• news-banner

    Expert Insights

Q&A: Business tenancies: Improvements and the determination of rent

In an unopposed lease renewal under the Landlord and Tenant Act 1954, improvements carried out by the tenant are to be disregarded when establishing the rent. Would improvements carried out under an agreement for lease but prior to the actual commencement of the lease amount to improvements carried out 'during the current tenancy' and thus fall to be disregarded (assuming they were carried out by the tenant and not pursuant to an obligation to the landlord)? 

There are a number of exceptions to the general principle that improvements carried out by the tenant are to be disregarded when establishing the rent under section 34 of the Landlord and Tenant Act 1954 (LTA 1954). Where an improvement that has been made to property has been carried out by a tenant pursuant to an obligation to the landlord, it will be taken into account when determining the rent. If, however, the improvement was not carried out pursuant to an obligation under the lease (but rather, for example, by way of a licence to alter) then the improvement will be disregarded if it has been carried out during the term of the current tenancy.

The improvement would not amount to an improvement 'carried out during the current tenancy' if the works were carried out under an agreement for lease. This is because: 

  • References: Hambros Bank Executor & Trustee Co Ltd v Superdrug Stores Ltd [1985] 1 EGLR 99 

LTA 1954, s 34 requires the person who has carried out the improvement to be the tenant at the time (Hambros Bank Executor & Trustee Co Ltd v Superdrug Stores Ltd), and

  • the works would have been carried out prior to the tenant entering into the current tenancy

Therefore, the improvement works will instead have been carried out by a future tenant under a licence in contemplation of the grant of the current tenancy. Any improvements carried out under an agreement for lease will not, therefore, be disregarded under LTA 1954, s 34 as having been 'carried out during the current tenancy'.

However, even if it was not carried out during the current tenancy, the improvement may still fall to be disregarded if all of the following conditions are satisfied: 

  • the improvement works were completed no more than 21 years prior to the application to court for a renewal lease, and
  • the holding, or the part of the holding affected by the improvement, has at all times since the improvement been comprised in a tenancy or tenancies to which LTA 1954, s 23(1) applies (for example, occupied for business purposes), and
  • at the termination of that tenancy or tenancies, the tenant did not quit the holding 

References: Landlord and Tenant Act 1954, s 34(2)

See Practice Note: LTA 1954—terms of the renewal lease.

This content was first published on the Lexis Nexis Ask Forum. Please do not hesitate to contact Georgina Muskett or your usual Charles Russell Speechlys LLP contact if you have any queries. 

Our thinking

  • Reporting Relief Ahead: Who benefits from the UK’s 2026 changes?

    Isabella Ross-Skinner

    Quick Reads

  • The Challenge of Waste Crime – Signals for 2026

    Rachel Warren

    Insights

  • When is a prospectus required under the new regime?

    Brianna Davies

    Quick Reads

  • Providence v Hexagon: Supreme Court clarifies specified default and accrued rights of termination under a JCT Contract

    David Savage

    Insights

  • The Telegraph quotes William Marriott on the importance of correctly completing a property information form and the onus placed on sellers

    William Marriott

    In the Press

  • ESG considerations in the UAE: what businesses need to know

    Dalal Alhouti

    Insights

  • Top Tips for Homes England Transactions

    Alexander Gold

    Quick Reads

  • The Spotlight of Sports Investment: Reputation as Capital

    Ellen Roberts

    Insights

  • Update on UK ESG ratings regulation: FCA consults on rules to improve transparency and trust in the ESG ratings market

    Megan Gray

    Quick Reads

  • UK Real Estate Sector: 2026 and Beyond

    Sarah Morley

    Insights

  • Agricultural law review 2025/2026: Key cases and legislation in 2025 and what’s ahead in 2026

    Maddie Dunn

    Insights

  • Extra Time: Football Beyond Borders – the Lost Boys taskforce

    David Savage

    Podcasts

  • Construction & Infrastructure Lookahead for 2026

    Michael O'Connor

    Insights

  • UK Surrogacy and proposed reform

    Hannah Owen

    Quick Reads

  • The Daily Telegraph quotes Nick Hurley on Labour’s plans to ban ‘non-compete’ agreements in the UK

    Nick Hurley

    In the Press

  • Key Developments in International Arbitration for 2026

    Dalal Alhouti

    Quick Reads

  • Agricultural policy review 2025: Key changes and what to expect in 2026

    Maddie Dunn

    Insights

  • Leasehold and Freehold Reform Act 2024: Government launches consultation to switch on provisions relating to estate management charges

    Laura Bushaway

    Quick Reads

  • M&A in UK financial services - will mega-deals in 2025 lead to more mid-market activity in 2026?

    Mike Barrington

    Quick Reads

  • A new prospectus regime and other developments impacting UK Equity Capital Markets in 2026

    Andrew Collins

    Insights

Back to top