Landlord & Tenant - Session 1

Question 1

What is the basic difference between a lease renewal and a rent review?

Answer 1

A lease renewal is a statutory procedure laid down by the Landlord and Tenant Act 1954 Part II. Whereas a rent review is a contractual procedure contained within a lease

Question 2

When can you opt out of the 1954 act?

Answer 2

Procedure for contracting out of the 1954 Act is served by the LL but initially outlining that the tenant must acknowledge that they will lose their protection under the 1954 Act.

Simple declaration and a statutory declaration.

Question 3

What is a statutory decleration?

What is the difference between a simple and statutory demand?

Answer 3

A statutory declaration is a formal statement made affirming that something is true to the best knowledge of the person making the declaration (14 days).

Simple - signed agreement between 2 parties.

Question 4

Basic difference between lease and a license?

Answer 4

Lease – gives tenant exclusive right of possession. Must be fixed term and a rent payable.

Licence – gives permission to do something on the owners land that would otherwise constitute as trespasas.

Question 5

What is the case law for Lease / License?

Answer 5

Street v Mountford 1985

If the agreement satisfies all the requirements of a tenancy, then the agreement is a tenancy.

Question 6

To what tenancies does the 1954 Act apply?

Answer 6

Tenancies occupied for business purposes only.

Question 7

When was the LL&T Act 1954 last amended?

Answer 7

1st June 2004

Question 8

Name the tenancies to which the 1954 Act does not apply

Answer 8

Agricultural holdings, Mining leases, residential tenancies, tenancies granted as a condition of employment, and tenancies not exceeding 6 months.

Question 9

What is a s25 notice?

Answer 9

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

Question 10

When can a LL serve a S25 notice

Answer 10

This must be served between 12 and 6 months prior to:
(a) the contractual end of the tenancy, or,
(b) the date specified in the notice i.e.
➢ if a tenancy has less than 6 months to run
➢ T is holding over under Section 24
➢ the tenancy is on a periodic basis

Question 11

What must a LL S25 notice contain?

Answer 11

Landlord, Tenant and the Property, date of notice and the date of termination of the tenancy.

Question 12

What advise would you give to a Landlord in respect of a lease renewal where a property is significantly over-rented?

Answer 12

It would depends on the clients intentions,

• Do nothing at all- this would mean that the landlord would continue to gain rent at the overrented value but would be risky as the tenant could serve a section 27 notice providing three month notice or hand keys back upon expiry. If the property is overrented then this may indicate a depressed market with a high void risk which could result in the landlord incurring additional costs (rates, utilities etc).

Risk averse Landlord:
The landlord could serve a S25 notice to grant a tenancy which will maximise income over a fixed period. This would mean that the unit would be let at a lower rent but it would be let to a tenant with higher covenant strength resulting in a better investment.

Question 13

When is the best time to serve the s25 notice: 12 months or 6 months before lease expiry?

Answer 13

It would depend on the market.

12 months - Falling market serve 12 months:
Gives maximum amount of time for both parties, this may result in the market rent being agreed at an earlier stage which may not be as favourable to the landlord.

Rising market 6 months - If the property is under rented then the landlord could provide 6 months’ notice to engage in tenant conversations at the earliest opportunity.

Certainty in 6 months as you are negotiating as close to the renewals date as possible.

If the property is overrented then the landlord could wait until the last possible moment (1 day before expiry) to serve a S25 notice to maximise income but then this would be risky as the tenant could vacate upon lease expiry.

Question 14

Why would a LL give 12 months notice when he could give 6 months notice?

Answer 14

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

Question 15

What action should LL take if require possession of a property at end of lease?

Answer 15

Serve notice under s.25 to terminate tenancy and objecting to tenant having new tenancy under one of more of the grounds listed in s30.

Question 16

What can the LL do if he cannot get a response from the T to his friendly S.25 notice?

Answer 16

The landlord can send a letter to the tenant stating that if he does not hear back from the tenant on a certain date (14 days from the date of the letter is acceptable) then the landlord will be applying to court and will be expecting the tenant to cover the legal costs.

Question 17

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?

Answer 17

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 under s.28.

Question 18

Name grounds under the s30(1) of LL & T Act 1954 under which a LL can obtain possession

Answer 18

A – breach of repairing covenant
B – persistent late payment of rent
C – other substantial breach
D – alternative accommodation
E – uneconomic sublet (more rent can be achieved as a whole)
F – substantial redevelopment/demolition
G – owner occupation (the landlord must be the landlord for at least 5 years - T would serve a S.40)

Question 19

In what circumstances is a T entitled to compensation when a LL successfully opposes a new lease under the 1954 Act?

Answer 19

The last three grounds (the no-fault grounds); e, f and g as the tenant is required to leave through no fault of their own.

