of the essence likely?
- When Lease says,
- deeming provisions,
- T serves notice making time of essence
- RR inter relates with another clause
What advice would you give to a Landlord Client in respect of a lease renewal where a property is significantly under-rented?
Find out clients aims and objectives
- If it is about collecting maximum rent then advise they serve a s.25 at earliest opportunity - Advise that underrenting is having effect on capital value due to uncertainty - T can also leave after 3 months when holding over
- Seek to offer a 10 year lease from s.25
Why do you disregard tenants improvements?
Disadvantages tenant as you are effectively charging them twice for the improvement and then rentalising the improvement.
What does the code for leasing business premises (2007) say about rent reviews?
RR clauses should be:
- clear
- Should not use headline review
- Leases should allow L&T to initiate RR process.
What is the defective premises act 1972?
Imposes duty on the landlord to prevent injury to persons on premises
- If injury/harm is suffer due to a LL failure to remedy defects, a claim can be made to court
What is part 1 of the L&T Act 1954?
Relates to residential tenants (Long tenancies at low rents).
What does a section 25 notice do?
Terminates the lease
Is a calderbank offer binding?
Yes if it is accepted
Who pays the independent experts costs?
The lease will state who pays (arbitrator governed by Arbitration Act)
How long was the hypothetical term in your rent review?
The term was 10 years
What is adverse possession?
When a party who doesn’t own the land becomes owner of the land (10/12 years)
What is difference between Arbitration and PACT?
PACT on course terms and relates specifically for lease renewal disputes
How does the L and T act 1927 relate to sublets and assignments?
Section 19(2) - Consent not to be unreasonably withheld (If landlord consent is required under the lease)
When is it reasonable to withhold consent?
- Consistent disrepair and failure to remedy breaches of lease
- Proposed assignee of less financial covenance of existing T
- If assignee wants to change use
- If it affects the investment value of the property
What is a covenant?
An agreement between parties for specific performance during a lease
What does it mean when a lease is vested in the crown?
The lease is passed to the crown as the limited company holding the lease has dissolved
- The crown doesn’t take on any liabilities of the tenant and isn’t bound by their covenants
What is a rolling break?
A short form break clause enabling either the landlord or the tenant to terminate a lease at any time during the term, giving notice - OUTSIDE OF THE 1954 ACT
Can a side letter be documented by surveyors?
Yes
What if LL doesn’t respond to a S.26 within 2 months?
Bound to accept on a new lease but can negotiate terms
What are the types of rent review mechanism?
- Open-market
- Fixed basis
- Turnover
- Index linked
Is there any RICS guidance on heads of terms?
RICS Professional Standard: Code For Leasing Business Premises, 1st Edition 2020
- Provides templates for HOTs alongside a guide for constructive and collaborative negotiation
What does Ponsford vs HMS Aerosols relate to?
The lease had no provision for excluding tenant’s improvements, therefore they were taken into account at rent review (wasn’t listed in the disregards).
What did the Regulatory Reform Order 2003 bring in?
- New procedures for terminating or renewing business tenancies under the Act
- Procedures for contracting out of sections 24 to 28 relating to security of tenure
Is a guarantor a party to a side letter?
Only if they sign it (In most cases they do)
What are the main points part of the RICS professional standard Code for Leasing Business Premises 2020?
- Sub-letting = to be at market rent and not passing rent is passing rent lower
- Rent review = clauses need to be clear
- Assignments = only to request AGA if propose assignee and proposed guarantor is of weaker financial covenant
- Break clauses = pay rent up to date, vacant possession, no sub-tenants left in occupation
What is the difference between a new form and old form lease?
Old form lease before the Landlord and Tenant Covenants Act 1995 (01/01/1996)
What there must be to be L&T act Compliant?
Business tenants, who are in occupation
What is section 34?
Section 34 is the court determined rent - To be based an on open market basis regarding the previous tenancy
Can a tenant withdraw a section 26 notice?
Yes they can withdraw the notice
How long must a tenancy be to have security of tenure?
Must exceed 6 months
Why didn’t you serve a s.25 before, were you opposed to renewal (Staines Road)?
No my client was not opposed to a renewal of the lease, however, I was instructed to assess if there were any grounds of objection.
Putting yourselves in the tenant’s shoes, why do you think they served a s.26 (market rent higher than passing rent)?
- They were happy and comfortable (Wasn’t necessarily a large uplift here)
- They offered a shorter lease (5 years in comparison to 15 currently) = higher rent
- Retail kitchen warehouse - Retail parks in high demand (in London)
- Landlord risk taker and hadn’t served s.26
Did you deal with the heads of terms?
No, although I had a say with the negotiations, these were dealt with by the letting agents and drawn up with solicitors.
What parts of the L and T Act 1927 give rights for compensation for tenants?
Sections 1-3
- gives right for tenant who has improved premises during tenancy a right to compensation (must have served notice of intention to carry out works and spec of works)
- if LL does not respond within 3 months - T can undertaken improvements
- If L objects - can go to court and court will determine if improvements will add to letting value of prop
- Must note if improvements are disregarded in the lease
- COMPENSATION BASED ON THE INCREASE IN VALUE
