Agency and Tenancy Law Study Notes
Agency and Tenancy Law
Business Tenancies: Renewal, Expiry and Rent Review
Overview of Topics Covered
Introduction to Business Tenancies: Discussed the essential elements concerning commercial leases and the relevant legal frameworks that apply to them.
Contracted Out of the Landlord and Tenant Act 1954: Explored scenarios where tenancies are exempt from the regulations of the LTA 1954.
Heads of Terms in a Business Tenancy: Investigated the preliminary agreements and guidelines leading to formal lease agreements.
Focus of Today's Lecture
Examination of business tenancies (commercial leases).
Regulation by the Landlord and Tenant Act 1954 (LTA 1954).
Protection Under the LTA 1954
Security of Tenure (Section 24): Tenants have protection ensuring they cannot be easily evicted after their lease expires.
Request for New Tenancy (Section 26): Tenants are entitled to ask for a renewed lease.
Compensation on Termination: In certain cases, tenants may receive compensation if landlords seek to terminate the tenancy successfully.
Relevant Sections for Protection:
Sections 24 to 28 cover tenants' rights.
Section 30 outlines grounds for possession.
Key Provisions of the LTA 1954
Section 24 - Tenancy Termination
Statement: “A tenancy shall not come to an end unless terminated in accordance with provisions of this act.”
Continuation Tenancy: If tenants remain in occupation past the expiry, they enter a continuation tenancy or ‘holding over’.
Case Study: Berthon Boat Co Ltd v Hood Sailmakers Ltd (2000): Tenant continued to pay commission to landlord, establishing terms for continuation tenancy.
Section 29 - Court Orders
Court Application: Landlords can apply under Section 25; tenants can apply under Section 26.
Only one application can be made for each scenario.
The court can either grant a new tenancy or order termination.
Summary of Notices
Section 40 Notice: To provide information; ensures details are accurate concerning future notifications.
Section 25 Notice: Landlords can choose to either offer a new tenancy or seek to terminate an existing tenancy.
Section 26 Notice: Tenant’s formal request for a new tenancy.
Section 27 Notice: Tenant’s notification to terminate at the end of the term.
Section 40 Notice - Details
Can be served by either party to ensure accuracy of terms.
Must detail:
Names of landlords/tenants
Demise (rent and terms)
Issued up to two years before tenancy expiry
Identification of ‘competent landlord’ is required (minimum 14 months remaining).
Section 25 Notice - Requirements
Provides two options for landlords:
New Tenancy Offer (Non-hostile): Must include proposed new lease terms.
Termination of Tenancy (Hostile): Must state grounds for possession from Section 30.
Prescribed Form: Must adhere to the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004.
Timings: Must serve notice between 12-6 months before the tenancy ends.
Case Reference: Lord Newborough v Jones (1975): Valid service of notice despite being concealed.
Section 30 - Grounds for Possession
Grounds for landlord to regain possession:
(a) Tenant’s breach of repairing obligations.
(b) Persistent delays in paying rent.
(c) Other substantial breaches.
(d) Suitable alternative accommodation.
(e) Landlord requires possession to let the property as a whole or for disposal.
(f) Landlord needs possession for demolition/reconstruction or to undertake construction works.
(g) For the landlord's own business.
Specific Grounds for Possession
Ground (a) - Failure to Repair
Discretionary basis for termination.
Examined through the presence of disrepair at the notice service and hearing.
Case Study: Gill v Lees News Ltd (2023): Even minor disrepair during lease can be relevant for proceedings.
Ground (b) - Persistent Delay in Rent Payment
Depends on series of arrears; seen as discretionary by the court.
Examples of needed considerations:
Hopcutt v Carver (1969): Late rent causes non-renewal over 2 years.
Hurstfell Ltd v Leicester Square Property Co Ltd: Late payments but on time upon serving notice led to granted tenancy.
Ground (c) - Substantial Breach of Other Reasons
Definition of ‘Substantial’: Interpretation from Palser v Grinling (1948) as significant to the holding's management.
Discretionary with no compensation awarded.
Ground (f) - Demolition and Reconstruction Requirement
Landlord must substantiate intention to demolish/reconstruct at hearing date.
Case Law Insight:
Hough v Greathall Ltd (2015): Emphasizes the necessity to establish a concrete intention to proceed with renovations.
Cunliffe v Goodman (1950): Requirements for proving intentions beyond mere contemplation.
Ground (f) - Substantiality of Works
The undertaking must involve considerable demolition or rebuilding efforts.
Case Law Examples:
Joel v Swaddle (1957): Landlord's renovations deemed substantial.
Barth v Pritchard (1990): Minor renovations ruled insignificant.
S Franses Ltd v The Cavendish Hotel (London) Ltd (2018): Works must not solely aim to evict tenant.
Compensation on Termination of Tenancy
Applicable only on specific grounds (E, F, G) and not for misconduct.
The compensation structure:
1 times RV for tenancy up to 14 years.
2 times RV for tenancies longer than 14 years.
Definition: RV refers to the rateable value that reflects the property's worth.
Section 26 - Tenant’s Request for New Tenancy
Must be formally documented where tenancy exceeds one year.
Timing is akin to Section 25, where requests are made 12 to 6 months prior to expiry.
Section 26 lays out when a new tenancy starts and conditions under which landlords can oppose renewal via counter notices based on Section 30 grounds.
Section 27 - Tenant’s Notice to Terminate
Tenant must notify termination, which negates the application of Section 24 (eliminating continuation).
Notice Requirement: Minimum of 3 months.
Case Reference: Esselte AB v Pearl Assurance Plc (1997) highlights the need for tenant occupation for continuation tenancy.
Section 28 - Granting New Tenancy
Allows for advanced agreement on tenancy terms between landlord and tenant.
Current tenancy remains in effect until finalized agreement; LTA 1954's stipulations do not apply in this interim.
Disputes in Renewal of LTA 1954
Disputes involving protected tenancies or lease terms/terminations can prompt court intervention.
Section 33 – Court Procedures
In situations of renewal disputes, application can be made to County or High Court.
Claim forms submitted by solicitors need to be lodged pre-determined notice dates (Sections 25/26).
The court can provide fixed terms of up to 15 years and set interim rents from the earliest application date.
Unopposed applications may qualify for the PACT scheme to promote negotiations and resolutions through alternative dispute resolution (ADR).
Rent Reviews at Renewal
The LTA 1954 specifies no prescribed method for reviewing rent; it is defined within the lease itself.
The rent review process commences with the landlord issuing written notice to the tenant, with the possibility for unilateral counter notices from either party.
Assessing the Rent
Assumptions in determining the fair market rent include:
The landlords and tenants are reasonable and willing parties.
Considerations beyond merely rental rates are included.
Expectations of tenant obligations being fulfilled and property being repaired and maintainable.
The property must be considered as vacant and ready for letting, creating a hypothetical lease within the existing lease framework.
Court Determination of Rent
According to Section 34, the determined rent should reflect what the property might reasonably fetch in the open market, taking into account the following disregarded factors:
Tenant in occupation.
Tenant goodwill.
Any improvements carried out by the tenant for which they are not liable under the tenancy and made max twenty-one years ago.
If the property is a licensed premise, any value tied to the accompanying license will be disregarded.