E – uneconomic sublet (more rent can be achieved as a whole)
F – substantial redevelopment/demolition
G – owner occupation (the landlord must be the landlord for at least 5 years S30 (2))

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

Question 20

How is T compensation assessed under 1954 Act?

Answer 20

Compensation is calculated using the rateable value:

Up to 14 years in continuous occupation – 1 x rateable value

Over 14 years in continuous occupation – 2 x rateable value

NOTE: 14 years on the dot is 2x rateable value.

Question 21

What do you understand s34 rent to be?

Answer 21

S34 - rent disregarding the tenants previous occupation, any good will, certain improvements and any licence to sell intoxicating liquor if the licence belongs to the tenant.

Question 22

Explain the power of the court in ordering a new lease

Answer 22

If the tenancy has been terminated in accordance with the Act and
➢ an application made by T or L under Section 24(1)

The Court has the power under Section 29(1) to grant a new tenancy, and may determine

S32 = property comprised

S33 = term

S34 = rent

S35 = other terms

S24a = interim rent

Question 23

What do you understand interim rent to be?

Answer 23

The rent payable from the

Question 24

How is the Interim Rent assessed?

Answer 24

It is the market rent at the start of the interim period.

Alternative:
- The interim rent is the rent under the new tenancy, unless there are reasons to state otherwise.

Question 25

In what circumstances would you recommend a tenant to serve a S26 notice?

Answer 25

It depends on the clients advise: If the T believed the current lease was over-rented or when the tenant wants certainty as holding over doesn’t give certainty.

Question 26

Explain when tenant's improvements are disregarded at lease renewal

Answer 26

If improvements were carried out within the last 21 years, or at any time during the old tenancy

Question 27

What action should a tenant take if there is 6 months of the lease remaining and they want to vacate at expiry. The LL has not served a s25 notice.

Answer 27

Nothing as you can hand the keys back on expiry or serve a section 27 notice giving 3 months’ notice before expiry or 3 months. There is no maximum period of notice for S27. The tenant must provide 3 months’ notice if they are holding over.

Question 28

What are the key elements of a rent review clause?

Answer 28

1. The machinery for effecting the rent review 2. The basis of valuation 3. The means of settling disputes where the parties cannot agree on the revised rent

Question 29

What is a trigger notice?

Answer 29

A notice that triggers a pre-determined sequence of events. EG the first notice (served by LL or T depending on what lease states) to trigger the rent review

Question 30

What is 'time of the essence'

Answer 30

Where a lease expressly states that time is of the essence (or it can be implied) failure to exercise the right in time will mean that the right is lost.

Question 31

What are the 2 landmark cases in respect of time of the essence?

Answer 31

The Burnley and the Cheapside cases 1977 which both determined that time is not of the essence.

Question 32

In what circumstances is it likely that time is of the essence?

Answer 32

- When the lease expressly states so - If there are deeming provisions - The tenant can serve a notice making time of the essence - When the rent review clause inter-relates with another clause i.e. break clause

Question 33

What are deeming provisions?

Answer 33

Rent Review: Some rent review clauses in older leases outline that the LL will issue the new rent in the trigger notice The lease expressly states: If the LL give notice proposing new rent, if T fails to respond or serve a counter notice then the T is deemed to accept Ls rent. ➢ L could be deemed to accept Ts counter proposal if lease states so.

Question 34

What is the leading case law for this?

Answer 34

Case Law; Barclays Bank Case. - RR was a few years outstanding. LL Doesn't respond within 28 days, you will loose your right to rent and LL didn't respond. T won as they gave reasonable time for the LL to respond.

Question 35

What lease terms affect the rent at review? COMMON Q:

Answer 35

1. Rent Review Clause itself (definition of rent, assumpts, disregs) 2. Rent review frequency (longer the RR period, higher the rent) 3. Repairing liability (wider than normal liability can reduce rental value) 4. User clause (tight clause may reduce rent obtainable on review) 5. LTA 1954 protection (protected tenancy may call for rental uplift from unprotected) RRRUL

Question 36

What assumptions are usually made in determining the rent at review? COMMON Q

Answer 36

1. Vacant Possession 2. The subject property is fit for immediate occupation and use 3. The property is available to let on the open market by a willing landlord to a willing tenant at the market rent 4. All the covenants in the lease have been observed by the Tenant 5. The property may be used for any purpose permitted under the terms of the lease.

Question 37

What is the hypothetical term?

Answer 37

The Hypothetical term is the term to be valued in the rent review clause. Examples could include i) A 5 year hypothetical term ii) A 10 year hypothetical term iii) The unexpired residue of the lease

Question 38

Is the hypothethcial term more advantageous to LL or T?

