The New 1954 Act: Threats and Opportunities

1
The New 1954 Act Threats and Opportunities

• Julian Fenn
• and
• Robert Bajaj

2
Happy Birthday

• LTA 1954
• Law Commission Report 1992
• DETR Consultation 2001
• Regulatory Reform Order 2003
• Effective 1.6.04

3
Topics

• Ending current tenancy
• Applications to Court
• Information Requests
• Length of new term
• Occupation Companies

• Termination by Tenant
• Statutory Compensation
• Compensation for misrepresentation
• Contracting out
• Transition

4
Ending current tenancy

• New S25 26 notices
• 2 S25 Notices opposing/not opposing
• Landlord renewal proposals to be added
• Tenants Counter-notice abolished

5
Applications to Court

• Landlord or tenant can apply
• Application ok immediately after s25 notice
• Time limit termination date in s25/s26 notice
• Extending time limits

6
Information Requests

• More information to be given
• Duty to update within 6 months
• Duty ceases as giving notice of transfer
• Damages

7
Length of New Term

• 15 years

8
Occupation and Companies

• Tenant can renew where business carried on by his
  company
• Company tenant can renew where business carried
  on by controlling shareholder
• Similar changes for Landlord intending to occupy

9
Termination by Tenant

• Tenant can vacate before expiry of term
• After Tenant holds over he must give 3 months
  notice
• Notices may end on any day
• Apportionment of rent

10
Statutory Compensation

• Twice RV only for the part occupied

11
Compensation for Misrepresentation

• Now payable where no court application

12
Contracting Out

• Court Orders abolished
• Notice to tenant
• 14 days cooling period before agreement/lease
• Tenant declaration
• Fast Track no 14 day cooling off but statutory
  declaration by tenant

13
Transition

• Generally changes do not affect anything done
  before 1 June 2004

14

• Interim Rent
• Robert Bajaj
• Partner

15
Interim Rent

• The reforms to the interim rent system will be
  fairer to both parties and will speed up the
  whole renewal process, as neither party will have
  an incentive to delay renewal proceedings. In the
  interests of fairness, they are admittedly
  somewhat complex
• The Office of the Deputy Prime Minister

16
(No Transcript)
17
Interim Rent
Why Change?

• Landlord only able to apply
• Unsatisfactory basis of valuation?

18
Interim Rent

• When does it bite"
• Overall differences
• When can you apply
• How do you apply
• Period from when Interim Rent is Payable
• Amount of Interim Rent

19
Interim Rent

• When does it bite
• The changes do not apply where the Landlord has
  served a s.25 Notice, or a Tenant has served a
  s.26 Notice before 1st June 2004

20
Interim Rent Overall Differences

• Either Landlord or Tenant can make application
• Application can be made as soon as Landlord or
  Tenant Notice is served
• Different basis for Valuation
• Fairer?

21
Interim Rent When Can You Apply

• No longer necessary to wait until application
  for a new tenancy or for existing tenancy to
  expire
• Application can be made at any time after the
  Landlord or Tenant has served Notice
• Latest date for Application is no later than 6
  months after termination of the old tenancy
• A Party cannot make an application if other has
  made one first

22
Interim Rent How do you apply

• When proceedings for a new tenancy or for the
  termination of an existing tenancy have started,
  the claim for interim rent must be made in those
  proceedings
• Where proceedings either not yet commenced or
  determined-application by Part 8 proceedings

23
Interim RentPeriod from when Interim Rent is
Payable

• Previously Interim Rent payable from the later
  of the termination/request date in the Ls s.25 /
  Ts s.26 notice or application to the Court for
  interim rent
• T had incentive to delay proceedings in a rising
  market
• L had incentive to drag heels in a falling market

24
Interim RentPeriod from when Interim Rent is
Payable

• e.g. Lease expires 31st December 2003.
• T could serve s.26 notice on 1st November 2003
  with request for new tenancy specifying date of
  1st November 2004.Interim rent payable from 1st
  November 2004.
• Old rent continues for 11 months after expiry of
  lease.

25
Interim RentPeriod from when Interim Rent is
Payable

• Now payable from the earliest date for
  termination of the tenancy which could have been
  specified in the Ls s.25 notice or Ts s.26
  request-irrespective of who applies for interim
  rent
• If a fixed term then the end of the fixed term
• If a continuation tenancy then 6 months from
  service of notice

26
Interim RentPeriod from when Interim Rent is
Payable

• e.g. Lease with expiry date of 10th March 2005. L
  serves a s.25 Notice on 2nd September 2004 with a
  termination date of 2nd June 2005.
• Earliest date that could have been specified in
  the Notice was 10th March 2005 so this is the
  date from when Interim Rent is payable and it
  will be backdated to this date, regardless of the
  termination date.

27
Interim RentPeriod from when Interim Rent is
Payable

• e.g. Same Lease with an expiry date of 10th March
  2005. L serves a s.25 Notice on 2nd June 2005
  with a termination date of 10th March 2006.
• Interim rent is payable from the 2nd December
  2005 as this is the earliest date that could have
  been specified in the Notice/Request

28
Interim RentAmount of Interim Rent

• More complex
• If certain conditions satisfied then the same as
  the renewal rent
• If conditions not satisfied then determined in
  accordance with a formula which is less
  favourable to Landlord
• Exemptions which are complex
• How Effective?

29
Interim RentAmount of Interim Rent The Interim
Rent will be the same as the renewal rent if 3
conditions are satisfied

• The T was in occupation of the entire premises at
  date of notice
• The L did not oppose renewal
• The new tenancy of the entire demise is granted.
• If above apply then interim rent usually the
  same as renewal rent

30
Interim RentAmount of Interim Rent
However-Exceptions!

• If the terms of the new tenancy are so different
  from the old tenancy that it would make a
  substantial difference to the market rent
• The interim rent will be a reasonable rent for
  the tenant to pay while the old tenancy continues
• Regard will be had to rent payable of a
  sub-tenancy of part

31
Interim RentAmount of Interim Rent
However-Exceptions!

• The interim rent payable under the new tenancy
  differs substantially from the market rent at the
  date when interim rent is payable
• The interim rent will be determined in accordance
  with market conditions at the time that interim
  rent became payable

32
Interim RentAmount of Interim Rent
However-Exceptions!

• Both 1 and 2 above apply
• Interim rent is that which it is reasonable to pay

33
Interim RentAmount of Interim Rent

• What if 3 conditions not satisfied?
• Old law on assessment applies subject to one
  exception!
• Regard now to rent payable under any sub tenancy
  of part of the property comprised in the tenancy

34
Interim RentConclusion

• Can be made by either party as soon as
  notice/request served
• Payable from earliest date notice to terminate or
  request for a new tenancy could have been made
• Complicated provisions for calculation but could
  be same as renewal rent
• Complex Professionals Paradise?

35
The New 1954 Act Threats and Opportunities

• Julian Fenn
• and
• Robert Bajaj