Landlord and Tenant

Question 1

Can you describe the implications and requirements of S.25 and S.26 Notices, from the L&T Act 1954?

Answer 1

Landlords S.25 Notice - 6-12 months notice to either terminate the lease (not prior to expiry), or to propose terms of new tenancy.
Tenants S.26 Notice - 6-12 months notice to terminate lease and create new tenancy, proposing new terms. L must counter proposal with 2 months.

Question 2

What is the difference between a Lease and a Licence?

Answer 2

Lease - exclusive possession, for a term, at a rent, with a contract between L & T. Creates an estate in land.
Licence - gives permissions to do something otherwise illegal, they are personal arrangements which are not capable of being assigned.

Street v Mountford

Question 3

What is an AGA and what notice must a landlord serve to pursue a gaurantor?

Answer 3

AGA’s were introduced by the L&T (Covenants) Act 1995, the require an assigning tenant to act as a guarantor for the assignee should the landlord request it. A landlord can serve a section 17 notice to a former tenant/guarantor within 6 months of the sums falling due.

Question 4

What is a Tenacy at Will?

Answer 4

A form of tenancy created by written agreement for an unspecified time in which the landlord may evict the tenant at any time.
Exclusive possession but no definite term.
Agreement that it can be terminated at any time by L or T, can arrive at if T holding over.
Not a lease, and not protected by 54 Act, personal arrangement.

Question 5

How can a party terminate a lease?

Answer 5

Forfeiture
Surrender
Lease expiry
Break
Service of Notices of L&T 1954

Question 6

What does ‘holding over’ mean?

Answer 6

S24 of the L&T 1954 Act - at the lease expiry tenancy continues until it is bought to an end under the act. It continues of the same terms at the same rent. Also know as a continuation tenancy.

Question 7

What is a Caldebank Offer?

Answer 7

A genuine offer to settle a dispute. Usually served “without prejudice save as to costs”. Meaning the offer may be used in court to determine the costs of the case.

Question 8

How can a tenant exit a lease which is inside the 1954 Act?

Answer 8

By vacating on or before the term date, by serving S.27 notice with at least 3 months notice, or by discontinuing any application for a new tenancy.

Question 9

What are the grounds on which a landlord can oppose a tenants request for a new tenancy, under S.30 of the 1954 Act?

Answer 9

a) Failure to repair
b) Persistent delay in paying rent
c) Other substantial beaches by the tenant
d) Suitable alternative accommodation is offered
e) Subletting of part
f) Landlord intends to redevelop/demolish - Most common, intention must be proven
g) Landlord intends to occupy

Question 10

If a landlord opposes a new tenancy on grounds (e), (f) or (g) then the tenant is entitled to statutory compensation. How is the compensation determined?

Answer 10

Compensation is assessed at 1x the rateable value of the property or, where the tenant has been in occupation for 14 years or more, at 2x the rateable value.

Question 11

If the landlord and tenant agree to a new tenancy but cannot agree the terms, they may apply to Court. This is called an ‘unopposed renewal’. What is the procedure which involves professionals other than the judge to determine the lease terms?

Answer 11

Professional Arbitration on Court Terms (PACT) is a procedure created by RICS which refers lease renewal issues to specialist arbitrators/experts.

Question 12

Arbitration – what 3 grounds of appeal are available, and to whom/timescale do you have to make an appeal?

Answer 12

You can only Appeal to the High Court within 28 days of the award on THREE specific grounds:

1. A challenge to the tribunal’s jurisdiction
2. On a point of law
3. Serious irregularity

Question 13

Arbitrator
Governed by what judicial doc?
Who appoints?
Power over procedure? Typical format of the procedure?
Powers over costs?
Useful in what comparable evidence circumstances?
Powers to order disclosure, and under what Section?
Can you appeal or sue for negligence?
Outcome?
Two main practical downsides compared to independent expert?

