Landlord & Tenant Flashcards
What sort of terms would you expect to see in a lease?
- Parties
- Term
- Rent
- Security of tenure provisions
- Repairing obligations
- L&T covenants
- Rent review
What information is required from the client at commencement of the instruction? (L&T)
- Agreed TofE
- An understanding of clients strategy and objectives
- Copy of existing lease and any plans attached to the lease
- Copies of any licences (e.g. alterations, improvements, sub-letting or assignment and any deeds of variation to the lease)
- Copy of any rent review memoranda
- Contact details for the tenant to arrange inspection or details of the landlord/agent
- Copy of the property management file (to see if there is any rental evidence on the file or relevant info which could assist negotiations)
- Details of any comparable evidence held by the client
What can fees for rent reviews or lease renewals be based on?
- A fixed fee (or fixed stages, e.g. stage 1 - report; stage 2 - negotiations)
- Incentivised fee (e.g. a % of the uplift agreed)
- Hourly rate (commonly applied for expert witness work)
What does without prejudice mean?
Cannot be disclosed to a third party/tribunal/court if its genuinely aimed at settling a dispute
What does without prejudice save as to costs mean?
That the matter can only be brought before a third party/tribunal/court on the matter of costs (providing it is a genuine attempt to settle)
What is a licence?
- Personal right to use a property in a certain way
- A right to enter a property
- A personal arrangement between the licensor and licensee
- The licensee acquires no interest in the land
- It is merely a personal right which can be terminated by either party
What is the key legal case relating to the lease vs. licence distinction?
Street and Mountford
What are the four requirements of a lease?
- Exclusive occupation
- Payment of rent
- Duration for a specified term
- If more than 3 years, the term must be in writing, signed as a deed
- If exclusive occupation is granted of a defined area for over 6 months, it is likely to be a lease
What are the 3 main differences between a lease and a licence?
- A lease provides an occupier with an estate in the relevant land - a licence is a permission to make it lawful for them to use the land
- A lease can be assigned - a licence is normally a personal right that cannot be assigned
- A lease cannot be terminated until it expires (unless there is a break clause) - a licence can usually be revoked at any time
What is a tenancy at will?
- Form of licence created by written agreement for an unspecified term in which the landlord may evict the tenant at any time.
- Not a legal interest in land with no renewal right.
- Used for allowing a tenant early entry for fit out works or whilst tenant is agreeing a new contracted out of the 54 Act lease after the lease expiry
What is a wayleave?
- A temporary right and receives an annual payment - e.g. right for an electricity company to install and retain their apparatus
- Is personal to the company and cannot be automatically transferred to the new owner
- It is not compulsorily registrabile
What is an easement?
- Is a permanent right and receives a capital payment
- Is capable of being registered at the land registry
- Allows a right enjoyed by one party over the land of another
- A prescriptive right of way or prescriptive easement can be obtained because of continuous and uninterrupted use being proven over a period of not less 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 public do not have a right to use them.
- There is usually signage in place to confirm that this is a permissive right of way
What is adverse possession?
- Is the process by which a person who is not the legal owner of the land 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 yrs of possession before the Land Registration Act came into effect in 2003, then the claim can be successful. If after 2003, new rules apply and 10 yrs or occupation is required.
- If land is not registered, then the 12 yrs rule applies
What are the contents of a rent review clause?
- Basis of valuation (normally upwards only to the market rent using standard assumptions. Other bases include indexation, turnover rents and stepped increases).
- The assumed term of the lease / hypothetical term (unless wording is explicit, e.g. 10 yrs from the review date, the assumed term is likely to be the unexpired residue
- Time is of the essence (United Scientific Holdings v Burnley Borough Council 1979 provides general presumption that time is not of the essence
- Deeming provisions (some clauses in older leases require landlord to specify the rent in the trigger notice. Clause will state that if tenant does not serve the appropriate counter notice within a specified time, the tenant will have deemed to accept the new rent)
What are the assumptions and disregards for a rent review?
Assumptions:
- Property is available to let on open market by willing landlord to a willing tenant for a term of years as stated (the notional or hypothetical term)
- 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
Disregards:
- Tenant’s occupation
- Any effect of goodwill on tenants occupation
- Ignore goodwill attached to the property
- Tenants improvements of landlord consent has been granted
- Any licences
What is the hierarchy of evidence for rent reviews?
