Termination of Lease & Security of Tenure Flashcards
what is security of tenure?
generic term of statutory protection of leases
how are leases terminated at common law?
- Effluxion of time
- Notice to quit
- Surrender
- Merger
explain effluxion of time
fixed-term leases automatically ends and the end of the contractual term. No notice is needed.
explain notice to quit
periodic leases end with service of an NTQ by LL or T.
One full period’s notice must be given and notice expires at the end of the completed month i.e. monthly tenancy starts on 1st of the month. If NTQ is served on 14 Aug, the earliest the NTQ could specify for expiry of the notice is 30 Sep.
what is the exception to the general rule re NTQ?
only 6m notice for yearly tenancy
explain surrender
LL and T must agree. The lease will merge with LL’s reversion and is extinguished. LL and T may agree to this if there has been a breach of covenant as this would be cheaper than forfeiture.
This can be done informally by operation of law i.e. T handing back keys
To be legal, surrender must be done by deed. The deed could deal with things like arrears.
what is needed for surrender to be legal?
To be legal, surrender must be done by deed. The deed could deal with things like arrears.
explain merger
T acquires the LL’s reversion or a 3rd party acquires the lease and the reversion. The lease is then automatically extinguished (unless the lease is partly preserved in the documentation)
give an overview of the LTA 1954
- If the tenancy meets the LTA requirements, common law termination does not apply. It will continue until terminated in accordance with LTA.
what does LTA 1954 apply to
- LTA applies to tenancies which are occupied by T for business purposes
explain ‘occupied’
o can be personally or through a manager/agent
explain ‘business purposes’
give example
wide definition i.e. trades, professions. Tennis clubs and hospitals have previously failed.
even if a lease meets the LTA requirements, when a tenancy not be protected?
o Tenancies at will;
o Fixed-term tenancies for less than 6m (note exceptions)
o Fixed term tenancies if LTA has been contracted out
o Certain business leases i.e. agricultural, farm and mining leases
- In other words, if LL wants to let a property without security of tenure, they will need to use one of the above.
when will a fixed-term tenancy have LTA protection?
if it meets the requirements and either:
If T (or predecessor in the same business) has been in occupation for 12m, they will have protection if the next fixed lease is less than 6m; or
Tenancy is less than 6m but there is provision for renewal or extension beyond 6m
when must the contracting out procedure take place?
before the grant of the lease
what is the contracting out statutory procedure?
Must follow statutory procedure before grant of lease for this to be effective:
1. LL gives T a notice in the prescribed form warning them they are agreeing to a lease without security of tenure and advise they seek professional advice
2. T makes a declaration in the prescribed form confirming they have received notice and agree the lease should be contracted out
3. Details of the notice and T’s declaration must be noted in/on the lease
re: contracting out
what must happen if there is less than 14 days between the notice and declaration?
- If there is less than 14 days between the notice and declaration, T must give a statutory declaration before and independent solicitor
if LTA 1925 applies, how can a lease be terminated?
- Applicable leases can only be terminated using one of the below:
1. s25 LL’s notice
2. s26 T’s request for new tenancy
3. Forfeiture
4. Surrender
5. T giving LL NTQ (if periodic tenancy)
6. s27 notice by T (if fixed-term lease)
7. T cease to be in occupation for business (s27(1A)) (fixed-term lease)
how can LL terminate the lease under LTA 1925?
- If there are no grounds for forfeiture and T will not surrender, LL will have to serve s25 notice.
re: s25 notice
what is the first step?
LL will serve a s25 notice on T which confirms whether LL wants:
o The property back and opposes new tenancy must state s30 grounds
o To renew and grant a new lease must state proposals
re: s25 notice
what will the notice state?
whether LL wants:
o The property back and opposes new tenancy must state s30 grounds
o To renew and grant a new lease must state proposals
- The notice will state date the tenancy will end
re: s25 notice
what is the limitation in terms of the proposed end date?
This cannot be earlier than the lease’s contractual expiry date. It can be after but then the tenancy will continue until there has been 6m notice.
These are called continuation tenancies and are common
re: s25 notice
when must the notice be served?
o The notice must be served at least 6m and no more than 12m before the proposed termination date.
re: s26 notice
when must the notice be served?
o The notice must be served at least 6m and no more than 12m before the proposed termination date.
what can T do if they want to stay beyond the contractual expires date?
- If T wants to stay beyond contractual expiry date they can either wait for LL to serve s25 notice or T can serve a s26 notice.
re: s26 notice
what is this notice?
- This a request by the tenant for a new tenancy
re: s26 notice
what is the first step?
T serves a notice
re: s26 notice
what must the notice state?
It must state the date they want the new tenancy to begin and the proposed terms
re: s26 notice
what is the limitation in terms of the start date?
- The start date can’t be earlier than expiry of current term
re: post-service of s25 / s26 notice
what is the next step?
The next steps depend on whether LL opposes or agrees to renew
re: post-service of s25 / s26 notice
where are court applications made to?
- Applications are made to the county court
re: post-service of s25 / s26 notice
can parties amend the termination/proposed start date?
Parties can agree to extend the termination/proposed start date (i.e. if they are negotiating) to avoid the costs of court
re: post-service of s25 / s26 notice
what happens if the LL opposes a new tenancy?
