Lease Termination & Security of Tenure under a Business Lease

Question 1

What are the 4 common law methods of termination of a lease?

Answer 1

I. Effluxion of time (when term of fixed-term lease ends - no notice needed)

II. Notice to quit (periodic tenancy)

III. Surrender (both parties must agree & must be by deed)

IV. Merger (tenant acquires landlord’s estate in land or where TP acquires both lease & reversion)

but! if tenancy comes within LTA 54 these methods may not apply!

Question 2

When will LTA 1954 apply?

Answer 2

1. Tenancy (fixed or periodic)
2. Tenant is in occupation
3. Tenancy is for business purposes

Question 3

Which tenancies are not included in LTA 1954 (4)?

Answer 3

Tenancies at will

Fixed-term tenancy for term of less than 6 months with no option to renew

Certain types of lease, incl. agricultural, mining

Fixed-term tenancy contracted out of LTA54 if statutory notice period followed

Question 4

Can a landlord circumvent LTA 1954 by granting a succession of 6 month tenancies?

Answer 4

No - if tenant already in occupation for more than 12 months when lease granted will be protected

Question 5

What is the statutory notice procedure for contracting out of LTA 1954

Answer 5

Landlord gives notice to tenant warning they are agreeing to lease w/o security - tenant then makes declaration they have received notice & agree to it

If served notice less than 14 days before grant of lease, tenant must make statutory declaration before independent solicitor

Question 6

What is the extra requirement for contracting out of LTA 1954 if warning notice is served on the tenant less than 14 days before grant of the lease?

Answer 6

Tenant must make statutory declaration before independent solicitor

Question 7

What is the effect of LTA1954?

Answer 7

Tenancy can continue beyond contractual expiry date until terminated in accordance with Act - & even then, tenant will have right to apply to court for new tenancy, which can only be opposed by landlord on grounds set out in Act

Question 8

What are the 7 methods of termination in LTA 54?

Answer 8

1. Landlord serving notice (s25)
2. Tenant serving request for new tenancy (s26)
3. Forfeiture
4. Surrender
5. For periodic tenancy: tenant giving landlord notice to quit
6. For fixed-term lease: tenant serving 3 mths written notice on landlord (s27)
7. For fixed-term lease: tenant ceasing to be in occupation for business purposes at end of lease

Question 9

What must a landlord’s s25 notice state?

Answer 9

That tenancy will terminate on specified date in 6-12 months & that.

a. Landlord will not oppose tenant’s application for new lease (indicating proposed terms of new lease) ⇒ start negotiating, but T should still apply to court for new lease within time limit

or

b. Landlord will oppose tenant’s application for new lease, stating s30 grounds of opposition ⇒ either party can apply to court (& other party must challenge)

Question 10

What are the time limits for the specified date of termination in a s25 notice?

Answer 10

Must be in no more than 12 months & no less than 6 months time

Cannot be before expiry date of lease

Question 11

What is the effect of a tenant serving a s26 notice?

Answer 11

Terminates current lease & constitute request for new one - must state specified commencement date (in 6-12 months, not before expiry date of lease) & their proposed terms

Question 12

How should a landlord respond to a tenant’s s26 request if they oppose the grant of a new tenancy?

Answer 12

By serving counter-notice within 2 months of service of s26 request, stating s30 grounds of opposition

↓

Tenant should apply to court for new lease before proposed commencement date - but landlord can pre-empt by applying for order to terminate if tenant has not yet done so

Question 13

What happens is the landlord does not oppose the grant of a new tenancy on receipt of a s26 notice?

Answer 13

Parties begin negotiating terms of new lease

+

Tenant applies to court for new lease before proposed commencement date

Question 14

What happens if a tenant does not apply to the court before the relevant date in their s26 notice & the landlord has not applied for order to terminate?

Answer 14

Tenant loses right to renew & must vacate

Question 15

What are the 7 s30 grounds for a landlord to oppose grant of a new lease?

Answer 15

(a) Tenant’s failure to repair [Discretionary]

(b) Tenant’s persistent delay in paying rent [Discretionary]

(c) Tenant’s substantial breach of other obligations [Discretionary]

(d) Landlord has offered alternative accomodation which is suitable to T’s needs & on reasonable terms [Mandatory]

(e) Tenancy is underletting of part [Discretionary]

(f) Landlord intends to demolish or reconstruct [Mandatory]

(g) Landlord intends to occupy for own business or residence [Mandatory]

Question 16

What must the landlord show for the s30(f) ground of opposition (intention to demolish or reconstruct)

Answer 16

1. Firm & settled intention to carry out the relevant work (eg. planning permission, financial arrangements in place)
2. Intends to demolish or reconstruct or carry out substantial construction works and
3. It cannot reasonably carry out the work without obtaining possession

Question 17

When can a landlord rely on ground s30(g) of opposition (intention to occupy)?

Answer 17

If they have owned the interest for at least 5 years before the end of the current tenancy

Nb. this does not apply if they purchased with vacant possession

Question 18

When will a tenant be entitled to compensation where the landlord has successfully opposed the grant of a new lease?

Answer 18

If the landlord successfully opposes the grant of a new lease only on one of the no-fault grounds (ie. (e), (f), (g))

Question 19

How much compensation will a tenant be entitled to where the landlord has successfully opposed the grant of a new lease solely on a no-fault ground?

Answer 19

The rateable value of the holding or

Twice the rateable value if the business has occupied the premises for at least 14 years

Question 20

Can a lease exclude the right to a tenant receiving compensation where landlord successfully opposes grant of new lease on no-fault grounds?

Answer 20

In limited circumstances

Any agreement will be void if the business has occupied the premises for at least 5 years

Question 21

What happens if the parties can’t agree the terms of a new lease?

Answer 21

Will be decided by court -

• Same premises
• For reasonable term not exceeding 15 years
• At open market rent (disregarding any voluntary improvements, goodwill, occupation etc.)

Taking effect 3 months after order

Question 22

If the parties think the terms of the new lease imposed by the court are unacceptable, what can they do?

Answer 22

Tenant: apply for order to be revoked

Landlord: appeal only