Landlord & Tenant Flashcards
(105 cards)
1
Q
Lease Renewal v Rent Review
A
- lease renewal is statutory process laid down by LL&T Act 1954
- rent review is contractual procedure contained within a lease
Note: if lease contracted out of 1954 Act then there is no statutory procedure
2
Q
To what tenancies does the LL & T Act 1954 apply?
A
Business tenancies in occupation
3
Q
When was LL & T Act 1954 last amended?
A
1 June 2004
4
Q
Name tenancies to which 1954 Act does not apply?
A
- agricultural
- mining
- residential
- tenancies granted as condition of employment
- tenancies not exceeding 6 months (unless there is provision for extension or T has been in occupation for more than 12 months)
5
Q
What is a S25 notice?
A
Notice served by LL on the T to terminate the lease
- cannot terminate before contractual expiry
- would either be friendly or hostile
6
Q
When can Landlord serve S25 notice?
A
12 to 6 months before contractual expiry, or anytime thereafter
Note: notice must be at least 6 months
7
Q
What must S25 notice contain?
A
- landlord
- tenant
- property
- date of notice
- date of termination
- friendly / hostile notice
8
Q
What do you advise Landlord to do in respect of lease renewal for property that is significantly over rented?
A
- Do nothing and carry on getting high rent if T holds over. However, T could serve S26 for new lease or S27 and vacate
- Serve S25 and enter into new lease at lower rent
- Note: if gave 12 months notice with S25 then T could apply to court for interim rent as they wouldn’t want to pay high rent for another 12 months, so would argue they will only pay higher rent for 6 months (shortest possible notice period)
9
Q
Is it better for Landlord to serve S25 12 months or 6 months before expiry?
A
- 6 months = negotiate as close to renewal date as possible but risk if T decides to vacate as have less time
- 12 months = maximum amount of time given to both parties. Useful if T vacating, but if staying then have to agree new rent far in advance so there is more uncertainty
10
Q
Why would LL give 12 months notice when could give 6 months notice with S25?
A
- if over rented then get extra 6 months of T paying higher rent
- if confident T leaving then get more time to find a new tenant
11
Q
What action should Landlord take if they want possession at end of lease?
A
Serve S25 notice and object to tenant having new tenancy under 1 or more of the S30 Grounds
12
Q
What should Landlord do if Tenant not responding to friendly S25 notice?
A
Write to tenant and state they have 14 days to respond else will go to court to determine terms and T will be liable for costs
13
Q
What advice would you give a Tenant when a Landlord S25 notice is due to expire and new lease is not yet agreed?
A
- approach LL to request time extension in which either party can apply to Court
- if not agreed, T would have to apply to Court for new tenancy
Note: if S25 notice expires then T loses security of tenure - LL can propose new terms and if T does not agree they have to leave
14
Q
Grounds under S30 of LL&T Act 1954 under which Landlord can obtain possession
A
- T failed to carry out repairs
- T persistently delayed paying rent
- T has substantially breached other covenant
- LL offers suitable alternative accommodation
- Building let as whole would produce higher rent than from separate lettings
- LL intends to demolish or reconstruct
- LL intends to occupy for own purposes (competent LL, min 5 years)
15
Q
Shop lease expiring in 12 months and LL wants you to negotiate new lease with T. What would you do?
A
- need copy of current lease
- agree terms of engagement
- inspect and measure property
- check for any breaches of covenant
- carry out rental valuation
- serve friendly S25 notice
16
Q
When is Tenant entitled to compensation when Landlord opposes new lease under 1954 Act?
A
Last three grounds of s30 are no fault grounds, so if new lease opposed due to one or more of these grounds then T gets compensation
Note: if another reason also stated (one of first 4 grounds) then compensation is NOT due
17
Q
How is Tenant compensation assessed under the 1954 Act?
A
- if T has been in occupation for 14 years or more then get x2 RV
- if T has been in occupation for less than 14 years then get x1 RV
18
Q
Explain the power of the Court in ordering a new lease
A
The Court can determine:
- property comprised (S32)
- length of lease (S33)
- rent (S34)
- other terms (S35)
- interim rent (S24A)
LL bound to grant new lease on terms determined by court
If T disagrees they can apply to have Court order revoked within 14 days (tenancy will then continue for reasonable period so LL can re let)
19
Q
What is S34 rent?
