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Property Law and Practice > Business Tenancies > Flashcards

Business Tenancies Flashcards

1
Q

What does security of tenure mean?

A

Means that a tenant with security of tenure 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

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2
Q

What are the benefits of security of tenure for the tenant?

A
  • the tenant being able to treat the premises as a long term prospect means that the tenant can invest in fitting out the premises and making them suitable for their purposes
  • a retail or restaurant business know that they can recap the benefits of goodwill from their location
  • tenant does not have to worry about the considerable upheaval that could be caused by having to move at the end of the contractual term
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3
Q

What are the benefits of security of tenure for the landlord?

A
  • the premises will be more appealing to prospective tenants
  • the tenant may be encouraged to treat the premises as their own and therefore look after them. Will be repairing obligations in the lease anyway, but better if tenant observes them without being coerced to do so
  • may mean landlord can achieve higher rent at rent review
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4
Q

When does security of tenure apply?

A

1) to tenancies

2) with premises occupied by the tenant

3) for the purposes of a business

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5
Q

What tenancies will security of tenure apply to?

A
  • fixed term tenancies
  • periodic tenancies
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6
Q

What will security of tenure not apply to?

A
  • licence to occupy
  • tenancies at will
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7
Q

What does it mean that the premises must be occupied by the tenant?

A
  • tenant cannot leave the premises vacant
  • will not be in occupation in tenant underlets the whole or part of the premises
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8
Q

What does ‘for the purposes of a business’ mean?

A

Means that the tenant must be using the premises for any ‘trade, profession or employment’

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9
Q

What have been held to be business purposes?

A
  • charity shops
  • tennis club for members only
  • residential use that furthers the tenant’s business (eg accommodation for medical school students or lease of shop)
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10
Q

What have not been held to business purposes?

A
  • Sunday school sessions provided free of charge
  • tenant of a house taking a small number of lodgers without profit
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11
Q

What tenancies are excluded from security of tenure under the Landlord and Tenant Act 1954?

A
  • agricultural tenancies
  • mining leases
  • service tenancies
  • fixed term tenancies of six months or less (but can become protected if the tenant has been in occupation for twelve months or more, whether through successive tenancies or if the tenancy is renewable beyond six months)
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12
Q

Can parties contract out of the Landlord and Tenant Act 1954 secured tenancy provisions?

A

Yes - if a fixed term lease

No - if a periodic tenancy

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13
Q

How can the parties contract out of the secured tenancy provisions?

A

Two stages:

Stage 1 - landlord must serve a warning notice on the tenant in the prescribed form which details the consequences of contracting out the security of tenure provisions. Notice must be served prior to parties completing lease.

Stage 2 - tenant must provide a declaration in prescribed form to the landlord before completing the lease.

Lease completion 14 days from date of warning notice - signed declaration enough

Lease completion less than 14 days away, tenant must provide a statutory declaration (declared before an independent solicitor)

Lease must contain reference to both notice and declaration of contracting out

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14
Q

What happens if the correct procedure for contracting out of security of tenure is not complied with?

A

Lease will likely enjoy security of tenure

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15
Q

What happens at the end of the lease term where there is no security of tenure?

A

The tenant has no right to occupy and if the landlord has notified the tenant that it requires possession at the end of the contractual term, and the tenant continues to occupy then the landlord can treat them as a trespasser and recover possession

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16
Q

What happens at the end of the lease term where there is security of tenure?

A

The tenant has a right to stay in occupation - holding over.

The landlord cannot evict the tenant during this time and the tenant’s else can only be brought to an end by certain methods allowed by the landlord and tenant act 1954.

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17
Q

What options does a landlord have in bringing a protected tenancy to an end?

A

Landlord can:

  • forfeit the lease if there has been a breach of the tenant’s covenants and the lease allows this
  • serve a s 25 notice, which may indicate intention to recover the premises or offer a renewal lease
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18
Q

What options does a tenant have in bringing a protected tenancy to an end?

A
  • simply vacate the premises at the end of contractual term
  • to surrender the lease with the landlord’s agreement
  • for a periodic tenancy, serve notice to quit to bring the tenancy to an end
  • serve a section 26 notice to request a new tenancy
  • serve a section 27 notice to leave the premises
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19
Q

What must the landlord’s state and do to be compliant with the legislation?

A
  • it must state when the current tenancy will end
  • must be on or after the date which the contractual term ends
  • s 25 notice must be be served no less than 6 months and no more than 12 months before the date of termination
  • must be in the form prescribed by statute
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20
Q

What is a friendly section 25 notice?

A

Notice that indicates the landlord is willing to renew the lease to start the day after terminating.

It will propose the rent and principal terms of the new tenancy

21
Q

What is a hostile section 25 notice?

A

Notice indicating that the landlord intends to oppose renewal of the lease

22
Q

What will rent be doing holdover period?

A

The same as it was on the last day of tenancy

23
Q

Why would a landlord want to serve a friendly section 25 notice?

