Landlord & Tenant Flashcards
What is the basic difference between and lease renewal and a rent review?
A lease renewal is a statutory procedure laid down by the Landlord and Tenant Act 1954
A rent review is a contractual procedure contained within the lease
To what tenancies does the 1954 Act apply?
Business tenancies
Name the tenancies to which the 1954 Act does not apply
- Agricultural holdings
- Mining leases
- Residential tenancies
- Tenancies granted as condition of employment
- Tenancies not exceeding 6 months unless → there is a provision for extention, or → Tenant has been in occupation for more than 12 months
What is a section 25 notice?
Landlord notice served to terminate the business tenancy
When can a landlord service a section 25 notice?
Between 12 and 6 months prior to:
a) The contractual end of the tenancy
b) The date specified in the notice
What must a landlords section 25 contain?
If landlord does not oppose new tenancy:
- The property comprised
- The rent
- The other terms
- That landlords proposals are for the purposes of negotiation
If landlord opposes new tenancy:
- The ground(s) under section 30(1) upon which he would opposed the tenants application for a new tenancy
What advice would you give to a landlord client in respect of a lease renewal where a property is significantly over rented ?
Serve a section 25 suggesting new tenancy on the same terms
When is the best time to serve the section 25 notice? 12 months or 6 months beofre expiry?
6 months
Why would a landlord give 12 months notice when he could give 6 months notice?
To avoid the tenant serving a section 26 notice → cannot serve s.25 once s.26 has been served
What action should the landlord take if he/she requires possession of a property at the end of a lease?
Serve a section 25 notice to oppose the new tenancy on grounds stated in section 30(1) of the Landlord and Tenant Act 1954
What can a landlord do if he cannot get a response from the tenant to his friendly section 25 notice?
Tenancy will continue at the Landlords new proposal terms
What adviec would you give to a tenant when a landlords section 25 notice is due to expire in two weeks time, and an agreement for a new lease has not yet been agreed?
Request an extension under which an interim rent is agreed
Make an application to court → court will direct the terms of the new tenancy
Name the grounds under section 30(1) of the Landlord and Tenant Act 1954 under which a landlord can obtain possession
a) Tenant failed to carry out repirs
b) Tenant has peristently delayed paying rent
c) Tenant is in substatial breach of another covenant
d) Landlord offers other suitable accomodation
e) Sub-letting of part, where higher rent can be achieved by single letting of the whole building
f) Landlord intends to demolish or reconstruct and cannot do so without possession
g) Landlord intends to occupy the premises for his own purposes
In what circumstances is a tenant entitled to compensation when a landlord successfully opposes a new lease under the 1954 Act?
If the landlord opposes under section 30(10 ground e, f or g (no fault grounds)
How is tenants compensation assessed under the 1954 Act?
In the form of a Rateable Value Multiplier
→ Twice x RV for occupation of 14 years or more: can be more than one tenant if there is business succession
→ Once x RV for occupation of less than 14 years
Additionall: Court can award compensation for damage or loss sustained by Tenant because of Landlords misrepresentation or concealment
Explain the power that a court has in ordering a new lease
If tenancy terminated in accordance with the Act and application made to court under section 24(i)
→ the court has power under section 29(1) to grant a new tenancy and may determine:
- The property comprised
- The length of the lease
- The rent
- The other terms
- An interim rent
What do you understand a section 34 rent to be?
The rent the property might reasonably be expected to let at in the open market by a willing lessor, disregarding:
i) Tenants previous occupation
ii) any goodwill
iii) Certain improvements carried out by the tenant
iv) Any licence to sell intoxicating liquor if the licence belongs to a tenant
What do you understand interim rent to be?
The period from expiry of section 25 or 26 notice and the start of the new lease, should such a period exist
How is the interim rent assessed?
If not opposed, it will be the same as the rent payable under the new lease
→ if market conditions have changed significantly, interim rent is subject to adjustment
→ Can be decided using PACT proceedings
In what circumstances would you recommend to a tenant to serve a Section 26 notice?
If they wish to remain in occupation and enter a new lease agreement
Explain when tenant’s improvements are disregarded at lease renewal
Improvements are to be disregarded if they were carried out by the tenant other than as a lease obligation and
→ during the old tenancy or
→ less than 2 years before the application for a new tenancy was made
Explain what action a tenant should take if there are 6 months of the lease remaining and he/she wants to vacate at expiry. The landlord has not served a section 25 notice
Nothing → no notice needs to be served if they wish to vacate on or prior to the lease expiry date
What are the key elements of a rent review clause?
- The machinery for effectinv the rent review (procedure)
- The basis of valuation
- The means of settling disputes where parties cannot agree on the revised rent
What is a trigger notice?
