L&T 1

Question 1

What are sections 24-28

Answer 1

24 - Gives T security of tenure
24A - Application to court for Interim Rent
25 - LLs notice of termination
26 - Ts request for new lease
27 - Ts request fro termination
28 - Agreement for new tenancy results in existing tenancy losing protection

Question 2

What is section 30?

Answer 2

Seven grounds at which a LL may object a new tenancy

Question 3

What is section 37?

Answer 3

Compensation where new tenancy is not granted

Question 4

Whats is section 38?

Answer 4

Contracting out of S24-28

Question 5

What is section 40?

Answer 5

Duty to give information

Question 6

Basic difference between lease renewal and rent review? 

Answer 6

Lease renewal is a statutory procedure laid down by the Landlord & Tenant Act 1954 Part II (as amended)

A rent review is a contractual procedure contained within a lease 

NOTE: if the lease is contracted out of 1954 Act then there is no statutory procedure 

Question 7

To what tenancies does the 1954 Act apply?  

Answer 7

Section 23 - Tenancies to which the Act applies

➢ Business tenancies - premises must be occupied by T for business purposes (trade, profession or employment)

Question 8

Name the tenancies to which the 1954 Act does not apply  

Answer 8

Agricultural Holdings
Mining leases
Resi tenancies
Tenancies granted as condition of employment
Tenancies not exceeding 6 months unless a)there is a provision for extension or b)tenant has been in occupation for more than 12 months

Question 9

Tell me about your understanding of the Landlord and Tenant (Covenants) Act 1954

Answer 9

An act that provides business tenancies with security of tenure

Question 10

What is a s25 notice?  

Answer 10

A notice served by the Landlord to the Tenant so that they can terminate lease at its contractual expiry 

Landlord either wishes to oppose a renewal of the lease or set out the terms of a new lease

Question 11

When can a LL serve a s25 notice?  

Answer 11

Between 6-12 months prior
a) contractual end to the tenancy
b) teh date specified in teh notice i.e of teh tenacy has less than 6 months to run

Question 12

What must a s25 contain?

Answer 12

If L does not oppose a new tenancy (sometimes referred to as a friendly notice) the Notice must state:

Name and address of landlord and tenant

➢ the property comprised

➢ the rent

➢ the other terms

A health warning would explain to T

➢ that Ls proposals are for the purposes of negotiation

If landlord opposes new tenancy:

The ground(s) under section 30(1) upon which he would opposed the tenants application for a new tenancy

Question 13

What advice would you give a LL in respect of a lease renewal where a property is significantly over rented?

Answer 13

Option 1) Do nothing - carry on receiving higher rent when holding over but tenant can give 3 months notice and leave, you will then have a void unit and void costs, which will decrease the market value of your investment
Option 2) conversely we could serve S.25 notice terminate the tenancy and agree new terms, rent would be lower but you would have a secure tenant, are you willing to take a risk or are you risk adverse and let the client take initiatives  but if it is a good tenant with a good covenant and you could get a 10-15 year lease - this is a good investment

Question 14

When is the best time to serve the s25 notice: 12months or 6months before lease expiry? 

Answer 14

Serve it when the market is at its strongest and you will receive the most rent

Serving 12 months - gives you time to negotiate or max time to relet - but markets can change

6 months, means we are negotiating as close to the renewal date as possible - However, also a risk that the tenant may not respond for a few months and then confirm they’re leaving on the last day of the term.  

Question 15

Why would a LL give 12 months’ notice when he could give 6 months? 

Answer 15

If you could achieve a higher market rent or difficult tenant

Question 16

What action should LL take if require possession of a property at end of lease? 

Answer 16

Serve notice under s25 to terminate tenancy and objecting to tenant having new tenancy under one or more of the grounds listed in s30(1)  

Question 17

What can a LL do if cannot get response from T to friendly s25 notice? 

Answer 17

Write to tenant and say unless I hear from you by X time on X date (14 days later is reasonable), my client will be making an application to the court to determine the terms of the new tenancy and will be looking to you to recover costs.

Tenant will unlikely actually end up in Court - good way to get a response! 