This is the relative weight attached to comparable evidence:
- Open market lettings
- Lease renewals
- Rent reviews
- Independent or expert determinations
- Arbitrator awards
- Court determinations under the 54 Act
- Hearsay evidence
- Sale and leasebacks
- Surrender and renewals
- Inter company arrangements
What does ‘Without Prejudice Save as to Costs’ mean?
‘Without Prejudice Save as to Costs’ allows parties in a dispute to make settlement offers that remain confidential during proceedings. However, once the dispute is resolved, the tribunal can refer to these offers when deciding who should pay the costs.
If a party rejects such an offer and doesn’t achieve a better outcome at the tribunal, they may be ordered to pay the other party’s costs from the time the offer was made, and they might not recover their own costs after that point.
This encourages early settlement to avoid unnecessary legal costs.
What is a Calderbank offer?
Parties can serve a Calderbank offer for disputed rent reviews.
Must be marked “without prejudice save as to costs” but not “subject to contract”
To be valid, the offer must set out the offer being made and the timescales for acceptance
Must be:
- A genuine offer to settle, must be
- Clear
- Capable of unconditional acceptance
- Must remain open for a sufficient period to allow the recipient to consider the proposal
Can be used for lease renewals of protected tenancies
What are dispute resolution options for rent reviews?
- Will be identified in the lease - read to establish the procedure for appointment, and role of the dispute resolver
- Arbitrator or independent expert
- Some leases provide for the appointment of the dispute resolved to be made via an application to the DRS
What can you tell me about an Arbitrator?
- Usually appointed following an application to RICS DRS
- Procedure governed by statute (Arbitration Act 1996) and has powers conferred by statute
- Parties have some flexibility to agree procedural matters, but if cannot agree, Arbitrator will decide on procedure
- Usually dealt by way of representation
- Decision made based on evidence submitted
- Arbitrator has power to order disclosure (making evidence available which either supports or undermines the respective parties’ cases)
- Arbitrator has power to award costs, including costs of the arbitrator and of the parties (in connections with the arbitration proceedings)
Following an arbitrators award, what are the 3 grounds of appeal?
- A challenge to the tribunal’s jurisdiction
- On a point of law
- Serious irregularity
What can you tell me about an independent expert?
- Usually appointed following an application to RICS DRS
- Procedure governed by contract (what the lease directs), not by statute.
- Independent expert has to agree full terms of appointment (including fees) with the parties
- Independent expert must have detailed knowledge of the market/sector/location
- Independent expert under a duty to make their own inquiries, but usually invites representations from the parties
- Usually dealt with by way if written representations
- No grounds to appeal determination, but expert potentially liable for negligence
- No power to order disclosure
- Can only determine costs if lease provides for it, and then only the costs of the expert not the expert witnesses or legal costs
- Advantageous if dealing with property or lease terms for which comparable evidence is scarce
What is the difference between an arbitrator and independent expert?
Evidence:
- Arbitrator acts on the evidence provided
- IE has a duty of investigation to discover the facts, details of comps and all other information they require relevant to valuation and do not have to just consider evidence provided. Use own knowledge and expertise.
Appeal:
- Arbitrator: limited right of appeal to High Court on a point of law, serious irregularities or the jurisdiction of an arbitrator
- IE: No right of appeal. In some limited circumstances Court may set aside if the determination involves fraud or manifest error
Negligence:
- Arbitrator is not liable for negligence
- IE: In theory can be liable, but difficult to prove
Disclosure:
- Arbitrator has power of disclosure
- IE no power
Law:
- Arbitrator acts within a formal statutory framework in accordance with Arbitration Act 1996
- IE appointment governed by contract
Outcome:
- Arbitrator: called an award
- IE: called a determination
Costs
- Arbitrator has power over all costs (e.g. parties surveyors, experts and legal advisors
- IE: No automatic power to determine costs - depends what lease says.
Arbitrator - RICS Professional Standard: Surveyors acting as arbitrators in commercial property rent reviews, 2013
IE - RICS Guidance Note: Surveyors acting as indecent experts in commercial property rent reviews, 2014
What are the contents of a rent review memo?
- Name of landlord and tenant
- Address of the property
- Date of the lease and rent review
- Confirmation of new rent agreed
- Signed and dated by both parties
- Can also be recorded by an independent experts determination or an arbitrators award or written acceptance of a Calderbank offer or an open letter (not marked subject to contract)
What is Section 24 of the ‘54 Act?
- S24 covers continuation tenancies
- At the end of the fixed term of business tenancy to which the Act applies, the tenancy will not come to an end if the tenant remains in occupation for business purposes. Will automatically continue on the same terms until it is terminated in accordance with Act.
