Landlord & Tenant Flashcards
How does a lease renewal differ from a rent review?
- A lease renewal is a statutory process laid down by the landlord and tenant act 1954.
- A rent review is a contractual procedure contained within a lease.
- Note: If a lease is contracted out of the landlord and tenant act 1954 then there is no statutory procedure
To what tenancies does the L&T act 1954 apply?
Business tenancies in occupation
When was the landlord and tenant act last amended?
The l&t act was last amended by regulatory reform order 2003, which came into effect 1st June 2004.
What tenancies does the 1954 act not apply to?
- Agricultural
- Mining
- Residential
- Tenancies granted as a condition of employment
- Tenancies not exceeding 6 months (unless there is a provision for extension or the tenant has been in occupation for more than 12 months).
What is a section 25 notice?
It is a notice served by the landlord on the tenant to terminate the lease.
- Cannot terminate the lease before contractual expiry
- Would either be friendly or hostile
What must a section 25 notice contain?
- The landlord
- The tenant
- The property
- The date of the notice
- The date of termination
- Friendly or hostile notice
When can the landlord serve a section 25 notice?
12- 6 months before contractual expiry or anytime thereafter.
Note- Notice mist be at least 6 months.
Is it better for a landlord to server a section 25, 12 months or 6 months before expiry?
- 6 months- Allows for negotiation as close to the renewal date as possible if the market is booming, however this risks the tenant deciding to vacate as you have less time to market the unit.
- 12 months- maximum amount of time given to both parties. Very useful if the tenant is vacating, however if they are staying means that the new rent is agreed far in advance so there is more uncertainty.
How would you advise a landlord in respect of a lease renewal for a property that it significantly over rented?
- Do nothing and continue to get the high rent if the tenant holds over. However there is the possibility the tenant could serve a section 26 for a new lease or a section 27 and vacate.
- Serve a section 25 and enter into a new lease at lower rent.
Note: If you give 12 months notice with a Section 25 then the tenant could apply to court for interim rent as they would not want to pay high rent for another 12 months, so would argue they will only pay the higher rent for 6 months (shortest possible notice period).
Why would a landlord give 12 months notice with Section 25 rather than 6 months?
If overrented then you get extra 6 months of the tenant paying the higher rent
- If confident the tenant is leaving then there is more time to find a new tenant.
What actions should the landlord take if they want possession at the end of the lease?
Serve a Section 25 notice and object to the tenant having the new tenancy under 1 or more of the section 30 grounds.
What is the difference between a hostile and a friendly section 25 notice?
A friendly notice, ends the lease but confirms that the landlord is willing to enter a new lease and sets out the terms the landlord is prepared to accept.
A hostile notice, ends the existing lease and opposes a new lease on one of the limited grounds avaliable.
What should the landlord do if the tenant is not responding to a friendly section 25 notice?
Write to the tenant and state that they have 14 days to respond or the matter will be taken to court to determine terms and the tenant would be liable for costs.
How would you advise a tenant if a landlord section 25 notice is due to expire and the new lease has not been agreed?
- Approach the landlord to request a time extension.
- If not agreed, the tenant would have to apply to Court for a new tenancy.
Note: If the section 25 notice expires then the tenant loses security of tenure- the landlord can propose new terms and if the tenant does not agree they have to leave.
What are grounds under the section 30 of the LL & T act 1954 under which the landlord can obtain possession?
- Tenant has breached their covenants
- Failing to carry out repairs - Tenant has persistently delayed paying rent.
- Landlord offers suitable alternative accommodation
- The building let as a whole would produce a higher rent than from separate lettings.
- Landlord intends to demolish or reconstruct.
- Landlord intends to occupy for own purposes (the landlord must have owned the property for a minimum of 5 years).
How is tenant compensation assessed under the L&T act 1954?
- If the tenant has been in occupation for 14 years or more then they get x2 the RV.
- If the tenant has been in occupation for less than 14 years then they get x1 RV.
A office lease is expiring in 12 months and the landlord wants you to negotiate a new lease with the tenant, what would you do?
- Review the current lease
- Agree the terms of engagement
- Inspect and measure the unit
- Check for any breaches of covenant or tenant works
- Carry out rental valuation
- Serve a friendly section 25 notice
When is the tenant entitled to compensation when a landlord opposes a new lease under the 1954 Act?
The last three grounds of section 30 are no fault grounds, so if the new lease is opposed due to one of more of these grounds then the tenant gets compensation.
Note: if another reason is also stated (one of the first 4 grounds) then compensation is not due.
Explain the power of the court in ordering a new lease?
The court can determine
- The property comprised (S32)
- The length of the lease (S33)
- The Rent (S34)
- Other terms (S35)
- Interim rent (S24A)
The landlord is bound to grant a new lease on the terms determined by the court.
If a tenant disagrees they can apply to have the court order revoked within 14 days- the tenancy will then continue for a reasonable period so the landlord can re-let.
How is interim rent assessed?
Market rent at the start of the interim period.
What is section 34 rent?
Market rent excluding disregards.
- Tenant’s previous occupation
- Any goodwill
- Certain improvements
- Any licence to sell intoxicating liquor that belongs to the tenant.
What is interim rent?
The rent payable between the end of the old lease and the start of the new lease.
- Ideally the new lease should start the day after the old lease ends but if negotiations are ongoing then interim rent is agreed (either between parties or by the Court).
Note: usually used if the gap is 12 months or more.
When would you recommend that a tenant serves a S.26 notice?
- If the tenant believes the lease is over rented then serve a section 26 for a new lease at a lower rent.
- The tenant may also serve a section 26 if the rent increases as it means they still have a lease in place (it might be hard to find another elsewhere).