A
Market Rent disregarding:
- T previous occupation
- any goodwill
- certain improvements
- any licence to sell intoxicating liquor that belongs to the tenant
20
Q
What is interim rent?
A
The rent payable between the end of the old lease and the start of the new lease
- ideally, new lease should start day after old lease ends but if negotiations are ongoing then interim rent is agreed (either between parties or by Court)
Note: usually used if gap is 12 months or more
21
Q
How is interim rent assessed?
A
Market rent at start of interim period
22
Q
When would you recommend that a Tenant serves a S26 notice?
A
- if T believes lease is over rented then serve S26 for new lease at lower rent
- T may also serve S26 even if rent increases as means they still have a lease in place (might be hard to find another elsewhere)
23
Q
When are tenant improvements disregarded at lease renewal?
A
- if improvements carried out under old tenancy or any time during the last 21 years
Note: not all alterations are improvements, and improvements are not disregarded if they were a lease obligation
24
Q
What action should Tenant take if 6 months left, they want to vacate and Landlord has not served S25 notice?
A
- do nothing and hand keys back on last day
- serve S27 with minimum 3 months notice
Note: if T in occupation even one day after expiry then MUST give 3 months notice
25
What are the key elements of a rent review clause?
1. Machinery
2. Basis of Value
3. Means of settling disputes
26
What is a trigger notice?
Notice that triggers a pre determined sequence of events
EG first notice (served by LL or T) to trigger rent review
27
What is ‘time of the essence’?
If time is of the essence then time scales in the lease must be strictly adhered to
Note: if not stated, then time is NOT of the essence
28
When is time of the essence?
1. If lease says so
2. If tenant serves notice to make time of the essence
3. If RR clause interrelates with other clause
4. If there are deeming provisions
29
What are the two landmark cases in respect of time of the essence?
Burnley and Cheapside cases
- essence is that rent gets reviewed from that date
- despite there being timetables, these do not have to be stuck to as this is not the essence of the contract
30
What are deeming provisions?
- where lease explicitly states that T is ‘deemed’ to have accepted LL rent
EG 1: LL serves notice, T does not serve counter notice in specified time, so T deemed to have accepted LL rent
EG 2: LL could be deemed to accept T counter notice if lease says so
31
What lease terms affect the rent at review?
1. Rent review clause itself (definitions of rent, assumptions and disregards)
2. Frequency of review
3. Restrictions on alienation, user, repairing and insuring clauses
Overall, flexible lease = higher rent
Note: could state that if protected by 1954 Act then demand higher rent
32
What are the usual assumptions for determining rent at review?
1. Premises is fit for immediate use and occupation
2. Market Rent is payable after any rent free period
3. No work carried out by T has reduced the rental value
4. T has complied with terms of existing lease
5. If premises has been damaged or destroyed, they have been reinstated
33
Hypothetical term
A term other than the unexpired lease term
Used for rent review based on same terms as existing lease and assumes property remains in current state
EG assume term is length of time originally granted by this lease (10 years) - even though only 5 years remaining (unexpired term)
34
Is the hypothetical term more advantageous to the Landlord or the Tenant?
Depends on length
Long = better for T as get lower rent
Short = better for LL as get higher rent
35
What are the usual disregards?
1. T previous occupation
2. Any good will
3. Certain improvements (under current lease or within last 21 years)
4. Any intoxicating liquor licence belonging to the T
36
Where do the usual disregards originate from?
S34 of LL & T Act 1954
37
How is rent review resolved if Landlord and Tenant cannot reach agreement?
- Arbitrator or Independent Expert
- depends what lease says
38
Independent Expert v Arbitrator
- Arbitrator acts on evidence, Independent Expert has duty of investigation but can also request evidence
- Arbitrator makes award, Independent Expert makes determination
- Arbitrator conduct based on Arbitration Act 1996, Independent Expert is RICS surveyor so governed by Rules of Conduct
- Arbitrator cannot be sued for negligence, Independent Expert can be
- Arbitrator can award costs, whereas usually an Independent Expert can’t (check lease)
Note: fee for Independent Expert usually stated in lease - to be split between parties or paid by person who brought in Independent Expert
39
What is the purpose of a Calderbank offer/letter?
