Landlord & Tenant - Session 1 Flashcards
What is the basic difference between a lease renewal and a rent review?
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
When can you opt out of the 1954 act?
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.
What is a statutory decleration?
What is the difference between a simple and statutory demand?
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.
Basic difference between lease and a license?
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.
What is the case law for Lease / License?
Street v Mountford 1985
If the agreement satisfies all the requirements of a tenancy, then the agreement is a tenancy.
To what tenancies does the 1954 Act apply?
Tenancies occupied for business purposes only.
When was the LL&T Act 1954 last amended?
1st June 2004
Name the tenancies to which the 1954 Act does not apply
Agricultural holdings, Mining leases, residential tenancies, tenancies granted as a condition of employment, and tenancies not exceeding 6 months.
What is a s25 notice?
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
When can a LL serve a S25 notice
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
What must a LL S25 notice contain?
Landlord, Tenant and the Property, date of notice and the date of termination of the tenancy.
What advise would you give to a Landlord in respect of a lease renewal where a property is significantly over-rented?
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.
When is the best time to serve the s25 notice: 12 months or 6 months before lease expiry?
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.
Why would a LL give 12 months notice when he could give 6 months notice?
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
What action should LL take if require possession of a property at end of lease?
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.
What can the LL do if he cannot get a response from the T to his friendly S.25 notice?
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.
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?
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.
Name grounds under the s30(1) of LL & T Act 1954 under which a LL can obtain possession
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)
In what circumstances is a T entitled to compensation when a LL successfully opposes a new lease under the 1954 Act?
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
How is T compensation assessed under 1954 Act?
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.
What do you understand s34 rent to be?
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.
Explain the power of the court in ordering a new lease
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
What do you understand interim rent to be?
The rent being applied to the interim period which occurs the day after the notice expires and the date before the start of the new lease.
This would be the market rent at the expiry of the lease term. Both parties would agree the market rent.
How is the Interim Rent assessed?
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.
In what circumstances would you recommend a tenant to serve a S26 notice?
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.
Explain when tenant’s improvements are disregarded at lease renewal
If improvements were carried out within the last 21 years, or at any time during the old tenancy
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.
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.
What are the key elements of a rent review clause?
- The machinery for effecting the rent review
- The basis of valuation
- The means of settling disputes where the parties cannot agree on the revised rent
What is a trigger notice?
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
What is ‘time of the essence’
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.
What are the 2 landmark cases in respect of time of the essence?
The Burnley and the Cheapside cases 1977 which both determined that time is not of the essence.
In what circumstances is it likely that time is of the essence?
- 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
What are deeming provisions?
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.
What is the leading case law for this?
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.
What lease terms affect the rent at review?
COMMON Q:
- Rent Review Clause itself (definition of rent, assumpts, disregs)
- Rent review frequency (longer the RR period, higher the rent)
- Repairing liability (wider than normal liability can reduce rental value)
- User clause (tight clause may reduce rent obtainable on review)
- LTA 1954 protection (protected tenancy may call for rental uplift from unprotected)
RRRUL
What assumptions are usually made in determining the rent at review? COMMON Q
- Vacant Possession
- The subject property is fit for immediate occupation and use
- The property is available to let on the open market by a willing landlord to a willing tenant
at the market rent - All the covenants in the lease have been observed by the Tenant
- The property may be used for any purpose permitted under the terms of the lease.
What is the hypothetical term?
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
Is the hypothethcial term more advantageous to LL or T?
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)
Hypothetical Term - Case Law
Pivot Properties Ltd v Secretary of State for the Environment, 1980
What are the main features of a lease?
Fully repairing with upwards only rent reviews.
What are the usual disregards?
T’s previous occupation
Any goodwill
Certain improvements
Any licence to sell intoxicating liquor if it appears that the licence belongs to the T
Where do the usual disregards originate from?
They originate from s34 from LL & T Act 1954.
Note: Emphasising the LL&T act 1954 have nothing to do with RR.
How may a rent review be resolved if a LL and T cannot reach agreement?
By a 3rd party, either an arbitrator or an independent expert (depending on what the lease says).
What are the differences between an independent expert and an arbitrator?
Arbitrator
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
In what circumstances would you prefer to have an arbitrator rather than an expert?
In a falling market as the information provided may be stronger.
What is the purpose of a Calderbank letter/offer?
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.
What must a Calderbank letter/offer contain?
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
What does without prejudice save as to costs mean?
It cannot be relied upon in court to settle the liability of costs, but it is an attempt to resolve the dispute.
What is an expert witness?
Someone who has a specific level of knowledge in a particular field to present their opinion in court.
Can you tell me what the the definitions of S24 - 34 are?
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
What are the requirements for a tenant to serve a valid S26 request?
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
Is a tenant able to withdraw the S26 notice?
Yes, tenant can leave upon expiry.
What is tenancy at Will?
A property tenure that can be terminated at any time by either the tenant or the owner/landlord.
What is the difference between a rent deposit and a side letter?
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
What are the different types of break?
Fixed, Rolling, Conditional
Can you name some conditions that are common in break clauses?
No breaches, No arrears, property is vacated, Keys returned etc
What is the difference between an alteration and improvement?
Alteration = change to the property
Improvement = alteration that adds value
How does a tenant register improvements?
- 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.
What is the tenant entitled to if they have improvements registered?
Compensation
Before an instruction is issued i.e., lease renewal or rent review - what must you check?
That you are competent
No conflict of interest /personal interest
Refer to the standard terms of business
What would you state when agreeing heads of terms with a tenant for a lease renewal?
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’
What other forms of agreements are there besides licenses?
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.
Can you outline what factors hierarchy of evidence is based off?
- Open Market Lettings
- Lease Renewals – because the rent can go up OR down and the tenant can walk away
- Rent Reviews – the rent may be settled at nil increase but that doesn’t necessarily mean it
is the market rent - Independent Expert determinations – they can use their own knowledge and experience
- Arbitrator awards – they can only make an award based on the submissions provided by
both parties - Court Determinations under the 1954 Act
- Hearsay Evidence
- Sale and Leasebacks
- Surrender and Renewals and intercompany arrangements
O May Principles
Look up
Section 26 of the LL & T Act 1925
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
What happens in Section 27?
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
Section 29 - in more depth?
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
Section 34 - in more depth?
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
What are the tenants rights under S.25 of the LL & T Act 1925?
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.
Part 1 of the Landlord and Tenant Act 1954
Residential
Landlord and Tenant Act 1954 - opting out?
If the lease is silent - the it is a protected lease - will need a specific contracting out clause.
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.
Code for Leasing Business Premises, 2007
- Recommendations for rent reviews:
o Review clause should be clear
o Headline rent review clauses should not be used
o On request, landlords should offer alternatives to their proposed option for RRs based on risk-adjusted basis. Where landlord unable to offer alternatives, reason should be given
o Leases should allow both landlord and tenant to start RR process
