• 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

  • Mental Health Management

    Nick Hurley

    Events

  • Calculating Social Value in BTR

    Francis Ho

    Events

  • Dangers of trusts

    Mark Summers

    Events

  • The Evening Standard quotes Rose Carey on the increase in visa fees

    Rose Carey

    In the Press

  • Charles Russell Speechlys advises Zenzero’s management team on its majority acquisition by Macquarie Capital

    Mark Howard

    News

  • Updates and points to note in relation to buy-to-let residential properties

    Twiggy Ho

    Insights

  • Charles Russell Speechlys expands commercial offering with the appointment of Rebecca Steer

    Rebecca Steer

    News

  • The Times quotes Gareth Mills on the CMA’s preliminary approval of the Activision Blizzard-Microsoft deal

    Gareth Mills

    In the Press

  • Heritage property and conditional exemption

    Sarah Wray

    Insights

  • The Financial Times quotes Emma Humphreys on UK rental costs

    Emma Humphreys

    In the Press

  • Stamp Duty Refund - New Impetus To Eligible Incoming Talents

    Ian Devereux

    Insights

  • City AM quotes Gareth Mills on the CMA’s new set of principles for regulating AI

    Gareth Mills

    In the Press

  • Hamish Perry and Mike Barrington write for The Evening Standard on whether a merger between the CBI and Make UK can work

    Hamish Perry

    In the Press

  • Silicon quotes Gareth Mills on the UK consumer lawsuit against Google

    Gareth Mills

    In the Press

  • Common construction claims in Bahrain

    Mazin Al Mardhi

    Insights

  • Property Week quotes Louise Ward on the additional support required by aspiring UK life sciences operators

    Louise Ward

    In the Press

  • Sarah Higgins and David Wells-Cole write for Wealth Briefing on the pitfalls of using unregulated legal services

    Sarah Higgins

    In the Press

  • Charles Russell Speechlys’ UK offices receive environmental certification

    Kerry Stares

    News

  • Case analysis: URS Corporation Ltd V BDW Trading Ltd

    James Worthington

    Insights

  • True value adjudications; don’t jump the gun!

    Christopher Busaileh

    Insights

Back to top