Answer 13

• 1996 Arbitrator Act – quasi-judicial process
• Arbitrators can be appointed by RICS President using the Dispute Resolution Service and be a member of the Charted Institute of Arbitrators. (i.e. if it is not possible to agreed on the 3rd party)
• Format decided by arbitrator to include an agreed statement of facts & timetable for submission. The statement of agreed facts is a summary of the points agreed between both parties, such as relating to the lease terms, floor arears and comparable evidence.
• Can decide how to hear the case and order costs.
• Will provide a reasoned award unless agreed otherwise with parties (i.e. award must always contain full reasoning, therefore you are able to comment on the other sides submission)
• Can only use evidence submitted by the parties (evidence of fact, hearsay and/or form an expert witness)
• Immunity from negligence and can order disclosure (OTHER THAN privileged documents) - guarantee to show your evidence (CPR governs + s34 Arb Act, entitles parties to obtain details of other side’s evidence, secure witness attendance or production of documents by third party, when they would otherwise prefer to only show the most favourable evidence)
• Award
• More costly and generally slower than independent expert determination.

Question 14

Independent Expert
What expertise is required?
Who appoints?
Bound by lease or judicial rules, and with potential consequence?
Can you appeal or sue for negligence?
2 procedures used for carrying out the process?
Useful in what comparable evidence circumstances?
Powers to order disclosure?
Powers over costs?
Outcome?

Answer 14

• Has detailed knowledge of the market as a valuer
• Appointed by the President of the RICS by the Dispute Resolution Service but not bound by the judicial rules.
• Bound by terms of the lease, may be binding, depends on contract
• No judicial function
• No appeal against the decision (other than in very rare circumstances (incorrect interpretation)) but can sue for negligence (very rare)
• There is no relevant legislation so acts with an informal procedural timetable - can involve a hearing or dealt with by written representations
• Good when lack of market comparables and need to be up to date
• No power to order disclosure
• Orders costs as set out in lease but only has power over their own costs
• Outcome - called a determination

Question 15

What must a Calderbank letter be headed with, and what 3 things must the letter set out?

Answer 15

• Letter serves must be headed ‘without prejudice save as to costs’ (i.e. ‘save as to costs’ means only revealed to dispute resolver once decision made, then used to determine costs) AND NOT marked ‘subject to contract’.

For a Calderbank offer to be effective it must contain

a) An unconditional written offer to settle the rent review
b) A reasonable proposal regarding costs incurred up to the date of the offer (normally this would be that each party bears their own costs plus 50% of the Arbitrators fees)
c) A time within which the other party may accept the offer (usually 21 days)

Question 16

What did the Court consider re. rent review clauses in British Gas Corp v Universities Superannuation Scheme Ltd (1986), and what decision was held/established?

Answer 16

o The Court considered whether a hypothetical lease at rent review would contain a rent review clause.
o It was held that in the absence of clear wording that could be interpreted otherwise, future rent reviews in the actual lease should be considered in the hypothetical lease in agreeing the market rent.

(Normally 5 years but the longer the review period the HIGHER the rent. Usual adjustments are 1% to 2% for every year.)

Question 17

What are the 4 usual assumptions in a rent review?

Answer 17

o Property available to let on open market by willing tenant and willing landlord for a term of years as stated at the market rent (the notional or hypothetical tenant)
o Property is fit and available for immediate occupation and use
o All covenants observed by landlord and tenant
o Property may be used for purposes set out in lease

Question 18

Define a Tenancy at Sufferance/how it works.

Answer 18

• Where a tenant stays in a property/possession of land without the landlords consent after lease expiry. The tenant continues to hold this definition until either eviction or some arrangement is accepted by the landlord allowing them to stay.

Question 19

What governs a lease renewal

Answer 19

Statutory - L&T Act 1954

Question 20

What governs a rent review

Answer 20

Contractual - The lease terms

Question 21

What did the L&T (covenants) Act 1995 abolish?

Answer 21

Privity of Contract - demanding rent from original tenant.

Question 22

Imagine I am a tenant who is unrepresented can you explain the implications and provisions of having a lease contracted outside the L and T Act 1954?

