Business Tenancies Flashcards
What is security of tenure?
Landlord and tenant act 1954
- Provided with tenants with security of tenure
- Thus, a tenant may continue to occupy the premises at the end of the contractual term. They may request a new tenancy and the landlord’s ability to recover the premises from the tenant is limited.
Benefits of security of tenure for the tenant
- The tenant being able to treat the premises as a long-term prospect means that tenant can invest in fitting it out
- Can reap benefits from goodwill from their location
- Tenant does not have to worry about considerable upheaval
Benefits of security of tenure for the landlord
- Premises will be appealing to prospective tenants
- The tenants may be encouraged to treat the premises as their own
Application of security of tenure?
S23(1) of landlord and tenant act 1954 sets out when the security of tenure provisions applies
- Any tenancy where the property comprised in the tenancy is or included premises which are occupied by the tenant and are so occupied for PURPOSES of a business carried on by him or for those and other purposes.
Only applies to tenancy – if substance of a transaction is a tenancy the arrangement could still become protected with security of tenure.
Types of tenancy? Applies to TENANCY?
Fixed term tenancy
- Created exclusive possession and a proprietary interest.
- Binds successors in title to the landlord
- Tenant can use the property as if they ere the owner.
- Can benefit from security of tenure
License to occupy
- Personal permission to be on land and is not a proprietary interest
- It does not bind successors in title to the owner granting the license
- Cannot benefit from security of tenure
Periodic tenancy
- Created exclusive possession and property interests
- Can be brought to end by notice
- Can benefit from security of tenure
Tenancy at will
- Similar to license, it’s a personal permission but tenant can have exclusive possession
- Either landlord or tenant can end tenancy at any time
- CANNOT benefit from security of tenant
Occupied by tenant for purpose of business?
Occupied by the tenant
- If tenant leaves premises vacant then it is not entitled to claims security of tenure
- If it underletters whole or part – then loses security of tenure over it all.
For the purpose of a business
- Requirement is widely defined by landlord and tenant - including any trade profession or employment
- A charity shop, or a tennis club for members only counts as residential use that furthers the tenant’s business IS A BUSINESS
- Sunday school – free and tenant taking a few lodgers IS NOT A BUSINESS
Excluded tenancies
- S43 landlord and tenant act 1954 – specifically excludes some types of tenancies
- Agricultural tenancies
- Mining leases
- Service tenancies
- fixed term - less than 6 months
Contracting out?
Contracts out tenancies
- S38A of the landlord and tenant act 1954 allows the parties to agree to exclude a fixed term lease from the security of tenure provides
- Known as contracting out
A periodic tenancy that qualified for security of tenue cannot be contracted out
Procedure for contracting out
Two stage procedure
Stage 1
- Landlord must serve a warning notice on tenant in a prescribed form
- Must be served on both before the parties complete ethe lease
Stage 2
- The tenant must provide a declaration in prescribed from to landlord before completing the lease
- If lease completion is at least 14 days from date of warning notice then this can be a simple signed declaration
- If its less than 14 days away the tenant must provide a statutory declaring
- Lease must contain reference to both the notice and declaration of contracting out
- If the procedure is not correctly carried out the likelihood is that the lease will enjoy security of tenure
- Contracted out lease will end on end of contractual term.
Implications of security of tenure?
- For a non-protected tenancy – the tenant has no right to occupy beyond the contractual term.
- The landlord may treat them as trespasser and recover possession
By contrast – a protected tenancy - The tenant has a right to stay in occupation
- Known as holding over
- Will usually say – if they don’t keep up with rent payments, like for 21 days, landlord can forfeit the lease. RE-ENTER IT.
- Landlord cannot evict tenant [ and tenants’ occupation can only be brought to an end by certain methods allowed by the landlord and tenant act 1954
Ending a protected lease - landlord?
Ending a protected tenancy – landlord
- Landlord has limited option s
- Forefeet lease – if there has been a breach of tenant’s covenants and the lease allows this
- Serve a s25 notice which ay indicate an intention to recover the premises or offer a renewal lease
Ending a protected lease - tenant?
Ending a protected tenancy – tenant
- Simply to vacate it
- Surrender the lease with landlord agreement
- For a periodic tenancy serve notice to quit
- Seve a s26 notice to request a new tenancy
- Serve a s27 notice to leave the premises
S25 Notice?
- This notice stated when the current tenancy will end – the date of termination –
- A section 25 notice must be served no less than 6 months and no more than 12 months before the date of termination.
Friendly section 25 notice - Indicated that the landlord is willing to renew the lease to start the day after the date of termination
- It will propose the rent to be paid and principal terms
Why? - May do so for peace of mind
- In a rising market to enable a market rent to be fixed
Hostile one - Indicated landlord intends to oppose renewal of the lease
- Can only do so on certain statutory grounds
Grounds for hostile s25?
Seven grounds on which the landlord can oppose renewal of tenant’s lease
MANDATORY GROUNDS
- Landlord offers suitable alterative accommodation - COMPENSATION
- Landlord intends to demolish or reconstruct work which requires possession - COMPENSATION
- Intends to occupy for himself
DISCRETIONARY GROUNDS
- Persistent and serious breach by tenant of repairing obligation
- Persistent delay by tenant in paying rent
- Serious and persistent other breaches of covenant
Must be serious and material breach.
Landlord must substantiate the ground that it seeks to rely on
Grounds can be categories into compensatory and non-compensatory
Compensation is calculated
- At 1x rateable value (value based annual rental value of premisses, fixed by local authority) if less than 14 years
- At 2x rateable value if 14 years or more
If ground relies on no fault of tenant – then tenant may be entitled to compensation – this is a compensatory ground
Tenants notices?
May simply vacate
Could surrender – this is when the tenant gives up its leasehold interest to landlord bringing it to an end
Section 26 notices
- Tenant may want certainty of a fixed lease
- In a falling market tenant may be stuck on a higher than market rent whilst holing over – and will want a renewal lease at a market rent
- Request a new tenancy, states date of proposed start
- -dates of termination will be DAY BEFORE
- Do not need to apply to court
Requirements of a section 26 notices
- Lease originally granted must be more than one year
- Minimum notice period of 6 months and a maximum notice of 12 months – but this is based on the proposed commencement date of renewal of lease.
- A landlord has 2 months to serve a counter notice
Use of s27 notice
- Must give 3 months’ notice of the intended termination date
Procedure following a s25 or s26?
Application to court
Either party may apply to court after any service of a section 25 notice deadlines is the date of termination specified on notice.
With a section 26 notice – parties may only apply after landlord has served counter notice – or if not two months have elapsed from s26 notice. Deadlines is the day before the proposed commencement date
Negotiation of terms of new lease
- Both will propose the principal terms of a renewal lease.
- Court can grant a term of up to 15 years the rent will be open market rent
Interim rent
- Tenant will continue to pay rent as it was last reviewed by lease
- Either party can apply to have to based on market in the interim.
Date rules
- A notice expires on the same date as the date on which it was serves – a 6 month – served on 1 Jan expires on 1 July.