Protects against cost liability at arbitration
Note: only binding if in writing but if not been accepted then can be withdrawn
40
What must a Calderbank offer contain?
- statement made ‘without prejudice save as to costs’
- unconditional written offer to settle the rent review
- reasonable proposal regarding costs incurred up to the date of the offer (each party pays own cost plus 50% of arbitrator fees)
- time in which other party must accept the offer by (21 days most common)
Note: without prejudice save as to costs = does not prejudice anything I am subsequently going to say and cannot be used as evidence until it comes to the awarding of costs
41
Lease
- gives T exclusive right of possession
- can be fixed term or periodic
42
Licence
- gives someone permission to do something on owners land or in owners property that would otherwise constitute a trespass
43
Leading case in lease v licence?
Street v Mountford (1985)
- licence to occupy furnished room in house
- neither attendance nor services were provided (no washing/cleaning)
- House of Lords ruled it to be a lease
44
Licence examples
1. Car Park licence
2. External Seating licence
3. Pavement licence (drink outside pub)
4. Grazing Livestock licence
5. Telecoms licence
6. Food Van licence
45
A property you manage is going to be redeveloped soon. What options do you have to generate some rental income without giving Tenant security of tenure under 1954 Act?
1. Short term - grant tenancy of less than 6 months (excluded under S43)
2. Long term - grant tenancy of more than 12 months but contract out of S24-28
46
Tenant entered FRI lease of property in disrepair and Landlord requires Tenant to remedy disrepair. What advice would you give to Tenant?
- T who agrees to ‘keep in repair’ must ‘put in repair’
- limit repair by Schedule of Condition
- T has to do repairs but extent to which repairs need to be carried out can be negotiated if not explicitly stated
EG if all neighbouring units in industrial estate have car parks with pot holes and poor fencing then T has argument for doing very basic repairs
47
What advice would you give to Tenant who wants to take FRI lease of property in disrepair but suitable for their business?
- negotiate rent free period for doing repairs
- ask LL to do repairs before T moves in
- complete Schedule of Condition to limit repairing liability
48
What action can Landlord take when Tenant is in breach of repairing covenant?
- serve S146 under Law and Property Act 1925 (state breach, timeline and proposition if breach not rectified)
- exercise right to repair by entering, repairing and recharging tenant debt
- sue T for damages (limited by S18 of LL & T Act 1927)
Note: if lease silent on whether LL can enter (it doesn’t state LL can enter with 48 hours notice) then LL cannot enter as lease gives T exclusive right of possession
49
What action can a Tenant take when Landlord is in breach of repairing covenant?
- T request LL carries out repairs
- get injunction from Court compelling LL to carry out repairs (can be expensive and take a few weeks)
- T tell LL in writing that they plan to do works themself if LL not done them by certain date, and will then withhold cost of works
50
Jervis v Harris case
- if LL enters property to carry out repairs, can re charge tenant for debt
- case began because T argued they had not been served with S146 but this is a claim for debt rather than damages so avoids legislation (Leasehold Property Repairs Act 1938 and s18 of LL & T Act 1927)
51
How are damages assessed when a Tenant is in breach of repairing covenant?
S18 of LL & T Act 1927
- damages are limited to the diminution in value (usually the same as the cost of the works)
52
How are damages assessed when a Landlord is in breach of repairing covenant?
