Property 13

Question 1

What is ‘security of tenure’?

Answer 1

The right of a business tenant to stay in the premises at the end of the tenancy.

Question 2

What is the statutory protection given to commercial tenants under the Landlord and Tenant Act 1954?

Answer 2

Commercial tenant does not have to vacate their property at the end of a contractual lease and it will automatically continue, unless the landlord uses one of the statutory methods of terminating the lease (subject to certain excluded tenants)

Question 3

What are the four ways a tenancy protected by the 1954 Act can be terminated?

Answer 3

1. Forfeiture by the landlord2. Surrender by both parties3. Landlord serves a valid section 25 notice (to terminate lease or suggest new lease), or4. Tenant serves a valid section 26 notice (to request a new lease)

Question 4

What are three types of tenancy to which the 1954 Act does not apply?

Answer 4

1. Fixed term tenancy not exceeding six months2. Service tenancy3. Contracted out tenancy

Question 5

What is a ‘contracted out’ tenancy under the 1954 Act?

Answer 5

A prospective landlord and tenant can agree to exclude the security of tenure provisions from the tenancy that is due to be created. * This process is known as ‘contracting out’ of the 1954 Act, and the resulting tenancy is a ‘contracted out’ tenancy. * A failure to comply with the requirements to contract out will render the contracting out void, meaning that the** tenancy will be protected** by the security of tenure provisions of the 1954 Act.

Question 6

What are the three statutory requirements for a landlord to contract out of the 1954 Act?

Answer 6

1. Health warning from landlord2. Declaration from tenant3. Reference in the lease

Question 7

If the landlord wishes to contract out of the 1954 Act, how long before the tenant completes the lease should the health warning explaining what security of tenure is, that the tenant will be giving up these rights, the consequences of not having them and that they should seek professional advice be sent?

Answer 7

14 days before the tenant completes the lease

Question 8

What is required for the tenant to waive the 14 day period?

Answer 8

Tenant signs a formal statutory declaration in front of an independent solicitor waiving the period

Question 9

Regarding the tenant’s declaration in response to the health warning (not the one waiving the 14 day period), what two things must it confirm?

Answer 9

Tenant confirms they:1. Have received the health warning2. Agree to contracting out and to the consequences

Question 10

Does the tenant’s declaration in response to the health warning (not the one waiving the 14 day period) need to be signed in front of a solicitor?

Answer 10

No

Question 11

What three things must the reference in the lease contain?

Answer 11

Reference to:1. Health warning2. Tenant’s declaration and/or statutory declaration3. The agreement to contract outThey are usually contained in a separate clause in the lease

Question 12

What is a section 25 notice, and when must it be served?

Answer 12

A notice:* sent by the landlord informing the tenant that they require the premises back at the end of the term, or that they wish to enter into a new lease with the tenant, * served between six and twelve months before they wish the tenancy to end* which must be in the prescribed format to be valid and * must specify one of the statutory grounds on which possession is claimed

Question 13

If a landlord and tenant cannot agree whether the lease should end or cannot agree the terms of a new tenancy after service of a Section 25 or Section 26 notice, what happens?

Answer 13

A court application will settle the matter (rare)In this event, the new lease will not commence until three months after the court proceedings have ended.

Question 14

What are the seven statutory grounds (three of which concern tenant fault and four of which do not), one of which must be contained in a section 25 notice?

Answer 14

Tenant fault:1. Failure to repair2. Persistent delay in paying rent3. Substantial breaches of other obligationsNo tenant fault needed, but landlord:4. Has suitable alternative premises for the tenant5. Requires whole premises for subsequent letting (if tenant only rents part)6. Intends to demolish or reconstruct premises which cannot be done with tenant in occupation7. Intends to occupy premises himself

Question 15

Which grounds are discretionary, meaning even where they are advanced by the landlord and proved, the court can still order a new tenancy?

Answer 15

All three where the tenant is at fault, and the one concerning the landlord needing the whole of the property where the tenant only rents part

Question 16

Which grounds are mandatory, meaning once advanced, the court cannot interfere, and what are these also known as?

Answer 16

Alternative premises, demolish/reconstruct, intent to occupy.Also known as no-fault grounds.

Question 17

What is a section 26 notice, and when must it be served?

Answer 17

A notice:* served by the tenant on the tenant’s ‘competent landlord’ or agent requesting a new lease (and outline the required terms), * served between six and twelve months before they wish the new tenancy to begin * which must be in the prescribed format to be valid

Question 18

After receiving this notice, how long does the landlord have to inform the tenant if they intend to oppose the request?

Answer 18

Two months

Question 19

What must a landlord do in response to a section 26 notice if they are unwilling to agree to a new lease?

Answer 19

Justify their refusal by reference to one of the seven statutory grounds they would be able to use for their own section 25 notice

Question 20

What is a tenant entitled to if a landlord quits the lease using a no-fault ground (except available alternative accommodation)?

Answer 20

Compensation, on the basis that they have not done anything wrong

Question 21

Why is the tenant not entitled to compensation where there is alternative premises?

Answer 21

Because they will not have suffered any loss

Question 22

Is the tenant entitled to compensation if the landlord establishes one of the ‘fault grounds’?

Answer 22

No

Question 23

What are the determines how compensation is calculated when a tenant is entitled upon to termination due to a no-fault ground?

Answer 23

Whether the tenant has been in occupation for 14 years or less

Question 24

How is compensation calculated when the tenant has been in occupation for less than 14 years?

Answer 24

The ratable value of the premises

Question 25

How is compensation calculated when the tenant has been in occupation for at least 14 years, or took over the business from someone and their combined tenancy is at least 14 years?

Answer 25

Twice the ratable value of the premises

Question 26

What is the requirement of a ‘health warning’ to contract out of the 1954 Act?

Answer 26

Before the tenancy commences, the landlord must serve on the potential tenant a ‘health warning notice, which is a clearly written statutory notice that explains:* what the security of tenure is* that the potential tenant will be giving up these rights under the lease* the consequences of not having these rights, and * that they should seek professional advice. The notice should be served 14 days before the tenant completes the lease. The landlord can serve the health warning less than 14 days before commencement of the tenancy if the tenant signs a formal statutory declaration in front of an independent solicitor confirming waiver of the 14-day notice period.

Question 27

In a section 25 or 26 situation, what is the maximum length a court will order the new lease to be where the parties can’t agree?

Answer 27

15 years

Question 28

When will the court order a new lease and how will the terms be determined?

Answer 28

Either: * the landlord has failed to establish an opposition ground or * the landlord does not oppose the tenant’s applicationThen the new lease will normally be negotiated between the landlord and tenants’ solicitors. Once the new lease is agreed, the landlord and tenant should execute an original and counterpart in the usual way.