Answer 38

Depends on length of hypothetical term Long hypothetical term would be advantageous to the tenant (tenant would want inducement I.E lower rent) Short hypothetical term would be advantageous to the landlord in today's market (get higher rent)

Question 39

Hypothetical Term - Case Law

Answer 39

Pivot Properties Ltd v Secretary of State for the Environment, 1980

Question 40

What are the main features of a lease?

Answer 40

Fully repairing with upwards only rent reviews.

Question 41

What are the usual disregards?

Answer 41

T's previous occupation Any goodwill Certain improvements Any licence to sell intoxicating liquor if it appears that the licence belongs to the T

Question 42

Where do the usual disregards originate from?

Answer 42

They originate from s34 from LL & T Act 1954. Note: Emphasising the LL&T act 1954 have nothing to do with RR.

Question 43

How may a rent review be resolved if a LL and T cannot reach agreement?

Answer 43

By a 3rd party, either an arbitrator or an independent expert (depending on what the lease says).

Question 44

What are the differences between an independent expert and an arbitrator?

Answer 44

Arbitrator - need to apply to the president of the RICS. 1. Only acts on the evidence and arguments submitted but can draw attention to matters 2. Can award costs - within arbitration act 1996. 3. Can’t be sued for negligence but can be sued on a point of law. * Governed by the Arbitration Act 1996 * Can use witnesses * Has the power to disclose documents * Can’t use own knowledge * Appeal on a point of law * Court can determine arbitrators fees Independent Expert 1. Has a duty of investigation and may use evidence from the parties. 2. Can’t award costs unless the lease states so 3. Can be sued for negligence on a point of view. 4. Governed by the lease * Can use own knowledge * No witnesses * May seek assistance from others

Question 45

In what circumstances would you prefer to have an arbitrator rather than an expert?

Answer 45

In a falling market as the information provided may be stronger.

Question 46

What is the purpose of a Calderbank letter/offer?

Answer 46

It is a genuine offer to settle the rent review to reduce the liability of arbitrator and other costs. Only if going to arbitration as an IE can’t award costs.

Question 47

What must a Calderbank letter/offer contain?

Answer 47

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' Calderbank v Calderbank 1975

Question 48

What does without prejudice save as to costs mean?

Answer 48

It cannot be relied upon in court to settle the liability of costs, but it is an attempt to resolve the dispute.

Question 49

What is an expert witness?

Answer 49

Someone who has a specific level of knowledge in a particular field to present their opinion in court.

Question 50

Can you tell me what the the definitions of S24 - 34 are?

Answer 50

S23 – Defines a tenancy to which the Act applied. S24 – Gives tenant security of tenure. The landlord or tenant can apply to court to determine the terms of a new tenancy. S24a- Application to court for Interim Rent S25 – Landlords notice to determine the lease S26 – Tenants request for a new tenancy S27 – Tenants notice to determine the lease giving LL a minimum of 3 months’ notice S28 – Agreement for new tenancy results in existing lease losing protection S29 – Timescales for application to court. Order by the court for a new lease S29a – the parties can agree between them to extend the time they apply to court when the notice expires. No prescribed form. S29b- the date of the expiry of the last agreement becomes the expiry date of the tenancy: section 4 S30 – Landlord’s Ground for opposing a new lease (7) S31 – Court will dismiss the tenant application where the landlord successfully opposes a new tenancy S32 – Property to be compromised in the new tenancy S33 – The court has the power to grant a lease not extending more than 15 years S34 – Bases of Valuation for new rent. Assumptions to be made and the matters to be disregarded in assessing the rent under the new tenancy. S37 – Compensation provisions where the new tenancy is not granted on certain grounds S38 – Contracting out of sections 24-28 excluding security of tenure S39 – Saving for Compulsory Acquisitions S40 – Requesting information about either party (LL or T) S43 – Tenancies excluded for the Act S44 – Definition of competent landlord

Question 51

What are the requirements for a tenant to serve a valid S26 request?

Answer 51

Must be served 6-12 months before expiry, must be in occupation, must be served on competent landlord LL can make a counteroffer within 2 months of the tenant making the request. The counter notice must state the grounds upon he would oppose the request for a new tenancy

Question 52

Is a tenant able to withdraw the S26 notice?

Answer 52

Yes, tenant can leave upon expiry.

Question 53

What is tenancy at Will?

Answer 53

A property tenure that can be terminated at any time by either the tenant or the owner/landlord.

Question 54

What is the difference between a rent deposit and a side letter?

Answer 54

Rent Deposit: - A rent deposit is a sum of money deposited by the tenant with the landlord as security against non-payment Side Letter: - A short document that is ancillary to the main commercial lease, which is intended to vary, clarify or supplement the main lease terms

Question 55

What are the different types of break?

Answer 55

Fixed, Rolling, Conditional

Question 56

Can you name some conditions that are common in break clauses?