- it is the difference in value in repair compared to the value out of repair
- T can take LL to court and get order for ‘specific performance’
EG roof is leaking and T cannot use half the premises so pays half rent, half SC etc
EG T cannot use 25% of premises so pays 75% rent, 75% SC etc
53
Schedule of Condition
Statement describing physical state of building - usually prepared by T surveyor to limit repairing liability
Note: must be agreed with LL surveyor
54
Schedule of Dilapidations
Record of alleged breaches of repairing covenant, usually prepared by LL surveyor
55
Leasehold Property (Repairs) Act 1938
- applies to leases of 7+ years with 3+ years until expiry
- if LL serves s146 notice on T, then T can get relief from forfeiture under this Act (must serve counter notice with 28 days)
Note: no point serving Interim Schedule of Dilapidations if 3+ years remaining on 7+ year lease as T can get relief under 1938 Act
56
Scott Schedule
- recommended form for Schedule of Dilapidations to be presented to Court
- recommended by RICS
Note: called this because there was judge called High Justice Scott that invented the format
57
Alteration
Making physical changes to a property
58
Improvement
Alteration that adds value
59
Tenant client wishes to extend property. Explain factors to be considered?
- read lease to see if alterations permitted
- review plans and specifications
- request LL consent
- consider time left on lease - only worth it on long lease as T may leave at expiry (LL may serve hostile S25)
- check RR clause to see if improvements get disregarded (if lease silent on this, T would have to pay rent on their improvements)
- register improvements under LL&T Act 1927
60
How does Tenant register improvements for compensation?
- serve notice on LL
- submit specification
- LL has 3 months to offer to do work himself in exchange for increase in rent
- if LL does not object, T can do works
- if LL objects, matter can go to court
Improvements get registered under 1927 Act
61
What advice would you give Landlord if Tenant requests to have improvements registered under 1927 Act?
- confirm they add value and are in fact improvement not alteration
- LL has option to do work himself and increase rent
- might be worth letting T do work as means will have very secure T
62
How is compensation for Tenant improvements calculated?
- lower of either the addition in value or the cost of doing the works
- T gets compensation for improvement regardless of reason they leave
63
Legislation to consider in assignment of a lease
- s19 of LL&T Act 1927
- s1 of LL&T Act 1988
- LL&T Covenants Act 1995
64
When could no restrictions on assignment or sub letting be appropriate?
- incentive for large, difficult to let property
- good to have flexible lease terms (25 year lease with 5 yearly break options)
EG full of asbestos and bad location
Note: easier to let small units rather than large units
65
What are reasonable grounds for refusing consent to assign?
- poor assignee covenant strength
- effect on rental/capital value (weak covenant strength would reduce value)
- poor accounts (difficulty paying rent)
66
What is the usual amount of an assignee business profit that a Landlord will look for before giving consent to assign?
3x annual rent and other payments due other lease (insurance, rates and service charge)
Note: called Profits Test
67
What is AGA?
Authorised Guarantee Agreement
- assignor guarantees performance of assignee
68
When is it appropriate to have a restrictive user clause in a lease?
- protect value of investment
- lots of retail units EG reduce competition as don’t want lots of same type of shop (will lead to one going bust and vacant unit will be left)
69
Conditional break clause
T can only break if pre conditions met
70
What conditions are usually attached to a break clause?
- minimum 6 months written notice
- T has to pay fine/premium (3 month rent)
- repairing covenant to have been met
Note: LL may instruct surveyor to find breach of covenant so T cannot break
71
2 examples where break notice was held ineffective in Court
1. Osborne Assets v Britannia Life
- T due to have painted x3 coats of paint every 5 years
- only painted x2 coats
2. Riverside v NHS
- break conditional on vacant possession
- T did not remove demountable office partitions
72
What factors affect value in a lease?
- rent
- term
- other terms
- repairing clause (if T not doing repair, and LL does it then cost goes up)
73
What is it called if Tenant not responsible for repairs?
Internal Repairing and Insuring
74
How does Rent Review impact value?
- if lots, then can review rent frequently which would increase value
75
Open Market Rent Review or RPI better in this market?
RPI for retail as not doing that well at the moment
76
What are the methods of dispute resolution?
- mediation
- PACT
- Court / litigation
77
PACT
Professional Arbitration on Court Terms
- cheaper
- quicker
- run by property professional rather than judge
78
What is the procedure for carrying out a rent review?
1. Receive client instruction
2. Check competent
3. Check conflict of interest
4. Agree fee
5. Request legal documentation
6. Check RR clause in lease and see if there is LtA in place (rentalise improvements if not noted in LtA)
7. Inspect and measure property
8. Collect comparable and make recommendation to client
79
If LL served a friendly s25 notice 3 months before expiry, when would new lease start?