Answer 22

The L&T 1954 Act provides security of tenure, meaning the tenant has the right to renew the lease upon expiry, with the same terms and at market value. If you are contracted out of the Act, there is no requirement for the landlord to renew the lease upon expiry, so you may have to relocate your business. I would recommend seeking representation before agreeing to a lease.

Question 23

What does ‘subject to contract’ and ‘without prejudice’ mean?

Answer 23

Subject to contract - not to be relied upon until agreed in contract.
Without prejudice - not to be relied upon in court.

Question 24

What do you need prior to dealing with a rent review or lease renewal?

Answer 24

Before both, confirm competence, PII, conflict of interests and ToE.
RR - Contractual - Check the lease for requirements. If OM, find comps and negotiate with the landlord.
LR - Statutory (if 1954) - Serve relevant notice (S.25 for L, S.26 for T), find comps and assess MR.

Question 25

What are common assumptions and disregards in a rent review?

Answer 25

Assumptions:
Property is let in a state that is ready for immediate use.
Permitted use as anything permitted in lease.
Let on open market with sufficent marketing.
All covenants observed by tenant.
Disregards:
Any effect of the tenants operations.
Tenants improvements.
Licences personal to the tenant.

Question 26

What happens at the end of a lease if there is disrepair?

Answer 26

A final dilapidations schedule would be issued with 56 days of expiry. S.18 of L&T 1927 Act limits the damages to the dimunition in value, and requires a specific type of valuation.

Question 27

What’s the difference between arbitrator and independent expert?

Answer 27

Expert:
L and T can provide info but the expert is independent.
Fees shared equally.
Not governed by law
No right to appeal
Can be sued for negligence

Arbitrator:
L and T provide all info, arbitrator can only use info provided.
Award must be between the two offers made.
Some right to appeal.
Cannot be sued for negligence.
Must justify the decision.

Question 28

Can you tell me about a rent review case?

Answer 28

British Gas Corp v Universities Superannuation Scheme Ltd (1986)
o The Court considered whether a hypothetical lease at rent review would contain a rent review clause.
o It was held that in the absence of clear wording that could be interpreted otherwise, future rent reviews in the actual lease should be considered in the hypothetical lease in agreeing the market rent.

(Normally 5 years but the longer the review period the HIGHER the rent. Usual adjustments are 1% to 2% for every year.)

United Scientific Holdings –v- Burnley BCC [1978]
The general presumption is that time is not of the essence unless there are sufficient contra-indications that provides otherwise.

Question 29

Rowles Way: What rate did you apply to the excess service yard?

Answer 29

£25,000 per acre/£0.57 per sq ft

Question 30

Rowles Way: What rate did you apply to the floor area?

Answer 30

The GIA was about 1,330 sq m (14,330 sq ft), 82 sq m (887 sq ft) being on the first floor. I advised £7.50 per sq ft, and a half rate for the first floor. (£7.12 per sq ft for option 2, £6.75 for option 3).

Question 31

Rowles Way: What assumptions did you make?

Answer 31

6 months rent free at commencement, and advised on three scenarios intitially: break at years 5 and 10, break at year 10, no break.

Question 32

A T you’re representing has a lease renewal opposed on S.30 of the L&T 1954

Answer 32

The L must have been the L for at least 5 years to be a competent L.
Seek compensation. Rateable value x 1 (x 2 14+ years)
Ask for alternative premises

Question 33

S.40 of the L&T 1954 Act?

Answer 33

Request for information.
T may wish to confirm that the L has owned the land for at least 5 years.
L may want to confirm whether the original tenant is in occupation.

Question 34

When can tenants improvements be rentalised?

Answer 34

If the improvements were carried out without a Licence for alterations, and the lease does not state that they should be excluded (Ponsford v HMS Aerosols).
Or after 21 years

Question 35

What is interim rent?

Answer 35

The rent during the S.25, it is at market rent.

Question 36

If is lease is silent on time restrictions for for a rent review, what would you do?

Answer 36

Assume time is not of the essence

United Scientific Holdings –v- Burnley BCC [1978]