The landlords proposal of a new rent by a certain date
What do you understand about the term time of the essence?
Provision of the contract must be completed by the stated time
→ Stated time for completion of an obligation in a contract is a condition of the contract
What are the two landmark cases in respect of time of the essence?
United Scientific Holdings Ltd vs Burnley Borough Council (1977)
Cheapside Land & Development Co Ltd vs Messels Services Ltd (1977)
more recent:
→ Bello vs Ideal View (2008) → RR not initiated for 13 years. Court said time was not of the essence and the RR could proceed
In what circumstances is it likely that time is of the essence?
→ The lease says so
→ The lease makes it clear there are strict time limits (e.g. Break options)
→ There are deeming provisions
→ Tenant serves notice, making time of the essence
What are deeming provisions?
WHere the lease expressly states:
- Landlord to give notice proposing new rent
- Tenant to serve counter notice with a counter proposal within a stated period of time
- If tenant fails to serve counter notice in time, tenant is deemed to have agreed ndlords rent
- Landlord could be deemed to accept tenants counter propsal if lease states so
What lease terms affect the rent at review?
Most signifacntly → Rent Review clasue itself: Definition of rent, assumptions, disregards
also:
- Rent review frequency
- Repairing liability
- Insurance liability
- Alienation
- User
- LTA 1954 Provision
What assumptions are usually made in determining the rent at review?
- Property available to let on open market by willing tenant and willing landlord for a term of years aas stated
- Property is fit and available for immediate occupation and use
- All covenants observed by landlord and tenant
- Property may be used for purpose set out in lease
What is the hypothetical term?
The length of term to be valued.
If this is silent, assume the residue of the term
What are the usual disregards?
- Any effect of goodwill on tenants occupation
- Ignore goodwill attached to the property
- Tenants improvements if landlord consent was granted for the works
How may a rent review be resolved if a landlord and tenant cannot reach an agreement?
Lease should state the matter will be dtermined by a third party
→ Arbitrator or independent expert
→ if can’t agree on third party, President of RICS appoints
What are the differences between an Arbitator and an independent expert?
→ Arbitrator cannot decide without receiving evidence
→ Expert base decision on own knowledge and investigation
→ Arbitrator is regulation by Arbitration Act 1996
→ Expert is not governed by legislation
→ Arbitrator cannot delegate duties
→ Expert can seek assistance
→ Arbitrator is not liable for negligence
→ Expert is liable for damages through negligence
What is the purposeof a Calderbank letter/offer?
To acheive early resolution of a dispute and prevent costs from escalating
→ an unconditional offer to settle on specified terms
What must a Calderbank letter/offer contain?
- Unconditional written offer to settle the rent review
- Reasonable proposal regarding costs incurred up to the date of the offer
- Time which the other party must accept the offer
- Statement that it is made without prejudice save as to costs
What is the differrence between a lease and licence?
A licence passes no interest in the land but only makes lawful what would otherwise be unlawful
Lease can usually be assigned whereas a licence cannot as is a personal right
Licence can usually be revoked at any time
What is the leading case in the matter of lease or licence?
Street v Mountford (1985)
→ a licence to occupy a furnished room → agreement conferred exclusive possession at a rent
→ House of lords ruled that this agreement constituted a tenancy
In what circumstances have you granted (or would consider granting) a licence?
Tenancy at will
→ written agreement for an unspecified time in which the landlord can evict any time
→ not a legal interest in land with no renewal right
→ early access for fit-out works
You are managing a property that is going to be redeveloped at some unkown date in the future. What letting options do you have to generate some rental income without giving the tenant security of tenure under the 1954 Act?
- Tenancy at Will
- Normal tenancy but contract out
A tenant has entered into a full repairing and insuring lease of a property in disrepair. The landlord now requires the tenant to remedy this disrepair. What advice would you give to the tenant?
Tenant must put in repair if agreed to keep in repair in the 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 the expense of repair in the rent
→ Agree a specific state of repair e.g. good, habitable, tenantable
→ Agree a specification of works (ideal)
What action can a tenant take when a landlord is in breach of a repairing covenant?
Claim damages
specific performance → injunction compelling landlord to do works
Declaration → declration from court if injunction refused
Set-off against rent
What action can a landlord take if a tenant is in breach of repairing covenant?
- Damages
- Forfeiture → S.146 (tenant may apply for relief under leasehold property repairs act 1938 section 1)
- Exercise Right of Entry to Repair
What does the Jervis v Harris case mean to you?
Allows the landlord to recalim the cost of the works from the tenant as debt
→ Not subject to Leasehold Property Repairs Act 1938 → usually requires court permission to seek damages
→ Not subject to Section 18(1) of LTA 1927 → this is used to cap landlords damages claim to loss in value
How are damages assessed when a tenant is in breach of repairing covenant?