Question 18

What advice would you give a T when a LL s25 notice is due to expire in 2 weeks-time and agreement for new lease not yet agreed?  

Answer 18

Request an extension under which an interim rent is agreed

LL does not have to agree to an extension 

If not agreed, T would have to apply to Court for a new tenancy 

Question 19

Name grounds under the s30(1) of LL & T Act 1954 under which a LL can obtain possession

Answer 19

There are 7 grounds a L may oppose the request for a new tenancy in their S25 notice, or in response to Ts S26 request:
a) Persistently late with rent payments
b) Breach of repair covenant
c) Other substantial breaches
d) LL has found suitable alternative accommodation
e) Uneconomic subletting
f) LL intends to develop or reconstruct the property
g) LL wants to occupy premises for own purposes

(last 3 grounds e,f,g are the no-fault grounds) 

Question 20

A lease of a shop property is due to expire in 12 months’ time. You are instructed for the first time by the LL to negotiate a new lease with the T. How would you deal with this instruction? 

Answer 20

1. Request lease and other relevant docs
2. COI and TOE
3. Inspect a) measure b) carry out rental valuation c) any breaches of tenants covenant (sublet, repairs, breach of user)
4. Search for comparable evidence
5. Produce rental analyse and valuation report
6. Once agreed serve a section 25 not opposing new lease via solicitors

Question 21

In what circumstances is a T entitled to compensation when a LL successfully opposes a new lease under the 1954 Act?

Answer 21

The last three grounds e,f,g (the no-fault grounds) as the tenant is required to leave through no fault of their own

Question 22

How is T compensation assessed under 1954 Act?

Answer 22

• If tenant has been in occupation for 14 years or more, then get RV X 2
• If less than 14 years they get RV X 1

Question 23

  Explain the power of the court in ordering a new lease  

Answer 23

If the tenancy has been terminated in accordance with the Act and

➢ an application made by T or L under Section 24(1)

The Court has the power under Section 29(1) to grant a new tenancy, and may determine

S32 - Property comprised
S33 - Term (not exceeding 15 years)
S34 - Rent
S35 - Other terms

Potentially 24a - interim rent?

Question 24

What do you understand s34 rent to be? 

Answer 24

S34 - The rent the property might reasonably be expected to let at in the open market by a willing lessor, disregarding:

i) Tenants previous occupation

ii) any goodwill

iii) Certain improvements carried out by the tenant

iv) Any licence to sell intoxicating liquor if the licence belongs to a tenant

Improvements are to be disregarded if they were carried out by T other than as a lease obligation, and,

(i) during the old tenancy, or,

(ii) less than 21 years before the application for the new tenancy was made

Question 25

What do you understand interim rent to be?  Section 24A

Answer 25

➢ the interim rent is for the period from the expiry of the Section 25 or 26 Notice and the start of the new lease should such a period exist. Note: do not have to go to court, can just agree an interim rent between parties 

Question 26

How is the Interim Rent assessed? 

Answer 26

It is the rent under the new tenancy unless L or T show otherwise i.e. ➢ different valuation dates ➢ different terms of old and new tenancy

Question 27

In what circumstances would you recommend a tenant to serve a S26 notice? 

Answer 27

If they wish to remain in occupation and enter a new lease agreement (as holding over doesn’t provide certainty) OR if the property is over-rented

Question 28

Explain when tenant's improvements are disregarded at lease renewal

Answer 28

Improvements made by the tenant during the lease term: Any improvements carried out by the tenant at their own expense are disregarded when assessing the market rent for the renewed lease. With the landlord’s consent: Improvements are typically disregarded if they were made with the landlord’s consent or in compliance with the lease terms. Under a statutory obligation: Improvements that were made to comply with statutory obligations (e.g., health and safety regulations) are also disregarded in the rent-setting process.

Question 29

What action should a tenant take if there is 6 months of the lease remaining and they want to vacate at expiry. The LL has not served a s25 notice.  

Answer 29

T is within their right to vacate could serve S.27 or just had keys back on the end of the term. T should give MINIMUM 3 months notice.

Question 30

What are the key elements of a rent review clause? 

