Business Tenancies / Security of Tenure

Question 1

What are the three requirements for the 1954 act to apply?

Answer 1

Tenant in occupation

Conducting a business

Lease

Question 2

What tenancies are excluded from security of tenure provisions?

Answer 2

• Agricultural tenancies
• Mining leases
• Service tenancies
• Fixed term tenancies of six months or less – can become protected if the tenant has been in occupation for 12 months or more

Question 3

How can parties exclude SOT provisions?

Answer 3

Contracting out

Question 4

What type of leases are commonly contracted out of?

Answer 4

Short term leases - 5 years or less

Underleases

Question 5

What type of leases cannot contract out of SOT provisions

Answer 5

Periodic tenancies

Question 6

What is the procedure to contract out of a tenancy?

Answer 6

Step 1: Landlord serving warning notice on T - detailing consequences of contracting out, which must be served before parties complete the lease

Step 2:
a) More than 14 days away from lease completion: tenant can complete a signed declaration

b) less than 14 days away from lease completion: tenant must complete a statutory declaration, declared before an independent solicitor

Question 7

What are the implications of security of tenure?

Answer 7

tenant has a right to stay in occupation - to hold over

cannot be evicted

Question 8

How can a landlord end a protected tenancy?

Answer 8

• Forfeit the lease if there has been a breach of tenant’s covenants
• Serve a Section 25 notice – which may indicate an intention to recover the premises or offer a renewal lease

Question 9

Does a tenant who has SOT need to notify a landlord that it wants to stay?

Answer 9

No, can just stay in occupation

Question 10

if a tenant has a periodic tenancy and they want to end it, what must they do?

Answer 10

Serve a notice to quit

Question 11

What is a Section 25 notice?

Answer 11

Landlord’s notice, which says when current tenancy will end

Question 12

When must a Section 25 notice be served?

Answer 12

No less than 6 months and no more than 12 months before the date of termination

Question 13

What is a hostile s25 notice?

Answer 13

A notice saying that landlord intents to oppose renewal of lease

Question 14

What is a friendly s25 notice?

Answer 14

• Indicates that the landlord is willing to renew the lease to start the day after the date of termination
• Will suggest a rent and any new terms

Question 15

What are the statutory grounds for a hostile s25 notice?

Answer 15

• Persistent and serious breach of a repairing obligation
• Persistent delay by tenant in paying rent
• Serious and persistent other breaches of covenants by the tenant
• Landlord offers suitable alternative accommodation
• Landlord intends to demolish / reconstruct the premises / carry out substantial construction work which requires possession
• Landlord intends to occupy premises for itself

Question 16

What four categories do the statutory grounds fall into? What is the effect of each of them?

Answer 16

• Mandatory: if landlord establishes, court must grant possession
• Discretionary: if landlord shows ground, court has discretion
• Compensatory: no fault of tenant - can be entitled to compensation
• Non-compensatory: ground relies on the fault of the tenant - no compensation for the tenant

Question 17

How is compensation calculated for early termination?

Answer 17

• 1x rateable value is the business has occupied premises for under 14 years
• 2x if business has occupied for 14 years+

Rateable value is set by the local authority

Question 18

Which statutory grounds are compensatory?

Answer 18

Landlord intends to demolish or reconstruct premises, or carry out substantial reconstruction

Landlord intends to occupy premises

Question 19

Which statutory grounds are mandatory?

Answer 19

Landlord has offered suitable alternative accommodation

Landlord intends to demolish or reconstruct premises, or carry out substantial reconstruction

Landlord intends to occupy premises

Question 20

If someone has contracted out of a SOT, what must their lease say?

Answer 20

Lease must refer to notice and declaration

Question 21

What is a Section 26 notice?

Answer 21

A tenant’s notice which informs a commercial landlord that you wish to renew your lease

Question 22

What requirements are there for a tenant to serve a S26 notice?

Answer 22

Lease originally granted for over one year
Minimum notice period of 6 months, maximum notice period of 12 months

Question 23

What must a landlord do in response to a S26 notice?

Answer 23

Landlord has 2 months from the s26 notice to serve a counter notice, which must be based on one of the statutory grounds

Question 24

What is a Section 27 notice?

Answer 24

A notice by the tenant which gives 3 months notice of an intended termination date, which must be no earlier than the date on which the contract ends - not essential, but good practice

Question 25

Would a charity shop benefit from SOT provisions?

Answer 25

Yes

Question 26

What is the effect of either party serving any one of the S25-7 notices?

Answer 26

No other type of notice can be served

Question 27

What should happen after the service of a S25 notice?

Answer 27

Either party can apply to the court, for renewal lease by the date of termination specified in the notice

Question 28

For section 25 notices, what limit is there on the proposed termination date?

Answer 28

It cannot be before the contractual expiry date of the lease

Question 29

What should happen after the service of a S26 notice?

Answer 29

Parties can only apply to court for a renewal lease after either landlord has served a counter-notice, or if not, 2 months have elapsed after S26 notice Deadline: day **before proposed commencement date** of new lease Can be extended by parties agreed in writing

Question 30

For the notice period for both s26 and s27 notices, what limitation is there on the notice period

Answer 30

S26: proposed term commencement date cannot be before the contractual expiry date S27: tenant cannot leave the property before the contractual expiry date of the current lease

Question 31

What are the rules regarding when notices can be served?

Answer 31

No less than 6 months, no more than 12 months from date of service Date of termination cannot be before the contractual expiry date No other notices can have been served

Question 32

Both S25 and S26 notice procedure must be conducted between tenant and a competent landlord - who is the competent landlord?

Answer 32

First in the chain of landlords, starting with immediate landlord who owns a reversionary interest (either freehold or leasehold) that will not come to an end in 14 months’ time

Question 33

Which notice does not have to be in a prescribed form?

Answer 33

Section 27 - where tenant gives notice to leave

Question 34

for the date rules, when does a notice expire?

Answer 34

On the same date on which it was served e.g. 6 months notice period, 1 January expires on 1 July

Question 35

What is the corresponding date rule?

Answer 35

Notice served on last day of the month will end on the last day of appropriate month if shortened 6 month notice served on 31 August - end on last day of February – so 28th or 29th if a leap year

Question 36

How should the landlord and tenant negotiate a new lease?

Answer 36

between themselves, and only apply to court if they feel that they are unable to decide between themselves

Question 37

What powers does the court have regarding the terms of a lease granted?

Answer 37

court can grant a term of up to 15 years, with an open market rent, and any other terms considered

Question 38

During a period of holding over and negotiation what will a tenant pay? What can either party do if they are unhappy?

Answer 38

Rent under previous lease - but either party can apply to the court to fix an interim rent based on open market rent

Question 39

Can an interim rent be lower than the previous agreed rent?

Answer 39

Yes - not upwards only review

Question 40

Who can apply to the court to renew the lease?

Answer 40

Both parties

Question 41

If a court order has been granted but a tenant has changed its mind?

Answer 41

T has 14 days to ask the court to revoke a court order. Court must agree but then the tenant has no right to renew

Question 42

If a Landlord is opposing renewal on statutory grounds either by hostile s25 or counter-notice to s26, what can they do?

Answer 42

Apply to court for an order of termination of the existing lease

Question 43

If a court order is made to bring a tenancy to an end, how long will either party have?

Answer 43

3 months and 21 days - 3 months notice period, plus 21 days for appeal

Question 44

If a court makes an order for a new lease, when will the new lease start?

Answer 44

it will start the day after the termination of the existing lease