- Known as the continuation tenancy - a tenant whose protected lease has expired but they have not vacated is said to be ‘holding over’ under the expired lease.
What is Section 25 of the ‘54 Act?
Landlords notice for grant or termination of lease
- 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, which cannot be be before the contractural expiry date specified in the lease
Notice must be
- Given by a competent landlord and be given to the tenant
- State the date for the termination of the tenancy
- Be in the prescribed form and inform the tenant of their rights
- Where Landlord is prepared to grant a new lease (non hostile notice) the proposed terms of new lease must be stated to include new rent
- Where landlord opposes a new lease (hostile notice) the grounds for opposition must be stated
- Parties can extend time limits by agreement
- Max term of 15 yrs granted by the County Court but the parties are free to agree a longer term if they wish
- If you undertake a lease renewal negotiation and pass the date for a new lease/termination as specified in the s25 or s26 notice, tenant loses security of tenure unless: there is a new lease in place, either party has applied to court, or, the parties have agreed in writing to an extension of the deadline to apply to court for a new tenancy
What are the contents of a S25 Notice?
- Name and address of the landlord and tenant
- Address of the property
- Notice of the date to end the tenancy
- Confirmation of whether a new lease is to be opposed or granted
- Confirmation of the date by which the tenant must ask the court for a new tenancy
- Landlord’s proposals for a new tenancy to include the proposed rent if a ‘friendly’ notice
- If the landlord opposes the new tenancy (hostile notice) the ground(s) for opposition must be stated, which cannot later be amended
- A strong recommendation to seek professional advice
What is a S26 Notice?
Tenant’s request for a new lease.
- Tenant can serve a notice requesting a new tenancy beginning with a date not more than 12 months and not less than 6 months after the making of a request, which cannot be before the contractual expiry date specified in the lease
- Notice must be in the prescribed form
- It must state the tenant’s proposals for a new lease to include the proposed rent
- If the landlord opposes this, a counter notice must be served within 2 months
What is a S27 Notice?
When tenant does not want the lease to continue beyond the original fixed term
- Tenant can serve a S27 Notice on the landlord giving at least 3 months’ notice, expiring at the lease end, that they are intending to vacate
- Tenant has no obligation to tell landlord that they intend to vacate - no requirement to serve a S27 notice
- If tenant wishes to vacate once they are holding over following expiry of the contractual term, a S27 notice must be served on landlord. Must give at least 3 months’ notice of termination
What are the grounds for refusal of a new lease?
Section 30 sets out the 7 ground for opposition to grant a new tenancy:
a) Breach of repairing covenant
b) Persistent delay in paying rent
c) Other substantial breach
d) Provide suitable alternative accommodation
e) Tenancy was created by a sub-letting (compensation payable)
f) Demolition or reconstruction (compensation payable)
g) Owner occupation (compensation payable
For redevelopment, landlord must prove firm intention, prove funding and planning, substantial work and necessity to gain vacant possession and an ability to redevelop provided VP is secured
For owner-occupation, landlord must have owned property for 5 years and prove intention to occupy and/or run business
What is S34 of the ‘54 Act?
Rent under new tenancy.
Rent should be as may be agreed between L&T determined by the court that at which, having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably by expected to be let in the open market by a willing lessor.
Which 4 matters are to be disregarded in assessing the rental as per S34?
- Any effect on rent of the tenant’s occupation
- Any goodwill in the tenant’s business attaching to the premises
- Any effect on rent improvements carried out by tenant
- In the case of licensed premises, any effect on rent of additional value because of a license (e.g. alcohol)
What part of the ‘54 Act deals with requests for information by either party?
Section 40 Notice requests information from either party so that the landlord or tenant can check exactly who is the competent landlord or the tenant with statutory protection
Either party can serve during tenancy requesting details such as name and registered address
Have to provide details within 1 month - failure can be taken as a breach of statutory duty
Not limited to one request
What is the ‘Competent Landlord’?
Defined under Section 44 as the person/body upon whom a notice should be served or who should serve the notice
Must be a freeholder or superior tenant with unexpired term of over 14 months
What are the dispute resolution options for lease renewals?
- Default dispute resolution mechanism for renewal of a lease that is protected by the ‘54 Act is a referral to the Country Court
- Subject to both parties agreeing, an Alternative Dispute Resolution option is a reference under PACT (Professional Arbitration on Court Terms)
- Part 36 Offer of the Civil Procedure Rules
Lease renewal dispute resolution - what is process of a determination by the County Court? (default option)
County Court Process for Lease Renewal Dispute (Following S25 or S26 Notice)
- Application: After a valid S25 or S26 notice, the tenant usually applies to the County Court for a new tenancy and serves proceedings on the landlord.
