• 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

  • IBA Annual Conference 2024

    Charlotte Ford

    Events

  • LIDW: Is arbitration an effective process for disputes involving state interests: a panel discussion of concerns raised in Nigeria v. P&IDL [2023] EWHC 2638

    Richard Kiddell

    Events

  • LIDW: An Era of Constant Change – an event to explore the General Counsel’s role in delivering sustainable growth whilst managing global ESG risks

    Caroline Greenwell

    Events

  • LIDW: Liability imposed on UK Directors and how to mitigate the risks

    Claudine Morgan

    Events

  • The Court of Appeal clarifies requirements for specifying anticipated loss in notice of warranty claims

    Katie Bewick

    Insights

  • Charles Russell Speechlys advises on the acquisition of Wycombe Wanderers Football Club

    Keir Gordon

    News

  • The Telegraph quotes Rose Carey on the impact of skilled worker visa changes

    Rose Carey

    In the Press

  • Property Patter - Great Estates Miniseries - part 1

    Cara Imbrailo

    Podcasts

  • The Telegraph quotes Dominic Lawrance on Labour’s proposed expansion of rules governing trusts

    Dominic Lawrance

    In the Press

  • How is trust reporting under the Register of Overseas Entities changing after 4 June 2024?

    Jack Carter

    Insights

  • Relocation to Italy: Italian Lump Sum Tax Regime

    Nicola Saccardo

    Insights

  • The Law Society Gazette and CDR Magazine quote Caroline Greenwell on the LIBOR appeal

    Caroline Greenwell

    In the Press

  • Charles Russell Speechlys advises long standing client AgDevCo on its equity investment in Agris

    Adrian Mayer

    News

  • Freight and logistics – still on the agenda

    Sadie Pitman

    Quick Reads

  • The UK government updates on timings for Sustainability Disclosure Requirements components

    Megan Gray

    Quick Reads

  • Consequences of Disobeying Court Orders?

    Stephen Chan

    Insights

  • Disputes Matters: International Arbitration

    Thomas R. Snider

    Podcasts

  • CDR Magazine quotes Stewart Hey on the cum-ex scandal

    Stewart Hey

    In the Press

  • A Glimpse into Saudi Arabia's Tourism and Leisure Vision 2030 and Beyond

    Reem Al Mahroos

    Quick Reads

  • Using Generative AI and staying on the right side of the law

    Rebecca Steer

    Insights

Back to top