A
  • peace of mind - the landlord wants the tenant to be tied to a further term and therefore the landlord’s rental income will be guaranteed
  • in a rising market, to enable a market rent to be fixed for the renewal of the tenancy
24
Q

What are the seven grounds on which a landlord can oppose renewal of the tenant’s lease?

A
  • persistent and serious breach by the tenant of the repairing obligation
  • persistent delay by the tenant in paying rent
  • serious and persistent other breaches of covenants by the tenant
  • the landlord offers suitable alternative accommodation
  • landlord intends to demolish or reconstruct the premises or carry out substantial construction work which requires possession
  • landlord intends to occupy property for themselves
  • Sub-tenant - possession required for letting or disposing of whole of property
25
Q

If compensation is available for a landlord terminating a secured tenancy, how is it to be calculated?

A
  • at 1 times the rateable value if the business has occupied the premises for less than 14 years
  • at 2 times the rateable value if the business has occupied the premises for 14 years or more
26
Q

When will compensation be and not be available?

A

Will be available where ground is not the fault of the tenant’s such as landlord requiring possession or landlord demolishing the premises

Will not be available where ground is the fault of the tenants

27
Q

What is rateable value?

A

Value based on the estimated annual rental value of the premises and is fixed by the LA for purposes of collecting business rate

28
Q

Must the landlord produce evidence in support of grounds for terminating lease?

A

Yes - must substantiate the ground they seek to rely on

29
Q

What grounds will result mandatory termination by the court compared to discretionary?

A
  • the availability of suitable alternative accommodation
  • intention to demolish or reconstruct premises to carry out substantial construction
  • landlord intends to occupy premises
30
Q

Does the tenant need to provide the landlord with notice if they are going to vacate the premises at the end of the contractual term?

A

Not legally but good practice to notify the landlord

31
Q

What notice would a tenant give if it wished to renew the lease?

A

Section 26 notice

32
Q

What notice would a tenant give to end the lease after a period of holding over?

A

Section 27 notice

33
Q

What is the interaction between the different notices under the 1954 Act? (Section 26 notice to renew by tenant, section 27 notice to quite after holding over period by tenant and either hostile or friend section 25 notice by landlord)

A

The notices are mutually exclusive so once one has been served the other party cannot validly serve a different type of notice

34
Q

Why would a tenant want to service a section 26 notice to renew the lease?

A
  • may want certainty of fixed term, particularly if planning to carry out improvements to the premises or to assign the lease as part of a business sale
  • if falling market, may get renewal of lease at market rent which would be less than current rent
35
Q

What requirements are there for a valid section 26 notice?

A
  • tenant must have protected tenancy that originally granted a contractual term of more than one year
  • minimum notice period of six months and maximum notice period of 12 months
  • notice will expire on proposed commencement date of renewal lease
36
Q

What can the landlord do in response to a section 26 notice to renew the lease?

A
  • landlord has two months to serve a counter notice
  • can only oppose renewal on one of the statutory grounds which are the same as hostile s 25 notice
37
Q

How long a notice period of intended termination date must a section s 27 notice be?

A

Three months

38
Q

What rules are there surrounding when the intended termination date be?

A

Intended termination date must no earlier than the contractual term end date

39
Q

When can the parties apply to court following a section s 25 notice?

A

Either party can apply to the court after service of a section 25 notice and before the date of termination specified in the notice

40
Q

When can the parties apply to court following a section s 26 notice?

A

Parties can only apply after landlord has served a counter-notice or if not two months have elapsed from s 26 notice.

Deadline for applying to court is the day before proposed commencement date

41
Q

What happens if the parties cannot negotiate terms of new lease between themselves? What limits are on the court here?

A
  • court will decide
  • court can grant term up to 15 years
  • rent will be open market rent
  • other terms are determined by the court having regard to the terms of the current tenancy and relevant circumstances
42
Q

Rent during the holding over period is paid as it was per last review in lease. What can the parties do if the wish to vary it?

A

Can apply to the court for interim rent based on open market rent, meaning rent could go up or down.

43
Q

When is interim rent payable from?

A
  • earliest date of termination that could have been specified in landlord’s s 25 notice

OR

  • earliest date that could have been specified as the proposed commencement date in the tenant’s section 26 notice
44
Q

What can the tenant do if the court orders a new lease and the tenant is unhappy or changed its mind?

A

Tenant has 14 days to ask the court to revoke the court order

Court if asked must agree and tenant loses all right to renewal

45
Q

What happens if the court order termination of the existing lease?

A

The tenant will have no right to remain in occupation following the termination date

46
Q

When will an order to grant a new lease or order for termination of the existing lease take effect?

A

Both orders will bring existing tenancy to an end three months and 21 days after the date of the order.

New lease will start day after termination of the existing lease

47
Q

What are the rules in relation to dates of expiry?

A

Notice expires on the same date on which it was served

A notice served on the last day of the month will end on the last day of the appropriate month if shorter

48
Q

Section 25 and section 26 notice procedures must be conducted between the tenant and the competent landlord. Who is the competent landlord?

A

Competent landlord is that first in the chain of landlords to own a reversionary interest which is either freehold or a leasehold that will not come to an end in 14 months’ time

Property Law and Practice (12 decks)

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