Lease Renewals

Question 1

What is the main piece of legislation for lease renewals?

Answer 1

Landlord and Tenant Act 1954

Question 2

When does the Landlord and Tenant Act 1954 apply?

Answer 2

Where there is a tenancy in place and the tenant is occupying for business purposes.

Question 3

What leases are excluded from the benefit of the Landlord and Tenant Act 1954?

Answer 3

1. Tenancies that have been excluded
2. Short term tenancies (less than 6 months)
3. A tenancy at will
4. A licence
5. A tenancy for a dwelling house where business is carried out
6. Agricultural tenancy
7. Farm tenancy

Question 4

What is section 24?

Answer 4

Permits the tenant with the right to remain in the premises beyond the contractual expiry date until the lease has been determined in the prescribed manner.

Question 5

What is section 24a?

Answer 5

Allows for either party to make an application to court for interim rent to be payable from the earliest date specified in the S25 or S26 notice to the commencement date of the new lease

Question 6

What is a section 25 notice?

Answer 6

A notice to terminate the tenancy and set out terms to grant a new tenancy (friendly notice) or to state intention to oppose renewal under one of the section 30 grounds (hostile notice).

Question 7

What is the time limit for serving section 25 notices?

Answer 7

No more than 12 months and no less than 6 months from the contractual expiry date

Question 8

What is a section 26 request?

Answer 8

Notice served by the tenant to terminate the lease and request a new one.

Question 9

What are the time limits for serving a section 26 request?

Answer 9

No more than 12 months and no less than 6 months before contractual expiry.

Question 10

Can you serve a section 25 notice if the tenant has already served a section 26 notice?

Answer 10

No, but they can oppose renewal by responding to the section 26 request within 2 months of receiving the notice.

Question 11

When does a landlord have to respond to a section 26 notice by?

Answer 11

Within 2 months of receiving the notice if they intend to oppose renewal. There is no formal requirement to respond if they do not intend to oppose renewal.

Question 12

What are the exceptions to a section 26 request?

Answer 12

Periodic tenancies and fixed term tenancies of less than 1 year with the benefit of security of tenure cannot serve a section 26 request. Must wait for a section 25.

Question 13

What tactics could you employ when considering the service of a section 25 or section 26?

Answer 13

In a rising market, if I was acting for a landlord then I would serve the section 25 as soon as possible. Alternatively if the property is over rented, I would delay serving a section 25 notice and allow the tenant to hold over or wait until a section 26 notice is served.

Question 14

What is a section 27 notice?

Answer 14

A notice where the tenant provides the landlord with 3 months notice of its intention to quit during the holding over period

Question 15

How else could a tenant terminate a protected tenancy?

Answer 15

Provide the landlord with vacant possession on the contractual expiry date or if the tenant is holding over, then serve 3 months notice of its intention to quit.

Question 16

What is section 28?

Answer 16

Allows the landlord and tenant to reach an agreement of a future tenancy for the premises or another premises, therefore the current tenancy will continue until the death of the future tenancy and shall not be a tenancy subject to the Landlord and Tenant Act.

Question 17

What are the section 30 grounds?

Answer 17

Fault

a. Breach of repairing obligations
b. Persistent delay in paying rent
c. Any other substantial breach

Non-fault

d. Landlord has offered alternative accommodation
e. Where the property is un-economically subdivided
f. Landlord intends to redevelop
g. Landlord wishes to occupy themselves

Question 18

How would you contract out a lease from the security of tenure provisions?

Answer 18

Serve a health warning notice

Simple declaration - provide the tenant with 14 days notice before the tenant becomes contractually bound by the lease, stating the lease will be excluded. The tenant will then sign a declaration which will be endorsed in the lease.

A statutory declaration - if the tenant is unable to wait 14 days, then the tenant can make a statutory declaration in front of an independent solicitor.

Question 19

What section 30 grounds are eligible for compensation?

Answer 19

The non fault ground (EFG), except for ground D because the tenant does not suffer any loss.

Question 20

What is the amount of compensation payable?

Answer 20

1 x the rateable value if been in occupation for under 14 years, or 2 x the rateable value if been in occupation over 14 years.

Key Case Law: Department of the Environment v Royal Insurance PLC - held that 13 years and 364 years was not sufficient to qualify for 2x the rateable value.

Question 21

What other compensation is payable where the landlord has successfully opposed renewal?

Answer 21

Compensation for improvements under section 1 of the Landlord and Tenant Act 1927, where the landlord has obtained possession under ground E and G.

This applies where the tenant has served notice on the Landlord stating its intention to carry out works that add to the letting value of the building, and the landlord has not objected to the works within 3 months, or where the tenant has obtained consent from the property tribunal.

Question 22

What grounds do the courts have discretion over?

Answer 22

The fault grounds, A, B and C and E.

Question 23

What will courts decide in respect of the demise under the section 32?

Answer 23

1. Tenant is only entitled to a new lease for the holding. The holding is the demise under the old tenancy, less any sublet part.
2. LL can insist on the tenant taking a lease for the whole of the premises (including the sublet part) if the LL only wants to deal with one tenant.

Question 24

What will the courts decide in respect to the length of term?

Answer 24

1. Starting point is the old lease.
2. Courts will consider whether the tenants would like a short term than the existing lease, however the maximum term the courts can grant is 15 years.
3. Parties can agree the term commencement date to be the date the stated in the notice, otherwise the court will decide it shall be 3 months from court proceedings being finished.

Question 25

What is section 34?

Answer 25

Where the courts have the power to decide the renting the absence of an agreement between the parties.

Question 26

What shall the rent be under section 34?

Answer 26

What the property would reasonably expect to achieve in the open market with a willing lessor, disregarding

1. Tenants occupation
2. Tenants goodwill
3. The effect of tenants improvements
4. Any addition in value created from the tenant obtaining a licence for a licensed premises.

Question 27

What is the 21 year rule?

Answer 27

The effect of tenants improvements will be disregarded from the rent at rent review and lease renewal, providing

1. The works had been consented to by the landlord
2. The works were not undertaken as an obligation to the landlord
3. The works took place in the current tenancy or successive tenancies and less than 21 years have passed.

Question 28

What is section 35?

Answer 28

The courts will decide on other terms of the lease in the absence of default with the parties.

Question 29

What other terms can the courts decide on?

Answer 29

??