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Business tenancy renewals (1954 Act)

Part II of the Landlord and Tenant Act 1954: Frequently Asked Questions

When does the Act apply to a tenancy?

  • There must be a tenancy, i.e. the Act does not apply to licences.
  • The tenant or a company in which the tenant has a controlling interest must be in occupation of the premises.
  • The occupation must be for the purposes of the tenant’s business.
  • The tenancy must not be specifically excluded from the application of the Act (see below).

When does the Act not apply to a tenancy?

  • If the parties have properly excluded the Act.
  • If the term granted is 6 months or less, unless the lease provides for the renewal or extension of the term or the tenant’s total period of occupation (taking into account any previous occupation by the tenant or its predecessor in the same business) exceeds 12 months.
  • If the grant and continuation of the tenancy is connected with the tenant’s employment.
  • If the tenancy falls within certain categories of agricultural tenancy.
  • If the tenancy was created by a mining lease.
  • If the premises are licensed for the sale of intoxicating liquor on the premises, subject to certain exceptions.
  • If the tenancy arises out of the lease of a flat granted under section 56 of the Leasehold Reform, Housing and Urban Development Act 1993.
  • If the tenancy relates to certain premises covered by the Dockyard Services Act 1986, the Atomic Weapons Establishment Act 1991, the Armed Forces Act 1996, the Channel Tunnel Act 1987, the Immigration and Asylum Act 1999 and the Railways Act 1993.

How can a tenancy protected by the 1954 Act be brought to an end?

  • The landlord serves notice under section 25 of the Act, either offering or refusing to grant a new tenancy. The termination date for the tenancy specified in the section 25 notice must be a date not less than 6 months nor more than 12 months after the notice is served.
  • The tenant serves a request for a new tenancy under section 26 of the Act, to start from a date not less than 6 months nor more than 12 months after the making of the request.
  • The tenant gives 3 months’ notice of its intention to vacate the premises under section 27 of the Act.
  • The tenant vacates the premises on or before the lease termination date.
  • The lease is surrendered or forfeited.

The termination/start date specified in a section 25 notice/section 26 request respectively must not terminate the existing tenancy before the expiry date stated in the lease, but it can terminate the tenancy on any date after that provided that the date falls 6-12 months after the date of service of the notice/request.

A section 27 notice cannot terminate the tenancy any earlier than the termination date specified in the lease, but it can be served after that date.

What is the counter-notice procedure if a section 25 notice is served by the landlord?

A tenant does not need to serve any counter-notice to the landlord’s notice to inform the landlord of its intentions concerning the premises. However, depending on the circumstances, it is often helpful to discuss the position with the landlord and, if appropriate, start negotiations for the new lease.

What is the counter-notice procedure if a section 26 request is served by the tenant?

There is no need for the landlord to serve a counter-notice if it is willing to grant a new lease to the tenant, although it may be helpful to contact the tenant to start negotiations for the new lease. However, if the landlord wishes to refuse to grant a new lease, it must serve a counter-notice on the tenant within two months of the service of the section 26 request. The counter-notice must state the ground(s) (under section 30(1) of the Act) on which a new tenancy will be opposed by the landlord.

What is the deadline for action after the service of a section 25 notice or section 26 request and any counter-notice?

Both landlords and tenants can make an application to Court in relation to the tenancy. The tenant can apply for the grant of a new tenancy. The landlord can either apply for the terms of the new tenancy to be determined, or for the termination of the current tenancy if it has opposed the grant of a new tenancy. There are rules to prevent dual applications proceeding, which mean that if one of the parties has already made an application and the application has been served, then the other party is not entitled make an application of its own.

Where a section 26 request is served, neither party can make an application to court until 2 months after the service of the request unless the landlord serves a counter-notice. If a counter-notice is served, the application can then be made at any time up until the expiry of the statutory period (see below).

The parties are not entitled to make any application to the Court after the expiry of “the statutory period”. The tenancy will come to an end if no court application is made before the end of the statutory period.

“The statutory period”

  • Section 25 notice: the statutory period ends on the termination date for the tenancy specified in the notice.
  • Section 26 request: the statutory period ends on the date immediately before the date specified in the request as the date for the start of the new tenancy.

Can the deadline for the Court application be extended?

The deadline for the Court application can be extended by agreement between the parties, provided that the agreement:

  • is made in writing; and
  • is made before the statutory period would otherwise expire (see above).

Further extensions of the statutory period can also be made by agreement between the parties, so as to facilitate progress of negotiations, provided the agreement to extend time is made before the end of the current extended period.

Who can apply for an interim rent?

Once a section 25 notice or section 26 request has been served, either the landlord or tenant can apply to the court for an interim rent to be determined, which is the rent payable during the continuation tenancy, i.e. the period between the expiry of the existing tenancy and the start of the new lease.

What is the deadline for applying for an interim rent?

The application for an interim rent must be made not later than 6 months after the date for the termination of the tenancy as specified in the relevant notice. However, if the parties agree to extend the deadline for the substantive Court application (either for a new tenancy or for the termination of the tenancy), the deadline for the interim rent application will be similarly extended until 6 months after the revised deadline for the substantive Court application.

From what date is the interim rent payable?

Interim rent is payable from “the appropriate date”.

As a result, even if a tenant serves a section 26 request which asks for the new tenancy to start in 12 months’ time, the interim rent may nevertheless be payable from an earlier date.

“The appropriate date”

  • Section 25 notice: the earliest termination date that could have been specified in the notice.
  • Section 26 request: the earliest date that could have been specified in the tenant’s request as the date on which the new tenancy is to commence.

How is the level of interim rent assessed?

The interim rent will normally be the same as the rent payable under the new tenancy if:

  1. the landlord has served a section 25 notice or has not served a counter-notice to the tenant’s section 26 request;
  2. the tenant was in occupation of the whole of the premises comprised in the tenancy for the purposes of a business being carried on by him or her; and
  3. the landlord grants a new tenancy either as a result of successful negotiations or following an order of the court.

Where the landlord or the tenant can show that the market has changed since “the appropriate date” (see above), so that the interim rent that would normally apply is substantially different from the rent determined in respect of the new tenancy, an adjusted open market rent can be fixed as the interim rent.

A “cushioned” interim rent is still possible in cases where the landlord has opposed the grant of a new tenancy. The amount of the rent payable is that which it is reasonable for the tenant to pay during the continuation tenancy on the assumption that the tenancy is one from year to year.

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