Landlord and Tenant Act 1954 - Housing Disrepair Claim
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Rights Enjoyed by Tenants of Their Business Premises Under the Landlord and Tenant act 1954

Posted on: Mon Mar 28 | 4:29 PM by: housing

The Purpose Of The Act

The purpose of the Act is to provide business tenants with the right, if they so desire, to renew their lease on the expiry of the contractual term of their lease on essentially the same terms, subject to a review of the rent to open market rent.

Inasmuch as a landlord can oppose lease renewal on certain specified grounds (such as redevelopment), he may likely have to pay the tenant compensation if the tenant vacates the premises. If the tenant contests the issue the matter is referred to court, leading to potential delays, uncertainties and costs.

Landlord and Tenant act 1954

Why Is This Important?

This is important especially for investors who are considering purchasing a commercial building in England and Wales because if the tenants occupying the building for the purposes of their business enjoy such rights, the value and potential future use of the building can be affected.
Therefore, it is important to clarify at an early stage if any of the business tenants occupying the building are enjoying such rights. This should be taken care of by the investor’s legal adviser.

Excluding The Rights

Upon agreement by the parties prior to the grant of a lease of business premises, the rights granted to business tenants automatically by the Act can be excluded. This is commonly known as ‘contracted out lease’. The parties involved are then expected to follow a strict procedure specified by the Act prior to the grant of the lease in order to exclude the rights. The proposed landlord has to serve a formal notice on the proposed tenant and the tenant declaring that it is willing to give up its rights.

Continuation Of The Lease

In the event that the lease is not contracted out and the tenant continues to occupy the premises for the purposes of its business, the lease will not automatically terminate on the expiry of its contractual term (as it would if the lease is contracted out). It will continue automatically on the same terms until there is a notice to formally renew or terminate the process as specified by the Act.

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Notices Commencing The Renewal/Termination Procedure

The process of lease renewal/termination is commenced either by the landlord serving a ‘section 25 notice’ or the tenant serving a ‘section 26 request’. The notice can be served at the earliest- 12 months before the lease is due to expire. A termination date that falls between 6 and 12 months after it is served must be specified in the notice. This date is not supposed to be earlier than the expiry date of the lease.

The following determines who takes the initiative to commence the lease renewal/ termination process by serving a notice;

  • If the landlord wishes to obtain vacant possession for the purpose of redeveloping the building
  • If the rent under a new lease is likely to be higher than the present rent under the current lease contract

An interim rent which will effectively become the new market rent will become payable from either-

  • The date six months the notice was served
  • When the terms of the existing lease expires

Therefore, if the new market rent is likely to be more than the current rent, the landlord has to inform the tenant by serving a formal notice no later than six months prior to lease expiry, so that the interim rent applies from lease expiry. On the other hand, if the new rent is likely to be less than the current rent, the tenant will wish to ensure that the interim rent applies when the existing lease contract expires.

However, if the landlord chooses to serve a section 25 notice and it wants to oppose renewal altogether, it must specify one of the statutory grounds supporting such opposition- this may be redevelopment of the building.

Conversely, if it wants to grant the tenant a new lease then it must simply set out the terms upon which it is making such a contract. This includes the new proposed term of the lease and the rent (‘an unopposed notice’).

The same applies to the tenant if he commences the process by serving a section 26 request. If the landlord wishes to oppose such a request, a counter notice has to be sent to the tenant within two months specifying its grounds of opposition.

How We Help Tenants With Their Rights

Our firm is at the vanguard of protection of rights for tenants in line with the Landlord and Tenant Act 1954. This is why we offer services for claims for disrepair to tenants at no cost following our No Win No Fee policy.

You can find our housing disrepair helpline right on this page and we encourage you not to die in silence but make use of the power given to you by law to make disrepair claims as we would help you ensure that you are well compensated.

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