- Case Management Conference: Begins with a conference (phone or video call) to set a timetable for each stage of the case.
- Hearing Date: A date is fixed for the hearing if the matter is unresolved through negotiation.
- Court Hearing: Lawyers and witnesses present cases; the court determines the new lease terms.
- Compliance: Strict adherence to procedural steps and deadlines is essential.
- Costs: The trial judge has discretion over awarding costs for the proceedings.
- Cooling-off Period: After the order, the tenant has a period to decide whether to accept the court-ordered lease terms.
Lease renewal dispute resolution - what is PACT?
- Only an option if both parties agree to refer the dispute to PACT
- A joint initiative by RICS and the Law Society
- Encouraged by the courts and by RICS as an ADR mechanism for unopposed business tenancy renewals
- Non rent issues decided by solicitor, rent issues by chartered surveyor
- Parties free to decide some procedural matters including whether dispute resolver acts as an arbitrator or an independent expert
- Dispute resolver can be appointed following application to the DRS or by application to Law Society
- Decision is binding
What are some of the advantages of PACT?
- Faster
- Cost savings - an expensive County Court is avoided
- Greater flexibility and control over procedure for the parties
- Decision by a surveyor on rent-related terms rather than a County Court judge
What are the key sections of the ‘54 Act?
23 - Application of the act
24 - Security of tenure provisions and continuation of tenancy (holding over under the Act)
25 - Landlord’s notice to end the lease or seek a new lease
26 - Tenant’s notice to seek a new lease
27 - Tenant’s notice to end the lease
28 - Renewal of tenancy by agreement
29 - Order by Court for a new tenancy
30 - Landlord’s grounds for opposition of a new lease
32 - 35 - Terms of the new lease
34 - Basis of valuation for the new rent
37 - Compensation provisions
38a - Contracting outside the Act
40 - Notice requesting information about either party
44 - Definition of a competent landlord
How can a lease be contracted outside of the ‘54 Act?
A lease can be contracted outside the ‘54 Act under Section 38a (introduced in 2003) if these steps are followed:
- Warning notice: The landlord serves a notice to the tenant explaining that their rights are being waived.
- Tenant’s declaration: The tenant makes a simple or statutory declaration acknowledging the waiver. A simple declaration requires at least 14 days’ notice before the lease is granted.
- Lease endorsement: The lease must reference the landlord’s notice and the tenant’s declaration, confirming the agreement to exclude the 1954 Act provisions
Why might a letting be contracted out of the security of tenure provisions of the ‘54 Act?
- A requirement of the head lease to grant any subletting outside the Act
- The landlord will want to re-occupy the property in due course
- The landlord wishes to redevelop the property at the lease end
- The rent may be lower
- The landlord want’s future flexibility
What are the ways to terminate a lease?
- Forfeiture
- Surrender and negotiation
- Break clauses
- Lease expiry and service of notices under the ‘54 Act
- Merger
- Disclaimer (due to insolvency)
Alderney Gardens RR - what were the assumptions and disregards?
Assumptions:
1. No work by the tenant has diminished the rental value.
2. If the premises were damaged, they are assumed to have been fully repaired or rebuilt.
3. Both the landlord and tenant are assumed to have fully complied with their lease obligations.
4. The premises are in the same condition as when the lease commenced.
5. The hypothetical lease mirrors the actual lease except for the rent amount.
6. The premises are available to let with vacant possession.
7. The hypothetical lease will be renewed under the 1954 Act.
Disregards:
1. Any tenant occupation or use that could affect rent is disregarded.
2. Goodwill from the tenant’s business is disregarded.
3. Any tenant improvements are disregarded unless required by the lease.
4. Any licenses (such as alcohol)
If an agreement could not be reached, beyond serving a Notice to Refer to Arbitration or Independent Expert, what else might be considered?
Serve a Calderbank offer - This is a formal offer made in writing, “without prejudice save as to costs, offering a final settlement figure. It must be an unconditional offer, capable of being accepted.
Management of retail parade (Basildon) (Assignment) - What steps did you take upon receipt of a lease assignment request?
- Due Diligence: I reviewed the proposed assignee’s financial stability and business suitability to ensure they could meet the lease obligations.
- Lease Review: I carefully examined the lease, particularly the alienation clause, to confirm the assignment complied with the lease terms.