3 months after contractual expiry of old lease
80
What is included in friendly s25 notice?
- property
- rent
- other terms
- health warning
81
What is the name of a Calderbank offer for lease renewals?
Part 36 Offer
82
How do you settle lease renewal if cannot agree rent?
- mediation
- PACT
- Court
83
What does Court have regard to when granting new lease?
Old lease
84
Why can Court only grant lease of 15 years maximum?
Typical term for hypothetical lease as it falls in line with the standard 5 yearly upward only rent reviews
85
Case Law for Court deciding new lease at renewal
O’May v City of London
86
How long does a Landlord have to respond to a Tenant s26 request?
2 months
Note: if LL fails to serve counter notice then loses right to object new tenancy but can still negotiate proposed terms
87
If been doing lease renewal for some time and gone beyond contractual expiry, how do you protect your clients position?
- apply for interim rent under S24A of LL&T Act 1954
88
What does the LL&T Act 1954 set?
- procedures for termination and renewal of tenancies
- grounds for LL to oppose new tenancy
- power of Courts to award new tenancy
89
How can tenancy under 1954 Act come to end?
- T vacates on last day
- LL serves S25
- T serves S26
- T serves S27
- LL and T agree new terms S28
Note: T who remains in occupation = holding over (S24)
90
When can Tenant serve S26?
- must have been T for at least 1 year
- must not have received S25 from LL
91
When would Landlord or Tenant apply to Court to determine terms of new tenancy?
If tenancy come to end in accordance with Act
- T must make Court application before expiry of S25 / S26 or else lose security of tenure
- agreement can be made under s29 to extend time in which either party can apply to court (2-3 month extension)
- date of expiry of last agreement becomes expiry of tenancy
92
What happens to current tenancy if Landlord and Tenant agree new tenancy under S28?
- current tenancy runs until commencement of new tenancy but is no longer protected under the Act (S24 to S28 no longer applicable)
- no need to issue S25 / S26 (can just reach agreement under S28)
93
When can Landlord / Tenant request information from the other party?
- S40 of LL&T Act 1954 states either party can request information from other party within last 2 years of term
- LL may request sub tenancy details
- T may request superior LL details
- information must be provided within one month and if anything changes, must notify other party within 1 month of becoming aware of changes
94
LL & T Act 1730
If T should vacate, but doesn’t (EG after hostile S25 notice) then LL can double the rent from the date the notice was given
Note: usually just used as bargaining tactic!
95
When can Court / PACT not be used to determine new lease terms?
If outside the 1954 Act
96
What are the 4 tests of the O’May case?
1. Has party demanding change shown good reason?
2. Will party resisting change be adequately compensated?
3. Will adjustments materially impact conduct of T business?
4. Is variation fair and reasonable between parties?
97
How does Tenant contract out of 1954 Act?
- gives up security of tenure
- LL must serve notice on T under Regulatory Reform Order 2003
- if notice served 14 days (or more) before lease start, then T signs simple declaration
- if lease due to commence within 14 days of notice, then T signs statutory declaration before solicitor or independent expert
98
How can a Landlord / Tenant agree to surrender?
- LL break is only an option if contracted out of 1954 Act
- if LL and T agree lease will be surrendered on set date, then either simple declaration (T received 14 days notice) or statutory declaration (T received less than 14 days notice) signed
99
What is within the machinery of a rent review?
- LL proposes rent by certain date (trigger notice)
- T given certain period to object/negotiate
- negotiations to complete by set date
Generally time is not of the essence
100
Definition of rent at review
- usually Open Market rent
- on review date (or other date specified)
- assume property vacant and to let
- include usual assumptions and disregards
101
Repair
Restoration or replacement of subsidiary parts of the premises
102
Renewal
Reconstruction of all or most of premises
103
Privity of Contract
Initial T was always the one who had to meet lease obligations
104
Two types of user clause
1. General Planning EG Class E
2. Conducted Use EG hours
105
User Clause Case Law
Martin Retail Group v Crawley Council
- T wanted to sell alcohol
- LL said no
- had to establish closest place to buy alcohol and if far away then allowed