Under Landlord and Tenant Act 1927 Section 18(1)
→Damages limited to the loss in value to Landlords interest aused by the Tenants breach
How are damages assessed when a landlord is in breach of repairing covenant?
The difference in value to Tenant between the premises in their condition at the time of assessment and their value if the Landlord had fulfilled his repairing obligations
Explain the provisions of Section 18(1) of the Landlord and Tenant Act 1927
Statutory cap on damages
→ Damages for breach by the Tenant of its repairing covenants cannot be more than the reduction in value of the landlords reversionary interest
→ No damages are payable if the Landlord is going to make structural alterations which would render the repairs valueless
Explain the different between a schedule of condition and a schedule of dilapidations
A schedule of condition is a statement describing the current phsical state of a building
A schedule of dilapidations is arecord of alleged breaches of repairing covenant → where appropriate includes reinstatement provisions
Explain the difference between an Interim and a Terminal Schedule of dilapidations
Interim → served when more than 3 years left on lease
Terminal → served within last 3 years of the term
What is a Scott Schedule?
A table → extended version of Schedule of Dilaidations which enables the Tenant to respond to the content of the schedule of dilapidaitons
What is the difference between an alteration and an improvement?
An alteration is making physical changes to a property
An improvement is an alteration that adds value
Your tenant client wishes to extend an industrial property. Explain the factors that need to be considered and the action that need to be taken
Review lease and check wording
→ shall not make any alterations, additions or improvements to the demised premises?
→ without prior written consent?
→ is consent required to comply with lease?
Also consider: unexpired term of lease and rent review clause wording
You are managing property for your landlord client and have receieved a request from a tenant to carry out improvements. The tenant has requested that improvements are registered under the 1927 Act. What advice would you give to your client?
For improvements to qualify for compensation the procedure in the 1927 Act must be followed:
→ Tenant must serve notice on Landlord before works start, with details and plans
→ Landlord has 3 months to object or offer to do works himself in return for a reasonable increase in rent
→ If Landlord does not object or offer to do the works himself, Tenant can proceed and must complete the works within an agreed period
If rejecting, can only reject if works do not add value, diminish value, or unreasonable/unsuitable
How is tenants compensation for improvements calculated ?
Payable when tenancy come to an end
→ The net addition of the value of the property as a whole which is a direct result of the improvement
→ The reasonable cost of carrying out the improvement at the end of the lease less the cost of putting the improvement into reasonable state of repair
What lease terms are implied under Section 19 of the Landlord and Tenant Act 1927 ?
Section 19(1)(a) of the Landlord and Tenant Act 1927 implies that where consent can be given by Landlord such consent cannot be unreasonably withheld
What lease terms are implied under the Landlord and Tenant Act 1988?
Where consent can be given by the Landlord, consent must be given within a reasonable time
Explain the Legislation that needs to be considered in an assignment of a lease
Landlord and Tenant (covenants) Act 1995 → Privity of Contract
Landlord and Tenant Act 1927 & Landlord and Tenant Act 1988 → Consent and reasonableness
Landlord and Tenant Act 1954 → Security of Tenure
In what ircumstance could no restrictions on assignment and sub-letting be appropriate?
If expressly stated in the lease
Proposed tenant is of higher covenant strength and same user clause that doesn’t diminish value of interest
What are reasonable grounds for refusing consent?
→ character of the proposed assignee
→ effect on rental or capital values
WHat is the amount of an assignees business profit that a landlord will look for before giving consent to assign?
3x annual rent and other payments due under the lease
What do you understand about the expression authorised guarantee agreement or AGA?
AN AGA is an agreement which places an obligation on an outgoing tenant to guarantee the performance by the new tenant of covenants contained within the lease
In what circumstances is it appropriate to have restictive use clases in leases?
To protect the value of the investment
Protect the value of other premises under ownership
What do you understand a conditional break clause to be?
Option to break from the lease?
Usually all break clauses are conditional as if the conditions are not satisfied, the break notice will not be valid
What conditions are usually atatched to break clauses?
→ vacant possession
→ 6 month prior written notice
→ All sums due under the lease are paid prior to break date
→ repairs and decorations carried out prior to break date
Can you give two examples of situations where it was held in court that a break notice was invalid / ineffective?
Osborn Assets Ltd v Britannia Life Ltd (1997) → Tenant covented to paint internally with 3 coats of paint every 5 years → invoices showed only 2 coats → break ineffective
NYK Logistics (UK) Ltd v Ibrend Estates BC (2011) → Tenant had not completted Terminal Schedule of Dilapidations work prior to expiry date and workmen stayed in the unit for an additional week → no vacant possession provided → break ineffective