Answer 56

No breaches, No arrears, property is vacated, Keys returned etc

Question 57

What is the difference between an alteration and improvement?

Answer 57

Alteration = change to the property Improvement = alteration that adds value

Question 58

How does a tenant register improvements?

Answer 58

* T provides notice, plans and timeframe for improvements * LL has 3 months to object or undertake improvements in return for increased rent * If no objection then tenant can undertake improvements and have them registered.

Question 59

What is the tenant entitled to if they have improvements registered?

Answer 59

Compensation

Question 60

Before an instruction is issued i.e., lease renewal or rent review - what must you check?

Answer 60

That you are competent No conflict of interest /personal interest Refer to the standard terms of business

Question 61

What would you state when agreeing heads of terms with a tenant for a lease renewal?

Answer 61

Without prejudice subject to contract. Why? During the negotiation period of negotiation, the opposing party cant rely on any document/discussion which is labelled 'Without prejudice'

Question 62

What other forms of agreements are there besides licenses?

Answer 62

Tenancy at Will, Wayleaves and Easements Tenancy at Will - Form of license created by written agreement for an unspecified time in which the LL can evict at any point. - Used for either early access for fit out works or when a tenant is agreeing a renewal outside of the 1954 act after lese expiry. Wayleaves - Temporary right for an electricity company to install and retain their apparatus on Landlord demise land. Personal to that company and cannot be transferred to a new company. Easement - Permanent right of land from one party to another and can be registered through Land registry.

Question 63

Can you outline what factors hierarchy of evidence is based off?

Answer 63

1. Open Market Lettings 2. Lease Renewals – because the rent can go up OR down and the tenant can walk away 3. Rent Reviews – the rent may be settled at nil increase but that doesn’t necessarily mean it is the market rent 4. Independent Expert determinations – they can use their own knowledge and experience 5. Arbitrator awards – they can only make an award based on the submissions provided by both parties 6. Court Determinations under the 1954 Act 7. Hearsay Evidence 8. Sale and Leasebacks 9. Surrender and Renewals and intercompany arrangements

Question 64

O May Principles

Answer 64

Look up

Question 65

Section 26 of the LL & T Act 1925

Answer 65

Section 26 T’s request for a new tenancy * must be a T for fixed term of years * not received S25 Notice * Served 12 to 6 months before a) contractual end of tenancy OR b) the date in the Notice if served after the window in (a) * L cannot then serve S25 Notice * but can object to T being granted a new tenancy within 2 months: S26(6

Question 66

What happens in Section 27?

Answer 66

Section 27 Tenant’s Notice to Quit: A notice served by the Tenant on the Landlord informing them of their decision to vacate the property at the lease expiry. Can be served NOT LATER than 3 months before the end of the lease

Question 67

Section 29 - in more depth?

Answer 67

Section 29 Time-scales for application to Court: * T must apply to Court before expiry of S25 or 25 or loses security * L & T may agree to extend the date for Court Application: Section 29(B) * L can also apply to Court

Question 68

Section 34 - in more depth?

Answer 68

Section 34: Rent, assumptions and disregards DEFINITION * Open Market Rent / Market Rent disregarding i. Ts previous occupation. ii. any goodwill. iii. certain improvements carried out by T iv. any licence to sell intoxicating liquor if the licence belongs to T * Improvements disregarded if carried out I. during old tenancy II. Less than 21 years before Court application

Question 69

What are the tenants rights under S.25 of the LL & T Act 1925?

Answer 69

The Act safeguards certain rights for tenants, including the right to know the identity of their landlord, the right to a written tenancy agreement, protection against unfair eviction, and the right to live in a property that is reasonably maintained and fit for habitation.

Question 70

Part 1 of the Landlord and Tenant Act 1954

Answer 70

Residential

Question 71

Landlord and Tenant Act 1954 - opting out?

Answer 71

If the lease is silent - the it is a protected lease - will need a specific contracting out clause.

Answer 72

is the gift proportional to the work that has done Proportionality Nature of the gift - could you do the same to them when is the gift being offered.

Question 74

What is security of tenure?

Answer 74

It is the right of tenants using a property for business purposes to continue their occupation even after the lease term has expired.

Question 75

What if the lease comes to an end and you are contracted out the LL & T act 1954

Answer 75

If the lease is granted "outside the Act", the lease automatically comes to an end at the expiry of the contractual term. The tenant will have no right to remain in the property and will have to negotiate a new lease with the landlord if they wish to stay. The landlord does not have to agree to a new lease, meaning the tenant could be forced to move out. There is no action a tenant can take if the landlord does agree to grant a new lease, but the proposed terms are unfavourable. The tenant cannot apply to the court to fix the rent or request better terms for the new lease, and the tenant will not be entitled to compensation for having to vacate.