Leases: Security of tenure Flashcards
What is security of tenure under the LTA 1954?
Secures the right of a tenant to stay in premises at the end of a tenancy.
Under LTA 1954 Pt II, a business tenant is protected at the contractual end of their lease and does not have to vacate the property unless the landlord uses one of the statutory methods of terminating the lease. The tenant is said to “hold over” and can remain in the premises beyond the contractual expiry of their lease.
N.B: LTA 1954 does not apply to residential premises
Why would commercial tenants want security of tenure?
- They have run their business from that address for a long time;
- They have built up goodwill over the term of the lease
- Valuable right to many commercial tenants to stay in the premises at the end of the lease term
When does security of tenure apply?
The LTA 1954 applies when:
- [Valid tenancy] There is a tenancy (Street v Mountford [1985] AC 809), whether fixed or periodic. A licence is not protected by the LTA 1954, and s 43 excludes:
- tenancies at will
- agricultural holdings
- mining leases
- service tenancies (for example, caretakers)
- a fixed term tenancy for fewer than 6 months (with no option to renew), and
- tenancies that have been contracted out of the LTA 1954 (see below)
- [Tenant in occupation] the tenant is in occupation (so has not sublet), and
- [Tenant carries on business] the tenant carries on a business in the property. The term “business” is widely defined and includes sports clubs and charities but not Sunday schools: LTA 1954 s 23.
What is meant by ‘contracting out’ of security of tenure?
A tenancy can be contracted out to exclude the security of tenure provisions under the LTA 1954. This may be desired by the landlord to regain possession of the premises.
What must be done to contract out and what are the implications if this is not done?
The agreement between the landlord and tenant to contract out must satisfy three statutory requirements.
A failure to comply will render the contracting out void, meaning that the tenancy will be protected under the LTA 1954.
What is the first statutory requirement (health warning by landlord)?
- Landlord’s “health warning”: Landlord must serve a health warning on the tenant at least 14 days before the start of the lease.
What is the second statutory requirement (tenant’s declaration or statutory declaration)?
- Tenant’s declaration: The tenant then must sign a declaration confirming that they have received the health warning and that they agree to contracting out of the Act and its consequences. This declaration need not be signed in the presence of a solicitor.
NOTE: The landlord can serve the health warning less than 14 days before commencement of the tenancy if the tenant signs a formal statutory declaration in the presence of an independent solicitor confirming waiver of the 14-day notice period.
What is the third statutory requirement (reference in the lease)?
- Reference in the lease: The lease must make reference to the contracting out provisions:
a) Health warning;
b) Tenant’s declaration (or statutory declaration), and
c) Agreement to contract out
What are the 5 ways that a protected lease under LTA 1954 can be brought to an end?
- Forfeiture by the landlord
- Surrender
- Service by the landlord of a s25 notice (L ending tenancy terms: friendly - with renewal, hostile - without renewal) - 6 to 12 months before tenancy ends
- Service by the tenant of a s26 notice (T requesting renewal with new terms) - 6 to 12 months before tenancy ends
- Service by the tenant of a s27 notice - 3 months notice before tenancy ends (T ending tenancy without renewal)
How can forfeiture terminate a protected lease?
If the lease contains the right for the landlord to forfeit the lease, the landlord can do so in the event of tenant default. The LTA 1954 does not remove the landlord’s right to forfeit a protected lease.
How can surrender terminate a protected lease?
The landlord and the tenant can both agree to give up the lease before the end of the lease term by entering into a deed of surrender.
How does the landlord’s s25 notice terminate a protected lease and what is the deadline for serving notice?
Landlord’s s25 notice: The notice informs the tenant that the landlord wishes to terminate the protected lease. The s 25 notice must be served within 6 to 12 months before the landlord wants the tenancy to end.
What is the difference between a friendly s25 notice (A) and a hostile s25 notice (B) by the landlord?
A1) Friendly notice (renewal of lease on new terms) - the landlord will not oppose the tenant’s application for a new tenancy (friendly) but may want the old lease to be brought to an end so that a new lease can be created in which a higher/market rent is set and guaranteed.
B1) Hostile notice (opposing tenancy) - the landlord will oppose the tenant’s application for a new tenancy and state their grounds for opposition (hostile).
What is the procedure for a friendly landlord s25 notice (A)?
A2) Further action: Here, either party must apply to the court for a new lease after the s 25 notice is served, on or before the specified termination date
What is the procedure for a hostile landlord s25 notice (B)?
B2) Further action: In this case, either party can make an application to court (dispute):
- if the landlord applies to court under LTA 1954 s 29(2), the tenant will need to challenge it, otherwise the tenant will lose the right to renew, or
- if the tenant applies for a new tenancy under LTA 1954 s 24(1), the landlord will need to challenge it.
When can an application for a new lease be made after the landlord’s s25 notice?
Either party can apply to court for a new lease at any time after the landlord serves the s 25 notice, up to the day of the specified termination date at the latest unless extensions are agreed in writing between the parties before the specified termination date.
How does the tenant’s s26 notice request renewal of the lease on new terms and what is the deadline for serving notice?
Tenant’s s26 notice: (Renewal of lease on new terms) Tenant services on the ‘competent landlord’ or agent, requesting that the landlord grant a new lease to the tenant and outline the required terms.
- served 6 to 12 months before tenancy ends
What must the landlord do to oppose the tenant’s s26 notice request?
The landlord has 2 months to confirm whether they intend to oppose the request. If the landlord is unwilling to agree to a new lease, they must specify the statutory grounds for opposition.
What further action will be taken after a tenant’s s26 notice?
If the parties cannot agree on the terms of the new lease then an application will need to be made to the court for an order granting a new tenancy.
How does the tenant’s s27 notice terminate a protected lease and what is the deadline for serving notice?
Tenant’s s27 notice: (Ending tenancy without renewal) If a business tenant does not want to renew the tenancy at the end of the term, under s 27 the tenant can give not less than 3 months’ notice to their immediate landlord of their intention to end the tenancy.
The reason for doing this is that the tenancy will not come to an end at the end of the fixed term stated in the lease unless terminated in accordance with the LTA 1954.
What are the implications once a tenant has served a s27 notice?
If a tenant serves a s 27 notice, they cannot later change their mind and serve a s 26 notice requesting a new tenancy.
What are the landlord’s statutory grounds for opposing a new tenancy?
7 grounds for landlord’s opposition that can be put forward if the tenant makes an application for a new tenancy:
- Tenant’s failure to carry out repairing obligations - discretionary
- Tenant’s persistent delay in paying rent - discretionary
- Tenant’s substantial breaches of other obligations - discretionary
- Suitable alternative accommodation is available for the tenant - mandatory
- On subletting of part, landlord requires the whole property for subsequent letting - discretionary
- Landlord intends to demolish or reconstruct the premises - mandatory
- Landlord intends to occupy the holding - mandatory
Easy way to remember: Tenant’s breach of obligations + subletting are discretionary, other grounds are mandatory
What will the court do when applying a discretionary ground?
Discretionary grounds (a, b, c, e): The court can choose to grant the new tenancy
What will the court do when applying a mandatory ground?
Mandatory grounds (d, f, g): The court must find in favour of the landlord if this ground is successfully made
