Law Commission review of Landlord and Tenant Act 1954
The Department for Levelling Up, Housing and Communities has asked the Law Commission to review the Landlord and Tenant Act 1954 (“the 1954 Act”) and the process for renewing business tenancies. The Law Commission originally planned to consult in 2023 but this has been pushed back until “as soon as possible in 2024” and is expected during the first quarter of 2024.
This will be of interest to all landlord and tenants of commercial properties including those in the retail, offices, logistics and the life sciences sectors.
Somewhat strangely, the project was announced as part of the Government’s Anti-Social Behaviour Action Plan in March 2023. The Government suggested that “complex commercial leasing rules are holding back high streets” and for this reason the Law Commission would be asked to review the 1954 Act.
The review is anticipated to consider whether rather than contracting out of the 1954 Act where the parties do not wish the security of tenure provisions to apply, the emphasis should be altered so parties opt into the 1954 Act regime. However, there are other aspects such as turnover rent, which could also be reviewed.
Levelling Up and Regeneration Act 2023
The Act received Royal Assent on 26 October 2023. Some provisions are brought into force on 26 December 2023 but further provisions are anticipated to be implemented throughout 2024 including:
High Street Rental Auctions
These provisions give the local authority powers to arrange for rental auctions to grant tenancies to businesses where premises are vacant for over a year. The property must fall within an area which the local authority has designated as one which is important to the local economy before the provisions will apply. Secondary legislation is required to implement these provisions and that is anticipated to be published during 2024. Only time will tell how frequently local authorities utilise these powers to compel auctions of vacant high street commercial properties given how overstretched many local authorities currently find themselves.
Business Rates
The Non-Domestic Rating Act 2023
The Non-Domestic Rating Act 2023 received Royal Assent on the 26 October 2023 which will implement several changes to the business rates system. During 2024, it is anticipated that various provisions will be brought into force.
Significant changes include a new ‘duty to notify’, which will be implemented once the Government’s new online portal is working effectively. This duty requires commercial occupiers to provide information to the Valuation Office Agency about any changes to a property or lease terms within 60 days. These changes include anything that might affect the ownership, existence, extent or rateable value of the property. Failure to comply with this requirement will result in penalties.
The Non-Domestic Rating (Improvement Relief) (England) Regulations 2023 are expected to come into force on 1 April 2024. These Regulations aim to support businesses wishing to invest in their property, ensuring that no ratepayer will pay higher business rates for 12 months as a result of qualifying improvements to the property they occupy. The 12-month relief period begins from the day on which the qualifying works are completed.
Empty Property Relief Reforms
The Government’s Consultation: Business Rates Avoidance and Evasion closed on 28 September 2023. The Government’s response to that consultation is anticipated during early 2024 outlining its reform intentions. The consultation aimed to address the extent of avoidance and evasion within the business rates system, with a particular focus on a perceived exploitation of the Empty Property Relief.
The current system allows businesses with vacant properties to be exempt from business rates for three months (or six months for industrial premises.). A further period of exemption may be claimed if the property is re-occupied for a minimum of six weeks. After this occupation period, a further exemption period of three months (or six months for industrial premises) may be claimed.
The Government proposed four reforms in its consultation to include increasing the occupation period to three or six months before a further exemption of three or six months may be claimed, limiting the number of times a property can benefit from Empty Property Relief in a particular period, adding conditions to the period of occupation or funding local authorities to use their discretionary powers to make a decision on the award of any Empty Property Relief.
Safety and Security of Public Venues
The Terrorism (Protection of Premises Bill) – known as Martyn’s Law
The King’s speech restated the Government’s commitment to introduce Martyn’s Law to “improve the safety and security of public venues” and keep the British public safe from terrorism by being better prepared to respond in the event of such an act. The proposals, which will apply to the whole of the UK, have been championed by Figen Murray whose son, Martyn, was amongst the 22 killed in the 2017 Manchester Arena attack.
The draft Bill was published in May 2023 and once it becomes law will place a duty on owners and occupiers of certain commercial properties to fulfil necessary but proportionate steps according to their capacity to mitigate the impact of a terrorist attack and reduce harm.
The level of measures required is based upon the capacity, size of venue and nature of activity taking place (offices, warehouse/storage are excluded). Premises and events with a capacity of 800 or above will be in the enhanced tier, while premises with a capacity of 100 to 799 will be in the standard tier. There are a wide range of enforcement measures for non-compliance, including fines (fixed penalty not exceeding £10,000 for standard duty premises but rising to the higher of £18m or 5% of global revenue for enhanced duty premises and qualifying events) or, in the case of enhanced duty premises or qualifying public events, criminal offences. Significantly, the Bill also provides that where a corporate entity commits an offence with the consent, connivance, or neglect of a senior corporate officer then that individual may also face criminal liability.
See here for our previous Expert Insight setting out details of the proposed duties which will apply to a wide range of public premises, including entertainment, leisure, retail, food and drink and certain open-air premises and temporary qualifying public events.
The Government points out that the new duty should involve only "appropriate and proportionate measures" so as not to create an undue burden on business, especially smaller venues. In Spring 2024, a consultation is expected on the standard tier to ensure the Bill’s measures strike the right balance between public protection and avoiding undue burdens on smaller premises such as village halls and other community venues. This follows concerns raised about the implications of the standard tier through the pre-legislative scrutiny of the draft Bill.
The exact timetable for the introduction of Martyn’s Law is yet to be determined but indications are that it is expected in 2024, with a long lead time to allow businesses to plan and prepare.
Charity Land Disposals
The Charities Act 2022 came into force in 2023 and made a number of changes to the regime for disposing of charity land; see here, our Expert Insight detailing the rule changes. Implementation of the sections reforming dealings with charity land, covering changes to the information that must be included in statements and certificates for both charity land disposals and mortgages were delayed and are expected in March 2024.
……….and 2024 is a leap year!
Leap Day, on February 29, has been a day of traditions, folklore and superstitions ever since leap years were first introduced by Julius Caesar over 2000 years ago. According to an old Irish legend, or possibly history, St Brigid struck a deal with St Patrick to allow women to propose to men every 4 years. This is believed to have been introduced to balance the traditional roles of men and women in a similar way to how leap day balances the calendar.
This additional calendar day may have significance for property transactions: Consider anniversary dates in a lease which completes on 29th February 2024 with a term commencing on 29 February 2024 and includes a break option or rent review on the fifth anniversary of the commencement date; is the break date or rent review on 28 February 2029 or 1 March 2029? Uncertainty is always best avoided in lease drafting, so if a lease completes on 29 February, or uses that date as its commencement date, insert specific dates in break options and rent review clauses rather than relying on references to anniversaries.
What about apportionments in completion statements? In a contract to buy an investment property, or assign a lease, even though the transactions do not complete on 29 February, should the apportionment of rents and other annual sums reflect the fact that 2024 is a leap year? This will only make a significant difference with very high rental payments. It is worth noting that as property transactions usually incorporate the Standard Commercial Property Conditions - Condition 9.3.4 provides for a daily rate equal to 1/365th of annual sums, so ignoring the reality of a leap year.