When are tenant improvements disregarded at lease renewal?
If the improvements have been carried out under the old tenancy or anytime during the last 21 years.
Note: Not all alterations are improvements and improvements are not disregarded if they were a lease obligation.
What action should a tenant take if they have 6 months left and they want to vacate and the landlord has not served a section 25 notice?
- Do nothing and hand the keys back on the last day.
- Serve a section 27 with a minimum 3 month notice.
Note: If the tenant is in occupation even one day after expiry then they must give 3 months notice.
What are the key elements of a rent review clause?
- Date
- Mechanism
- Basis of value
- Means of settling disputes
What is a trigger notice?
A notice that triggers a pre-determined sequence of events. For example the first notice served to trigger a rent review (by a tenant or landlord).
What is “time of the essence”?
Time of the essence means that there are timescale within the lease that must be strictly adhered to.
Note: If not stated then time is not of the essence.
What are the two landmark cases in respect of time of the essence?
Burnley and Cheapside cases
- Essence is that rent gets reviewed from that date.
- Despite there being timetables, these do not have to be stuck to as this is not the essence of the contract.
What are deeming provisions?
Where the lease explicitly states that the tenant is “deemed” to have accepted the landlord rent.
For example- Landlord serves notice, the tenant does not serve counter notice in specified time, so the tenant is deemed to have accepted the landlords rent.
For example- Landlord could be deemed to accept the tenant counter notice is the lease states so.
What lease terms affect the rent at review?
- Rent review clause itself (definitions of rent, assumptions and disregards).
- Frequency of the review
- Restrictions on alienation, user, repairing and insuring clauses.
Overall, flexible lease= higher rent
Note: Could state that if protected by 1954 act then demand higher rent.
What are the usual assumptions for determining rent at review?
- Premises is fit for immediate use and occupation.
- Market rent is payable after any rent free period
- No work carried out by the tenant has reduced the rental value
- the tenant has complied with the terms of the existing lease.
- If the premises have been damaged or destroyed they have been reinstated.
What is a hypothetical term?
A term other than the unexpired lease term
Used for rent reviews based on the same terms as the existing lease and assumes the property remains in its current state.
For example assuming the term is the length of time originally granted by the lease (10 years)- even though only 5 years remain (or the unexpired term)
Is the hypothetical term more advantageous to the landlord or the tenant?
If longer- the tenant as they get lower rent
if shorter- the landlord as its a higher rent
What are the usual disregards?
- Tenant is in previous occupation
- Any tenant goodwill
- Certain improvements (under the current lease or within 21 years)
- Any intoxicating liquor licences belonging to the tenant
Where do the usual disregards originate from?
Section 34 of the landlord and tenant act 1954
How is rent review resolved if Landlord and Tenant cannot reach an agreement?
Arbitrator or independent expert
- Depends what the lease says
What is the difference between a independent expert and a arbitrator?
- Arbitrator acts on evidence, independent expert has duty of investigation but can also request evidence.
- Arbitrator makes award, independent expert makes a determination.
- Arbitrator conduct based on the arbitration act 1996, a independent expert is RICS surveyor so governed by the Rules of Conduct.
- Arbitrator cannot be sued for negligence but a independent expert can be.
- Arbitrator can award costs, whereas usually an independent expert cant (check lease)
Note- The fee for a independent expert usually stated in the lease, is to be split between the parties or paid by the person who brought in the independent expert.
What is the purpose of a Calderbank offer/ letter?
Protects against cost liability at Arbitration
Note: only binding if in writing but if not been accepted then can be withdrawn
What must a Calderbank offer contain?
- A statement made “without prejudice save as to costs”
- Unconditional written offer to settle the rent review
- Reasonable proposal regarding costs incurred up to the date of the offer (each party pays own costs plus 50 % of arbitrators fee)
- Time in which the party must accept the offer (21 days is the most common)
Note: without prejudice save as to costs, means that it cannot be used as evidence in court, except in the case of awarding of costs.
What is a calderbank offer?
It is a unconditional offer to settle, without prejudice save as to costs.
What is a lease?
A lease gives a tenant exclusive right of possession, which can be a fixed term or period.
What is a licence?
Not exclusive possession. Gives someone permission to do something on a owners land or in a owners property that would otherwise constitute a trespass.
note: licences are often used for a specific purpose.
What is the leading case in lease v licence?
Street v Mount (1985)
- It was a licence to occupy a furnished room in a house.
- Neither attendance nor services were provided (no washing/ cleaning).
- House of Lords ruled it to be a lease
Examples of a licence?
- Car parking licence
- External seating licence
- Pavement licence (drink outside pub)
- Grazing livestock licence
- Telecoms licence
- Food van licence
A property you manage is going to be redeveloped soon. What options do you have to generate some rental income without giving the tenant security of tenure under the 1954 act?
- Shot term- grant tenancy of less than 6 months (excluded under section 43)
- Long term- grant a tenancy of more than 12 months but contract out of the section 24-28.
Tenant entered FRI lease of property in disrepair and Landlord requires Tenant to remedy disrepair. What advice would you give to Tenant?
T who agrees to ‘keep in repair’ must ‘put in repair’
limit repair by Schedule of Condition
T has to do repairs but extent to which repairs need to be carried out can be negotiated if not explicitly stated
EG if all neighbouring units in industrial estate have car parks with pot holes and poor fencing then T has argument for doing very basic repairs
What advice would you give to Tenant who wants to take FRI lease of property in disrepair but suitable for their business?
- negotiate rent free period for doing repairs
- ask LL to do repairs before T moves in
- complete Schedule of Condition to limit repairing liability