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OUT
WITH THE OLD AND IN WITH THE NEW: THE END OF AN ERA |
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 THE OLD Anyone who has been involved with commercial leases at any time during the last several decades whether as Landlord, Tenant, Agent or Solicitor will be familiar with the expression "outside of the act". To describe a tenancy in this way is shorthand for an agreement being reached between a landlord and tenant to exclude the new tenancy from provisions of the Landlord and Tenant Act 1954 so as to deprive the tenant from what would otherwise have been their automatic right to remain in the premises beyond the contractual term of the lease and to renew their tenancy if required. For such an agreement to be legally valid it was necessary for a joint application to be made by the landlord and tenant to the Court seeking the Court's authorisation for such an agreement to be entered into by them. Such applications could take anything between several days and several weeks depending on the workload of the particular Court and could not be applied for until the lease in question had been successfully negotiated and agreed. A fee which had risen to £130 would need to have been paid to the Court for what was in effect a “rubber stamp”. This process was widely considered to be something of a farce and costly both in terms of time and effort. |
THE NEW After many years of dissatisfaction with the old regime legislation has at long last been introduced aimed at both simplifying and abbreviating the process of contracting out of the 1954 Act. Under the new rules which come into effect on 1st June 2004 it will no longer be necessary for an application to be made to the Court to exclude a new lease from the statutory rights of renewal under the 1954 act. To achieve such exclusion under the new simplified regime a landlord now only needs to serve a notice on the prospective tenant advising them of the nature and effect of the exclusion of the rights. In response the tenant must either make a simple declaration (if the lease is to be completed after at least 14 days following service of the original landlord’s notice) or a statutory declaration (if the lease is to be completed in less than 14 days after service of the landlord's original notice). In either case the Lease must contain a note of the fact that the notice had been served and the declaration made. Failure to follow the correct procedures could lead to significant problems and so advice regarding the forms and process should be sought. |
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MORE CHANGES
In addition to the changes made in respect of the initial contracting out process the new regime also deals with changes to the manner in which the renewal of leases which are protected by the 1954 Act are conducted. The landlord's notice to bring the tenancy to an end under section 25 of the 1954 Act now not only needs to specify whether or not the landlord would oppose the tenant's request for a new tenancy but if not opposing such renewal must also set out the basic terms on which a new lease would be granted although the landlord will not be bound by these proposals. The most significant change with regard to the renewal notice procedure is that once the tenant has received a notice from its landlord they will no longer be required to serve a counter notice in order to preserve its statutory rights to a renewal. This is a most welcome change as it eliminates one of the greatest risks to the preservation of the tenant's rights. Also enhanced is the effect of notices served under section 40 of the 1954 Act whereby the parties can seek information from each other as to their use of the premises and the identity of its occupants. |
At last this process has been given some teeth so that as from 1st
June the recipient of a section 40 Notice will be required to respond
within one month and to advise of any changes in the position within
six months. Failure to comply will be actionable as a breach of statutory
duty. Whilst under the old regime only the tenant was able (and in fact obliged) to make an application to the Court to progress the renewal procedure the new regime enables either party to make the Court application. Both parties will now be entitled to apply for an interim rent to be established. The Court will have discretion to order a rent which is lower than the existing rent if market conditions support it. SUMMARY
This newsletter only sets out some features of the new regime. It should not be treated as an exhaustive explanation but rather just an introduction. Please note the changes come into effect on 1st June 2004 so that apart from requirements set out in existing superior leases and agreements for leases entered into before 1st June 2004 the new rules will prevail. |
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| SILVERMAN
SHERLIKER LLP 7 Bath Place London EC2A 3DR Tel: 020 7749 2700 Fax: 020 7739 4309 Email: mail@silvermansherliker.co.uk www.silvermansherldiker.co.uk |
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