Answer 30

The Machinery for effecting the rent review Basis of value Means of settling disputes  

Question 31

What is a trigger notice? 

Answer 31

A notice that triggers a pre-determined sequence of events  e.g. the first notice (served by LL or T depending on what lease states) to trigger the rent review

Question 32

What is 'time of the essence'

Answer 32

If time is of the essence, then the time scales in the lease must be strictly adhered to, failure to exercise the right in time will mean that the right maybe lost.

Question 33

What are the two landmark cases in respect of 'time of the essence' 

Answer 33

Why is time not normally of the essence? Because of CASE LAW - The Burnley and The Cheapside cases - two cases in 1977 (held that time is not the essence of the contract and the essence of the contract is that the rent IS reviewed from that date)

Question 34

In what circumstances is it likely that time is of the essence?  

Answer 34

➢ the lease says so ➢ the lease makes it clear that time limits are strict (if there are interrelating clauses) ➢ there are deeming provisions* ➢ T serves notice making time of the essence

Question 35

What are deeming provisions? 

Answer 35

Assumption of acceptance if certain formal steps are not completed or certain conditions are not explicitly met

Question 36

What lease terms affect the rent at review?

Answer 36

1. The rent review clause itself - definition of rent, assumptions, disregards. (MOST SIGNIFICANT) 2. The frequency of review (the longer the period between reviews, the higher the rent)   3. Restrictions on user/alienation, insurance provisions, repairing liability etc (the more flexible a lease is, the higher the rent)  

Question 37

What assumptions are usually made in determining the rent at review? 

Answer 37

1. Vacant possession 2. Property is fit for occupation 3. Property is available to be let on teh open market by a willing LL and willing tenant 4. Property is being used for intended use 5. All repair covenants have been adhered to

Question 38

What is the hypothetical term?

Answer 38

Requiring the rent to be valued as a fictional lease - with certain assumptions and disregards. If the lease is silent then it is assumed that the hypothetical lease will be the unexpired residue.

Question 39

Is the hypothetical term more advantageous to the landlord or the tenant?

Answer 39

A longer term more advantages to the Tenant A shorter term more beneficial to the landlord

Question 40

What matters are usually disregarded?

Answer 40

1) Tenant's previous occupation 2) Tenant's goodwill 3) Tenant improvements 4) Any personal alcohol licences that belong T

Question 41

Where do the usual disregards originate from? 

Answer 41

They are included in the rent review clauses in many leases   They originate from s34 from LL & T Act 1954 (this act has nothing to do with rent reviews, the words have just been poached!) Rent Reviews only started being put into leases in 1960s (came in after 1954 Act) 

Question 42

How may a rent review be resolved if a LL and T cannot reach agreement? 

Answer 42

Lease should state the matter will be determined by a third party → Arbitrator or independent expert → if can’t agree on third party, President of RICS appoints

Question 43

What are the differences between an independent expert and an arbitrator? 

Answer 43

Arbitrator vs Independent Expert Acts only on evidence and arguments submitted but can draw parties’ attention to matters vs Has duty of investigation but may receive evidence from the parties Cannot decide without receiving evidence (can receive evidence from one of the parties only). vs Bases decision on own knowledge and investigations. However, may be required under the lease to receive evidence. Procedure regulated by Arbitration Act 1996 vs No legislation governing procedure May not delegate any duties vs May seek assistance Not liable for negligence vs Liable for damages through negligence

Question 44

What is the purpose of a Calderbank letter/offer?

Answer 44

An unequivocable offer to settle save as to costs Marked ‘Subject to Contract save as to Costs’ – save means ‘except’

Question 45

When is Calderbank offer used?

Answer 45

A Calderbank offer is used when there is an Arbitrator NOT an Independent Expert. The reason being that this is a procedure to save your client costs. An Arbitrator has the power to award costs but the Expert does not (unless it is specified in the lease that they do!)

Question 46

What must a Calderbank letter/offer contain?

Answer 46

1. Unconditional written offer to settle rent review 2. Reasonable proposal regarding costs incurred up until date of offer 3. Time within which party must accept (21 days) 4. A statement that is made without prejudice save as to costs'