- Advised on Rent Deposit: Since the assignee was new to the trade, I advised the landlord to request a rent deposit as a precautionary measure.
- Facilitated Legal Documentation: After completing my review, I recommended proceeding with the assignment and facilitated the preparation of the necessary legal documentation.
Is there any legislation that specifies the time in which a landlord should address an application to assign a lease?
Yes, under Section 1 of the Landlord and Tenant Act 1988, a landlord is required to respond to an application to assign a lease within a reasonable time. Although the Act doesn’t specify an exact timeframe, case law generally interprets a reasonable time to be around 28 days, depending on the circumstances.
The landlord must:
1. Give consent (which may be subject to reasonable conditions, such as a rent deposit).
2. Refuse consent, but must have reasonable grounds for doing so.
Failing to respond within a reasonable time may be considered a breach of the landlord’s obligations, which could expose them to legal claims from the tenant.
Were there any guarantees in the lease that limited the tenant’s ability to assign the lease?
In this case, the lease could have included provisions that limited the tenant’s ability to assign, such as:
- An Authorised Guarantee Agreement (AGA): This would require the outgoing tenant to guarantee the obligations of the incoming assignee, ensuring that if the assignee defaults, the original tenant remains liable.
- Alienation Clause: The lease may have stipulated that assignment is only permitted with the landlord’s consent, which cannot be unreasonably withheld or delayed, as outlined in the Landlord and Tenant Act 1988.
What might be grounds for a landlord to reasonably refuse consent for a lease assignment?
- Financial Instability: If the proposed assignee lacks sufficient financial stability or a proven business track record, the landlord may refuse consent, fearing potential rent arrears or lease breaches.
- Unsuitability of Use: If the assignee’s proposed use of the premises doesn’t comply with the lease terms or planning permissions, or if the use could negatively affect the reputation or operation of the property, the landlord could refuse.
- Covenant Strength: If the assignee is deemed to have weaker covenant strength than the outgoing tenant, the landlord might reject the assignment to protect their investment.
- Breach of Lease: If the tenant is in breach of any lease terms, such as unpaid rent or repairs, the landlord may withhold consent until these breaches are remedied.
- Alienation Clause Restrictions: If the lease includes specific restrictions on assignment (e.g., only allowing assignment to certain types of businesses or requiring guarantees), the landlord could reasonably refuse if those conditions are not met.
These grounds must be reasonable and in line with the lease terms; otherwise, the landlord may face legal challenges under the Landlord and Tenant Act 1988.
Were there any guarantees that limited the tenant’s ability to assign the lease in the retail parade in Basildon?
- Lease had an alienation clause that required landlord’s consent for any assignment (not to be unreasonably witheld as per S. 1 Landlord & Tenant Act 1988)
- No specific guarantees that restricted the tenant from assigning their lease
- Advised landlord to request rent deposit from assignee due to their relatively new business
How does a landlord protect their position if the tenant wants to assign their lease?
- Alienation Clause: Ensuring the lease includes an alienation clause that requires the landlords written consent
- AGA: The outgoing tenant may be required to enter into an AGA, meaning the remain liable for the lease if the incoming tenant defaults
- Rent Deposits or Guarantors
- Due Diligence: Performing due diligence on the assignee’s financial standing and business viability before granting consent
What is the Torts (Interference with Goods) Act 1977?
Governs the rights and obligations related to goods left behind by a tenant after a lease had been forfeited or ended.
Key points include:
- Duty of Care: Landlord has a duty to take reasonable care of the tenant’s goods left on the premises.
- Notice Requirements: Landlord must serve a written notice to the tenant, giving them a reasonable time to collect their belongings
- Disposal of Goods: If the tenant does not respond, landlord can dispose of the goods, but must followed correct procedure outlined in the Act
What is a Part 36 offer?
Part 36 of the Civil Procedure Rules allows a Landlord or Tenant to set out their proposals for a new lease in a “Without Prejudice” offer letter at any stage of the lease renewal process.
They cannot be referred to at trial they only affect the outcome when dealing with costs of the court proceedings.
If an offer is made and not accepted and at trial the party who made the offer equals or betters the terms proposed in the offer, there will be costs consequences for the other party for not accepting.
The offer is open for acceptance for a period of not less than 21 days. After this period, it can still be accepted but it is possible for the offer to be withdrawn by the party who made it.
The costs of the offer are set out, and if the offer is not accepted and the case goes to court, the final judgment will determine who pays the costs.
