Business tenancies

Question 1

What is a “tenancy at will”?

Answer 1

A personal permission to be on the land

Question 2

Disadvantages of a “tenancy at will”

Answer 2

Either landlord or tenant can end tenancy at any time
NO security of tenure

Question 3

Tenancies that are excluded from having security of tenure

Answer 3

Agricultural tenancies
Mining leases
Service tenancies (granted in a course of employment)
Fixed term tenancies of 6 months or less (but can become protected if the tenant is in occupation for 12 months+ through successive tenancies)

Question 4

Contracting out

Answer 4

parties can agree to exclude a fixed term lease from the security of tenure provisions;
applies to fixed term leases ONLY (not periodic tenancies)

Question 5

Contracting out 2-step process

Answer 5

Step 1: Landlord must serve a warning notice on the tenant before the parties complete the lease

Step 2: Tenant declaration to landlord pre-completion

Question 6

Formalities for tenant declaration of contracting out

Answer 6

If lease completion is at least 14 days from the date of the warning notice, it can be a simple signed declaration.

If lease completion is less than 14 days away, then the tenant must provide a statutory declaration (declared before an independent solicitor).

Question 7

How must the lease refer to contracting out?

Answer 7

the lease must contain reference to both the notice and declaration (or statutory declaration) of contracting out

Question 8

What happens at the end of a protected tenancy?

Answer 8

the tenant has the right to stay in occupation (“holding over”). The landlord cannot evict the tenant, and the tenant’s occupation can only be brought to an end by certain methods allowed by the LTA 1954.

Question 9

options available to a landlord who wants to bring a protected tenancy to an end

Answer 9

forfeit the lease if there has been a breach of the tenant’s covenants and the lease allows this
OR
serve a s.25 notice

Question 10

s.25 notice terminate date

Answer 10

date of termination must be on or after the date on which the contractual term ends

Question 11

When must a landlord serve a s.25 notice?

Answer 11

6-12 months before date of termination

Question 12

friendly s.25

Answer 12

indicates that the landlord is willing to renew the lease to start the day after the date of termination

Question 13

hostile s.25

Answer 13

landlord intends to oppose renewal; notice must specify on what ground(s)

Question 14

only possible for a protected lease to contract out of paying compensation if the tenant has been in occupation for

Answer 14

less than 5 years

Question 15

How is compensation calculated if lease is brought to an early end by landlord on a compensatory ground?

Answer 15

1 x the rateable value if business occupied the premises for less than 14 years

2 x the rateable value if business occupied the premises for 14 years+

Question 16

Compensatory grounds

Answer 16

If the ground for not renewing the lease relies on no fault of the tenant (eg the landlord needs to carry out work), then the tenant may be entitled to compensation.

Question 17

rateable value

Answer 17

based on estimated annual rental value of premises and is fixed by the local authority for the purpose of the calculating business rates due for the premises

Question 18

Examples of compensatory grounds

Answer 18

landlord intends to occupy premises; landlord intends to demolish/reconstruct premises

Question 19

discretionary grounds for hostile s.25

Answer 19

persistent delay in paying rent, persistent breach of repair obligation, other substantial breaches of tenant obligations

Question 20

mandatory grounds for hostile s.25

Answer 20

availability of suitable alternative accom, landlord intends to occupy premises, landlord intends to demolish/reconstruct premises

Question 21

Why would a tenant serve a s.26 notice if they are entitled to hold over?

Answer 21

The tenant may want the certainty of a fixed term or wants to take advantage of a falling rent market

Question 22

To serve a s.26 notice, the tenancy must have

Answer 22

a protected tenancy and have been granted the lease for a contractual term of over 1 year

Question 23

Time limits for a landlord to oppose a s.26

Answer 23

landlord has 2 months from the section 26 notice to serve a counter-notice on 1 or more of the statutory grounds

Question 24

If a landlord does not serve a counter-notice to a s.26, does it automatically pass?

Answer 24

No, the tenant will probably apply to court

Question 25

Notice period required for a s.27

Answer 25

3 months before the intended termination date, which cannot be before the end of contractual term

Question 26

dates for a s.26 notice are concerned with

Answer 26

the day before the proposed commencement date

Question 27

What terms can the court impose on a renewed lease?

Answer 27

The court can only grant a term up to 15 years, at open market rent, and other terms are determined by the court having regard to the terms of the current tenancy and relevant circumstances

Question 28

During the period of holding over and negotiation, either party may apply to the court to

Answer 28

fix an interim rent which is based on the open market rent (could go up or down)

Question 29

If the tenant is not happy with the terms determined by the court, or has simply changed its mind, what can they do?

Answer 29

the tenant has 14 days to ask the court to revoke the court order. If asked, the court must agree, and the tenant will then have no right to renew.

Question 30

What is the outcome if the court grants an order preventing renewal because of either a hostile s.25 notice or a counter-notice to a s.26 notice?

Answer 30

Both types of order bring the existing tenancy to an end 3 months and 21 days after the date of the order

Question 31

What does having security of tenure under LTA 1954 mean?

Answer 31

the lease can only come to an end in one of the ways prescribed or permitted by LTA54 and the tenant or the landlord can apply to the court for an order for the grant of a new tenancy.

Question 32

sinking fund

Answer 32

a reserve fund to cover the cost of any major work that might arise from time to time

Question 33

Benefits of a sinking fund

Answer 33

a sinking fund provides a reserve of capital, which can be used if any major works need to be carried out. The fund is built up over time by small regular contributions, which avoids tenants being called upon to pay a large one-off supplemental contribution to cover those works.