- s26 only LL must serve counter notice stating s30 grounds within 2m
- T must apply to the court for the lease to be renewed before the termination date/proposed start date or they lose LTA rights
- LL can pre-empt this and apply for an order for the lease to be terminated on the grounds in the notice (LL cannot make this application if T has already)
re: post-service of s25 / s26 notice
what happens if LL agrees to the renewal?
- Parties negotiate new lease. If negotiations are ongoing close to the termination date, T should apply to the court to protect their position.
what is a s27 notice? explain this
s27 T can end a fixed-term lease by serving 3m written notice on LL.
o The notice cannot expire before the contractual expiry date
o So s27 can be used when T wants to terminate or on after the contract date
what is a s27a notice? explain this
- s27a T can end a fixed-term lease at the end of the contractual term by ceasing to be in occupation for business purposes
re: fixed term lease
what can T do if they want to leave on the contractual end date?
o T of a fixed-term lease wants to leave on contractual end date:
1. Serve s27 notice 3m before end date; or
2. Leave at the end of the tenancy
re: fixed term lease
what can T do if they want to leave after the contractual end date?
T of a fixed-term lease wants to leave after contractual end date:
1. Serve s27 notice which gives 3m notice; or
2. Agree voluntary surrender with LL
what are the s30 grounds?
a) T’s failure to repair
b) T’s persistent delay in paying rent
c) T’s substantial breach of other obligations
d) L has offered alternative accommodation
e) Tenancy is an underletting of part (rare)
f) LL intends to demolish or reconstruct.
g) LL intends to occupy the holding for its own business or as a residence
re: s30 grounds
what needs to be proven for the discretionary grounds?
LL must prove ground and that T ought not to be granted a new tenancy on the facts. Expensive – court hearing required.
re: s30 grounds
what needs to be proven for the discretionary grounds?
LL only has to prove ground.
re: s30 grounds
which are the discretionary grounds?
a) T’s failure to repair
b) T’s persistent delay in paying rent
c) T’s substantial breach of other obligations
e) Tenancy is an underletting of part (rare)
re: s30 grounds
which are the mandatory grounds?
d) L has offered alternative accommodation
f) LL intends to demolish or reconstruct.
g) LL intends to occupy the holding for its own business or as a residence
re: s30 grounds
explain ‘d) L has offered alternative accommodation’
- The accommodation must be suitable to T’s needs and on reasonable terms
re: s30 grounds
what does LL need to prove under ‘f) LL intends to demolish or reconstruct’
Most common ground. LL must prove:
o It has a firm & settled intention to carry out the work (i.e. it has obtained planning permission, finances in place etc);
o It intends to demolish, reconstruct or carry out substantial construction on all or part of premises; and
o It cannot reasonably carry out the work without obtaining possession
re: s30 grounds
when can LL rely on ‘g) LL intends to occupy the holding for its own business or as a residence’
- LL can only rely on g) if they have owned the property for at least 5 years before the end of the tenancy, unless they brought the property in vacant possession, let it out and are seeking possession within 5 years
re: s30 grounds
what must LL prove to rely on ‘g) LL intends to occupy the holding for its own business or as a residence’
LL must prove:
o It has a firm and settled intention to occupy;
o It has taken practical steps to occupy (i.e. plans to move); and
o There is a reasonable prospect of achieving its intention (albeit they need not prove the business will be successful)
where the matter is before the court, what is the position regarding the term of the holding of the lease?
T is only entitled to a tenancy of the holding (i.e. the property of the current tenancy, not inc. any part T has underlet).
However, LL can insist on the tenancy including all of the original let property (i.e. inc. underlet parts)
where the matter is before the court, what is the position regarding the term of the lease?
- Terms of new lease must be reasonable and cannot exceed 15 years
where the matter is before the court, when will the new lease begin?
- Lease will not commence until 4m after final court order
where the matter is before the court, what is the position regarding rent?
- Rent payable is open market rent
- Court can add a rent review clause, even if there wasn’t one before
where the matter is before the court, what will the court do when deciding rent?
When deciding this, the court disregards:
o That T and their predecessors have been in occupation;
o Any goodwill attached to the holding;
o Any voluntary improvements carried out by T;
o Any value added by T’s licence
where the matter is before the court, what happens if the parties cannot agree?
The court will consider the current tenancy and all relevant factors (likely to be the same as the old one)
where the matter is before the court, what can T do if they are unhappy with the new lease?
- T can apply for the order to be revoked if they are unhappy (LL cannot)
where the matter is before the court, what can LL do if they are unhappy with the new lease?
- LL would need to appeal if they were unhappy
when is compensation payable?
- If LL is successful solely on one of more of the no fault grounds (i.e. e, f or g), T is entitled to compensation equivalent to the rateable value of the holding
what is ‘rateable value’
o Rateable value = hypothetical annual rent used for tax purposes
when will 2x rateable value be payable?
- If T and their predecessors in the same business have been in occupation for at least 14 years, they are entitled to 2x rateable value
can LTA compensation be excluded?
- Any clause/agreement to exclude compensation is void if T or their predecessors have been in occupation for 5 years or more
