A guide to the Landlord and Tenant Act 1954

In March 2023, the Law Commission of England and Wales announced it would be reviewing part of the Landlord and Tenant Act 1954 (the “Act”).

Total abolition of the Act seems unlikely. Instead, the consultation paper (aimed to be published in late 2023) will likely propose amendments to the Act.

Under the Act, when a contractual term ends, protected leases allow tenants who are in occupation of the premises for the purposes of their business, to remain there and “hold over” under the Act. Despite the fact that the fixed lease term has ended, a tenant can either remain in occupation or, after taking steps under the Act to serve notice, apply to court for the grant of a new lease.

If a landlord wants to end the lease without a renewal, they must serve the required notice under the Act. Landlords can only object to a new tenancy, or terminate the tenant’s occupation by proving one of a number of specified grounds. These include where a tenant has breached its lease and/or failed to pay rent although a well-advised landlord may be better off in these situations to avoid the Act completely and take action to forfeit the lease by re-entry or proceedings. Termination under the Act is usually therefore reserved for situations where the landlord is seeking to either occupy the premises for their own use or intending to significantly redevelop the premises and cannot do so whilst the tenant remains in occupation. Compensation may also be payable by the landlord where they rely purely on grounds which are not the fault of the tenant, such as redevelopment.

Legal advice should be obtained before serving any notice. Even minor errors in the giving of a notice can render it invalid and, in the case of termination without renewal, the strategy and timing of notices is critical. There are strict time limits governing notices for renewal and termination and we can advise on potential strategies to adopt in relation to making the relevant applications to Court. Our advice will factor in your commercial objectives and timescales, to ensure that your best interests are protected.

If the parties are unable to agree the terms of a new tenancy, either landlord or tenant can serve notice under the Act so that the Court will ultimately decide what these should be. The starting point is that the new lease will largely reflect the terms of the current lease subject to reasonable modernisation. The exceptions are:

• The Court cannot grant a new lease for a term of more than 15 years, although the parties can agree longer if they choose.
• The rent is determined by reference to market rent and valuation under the Act.

Two recent cases have also added to the body of case law in this area.

In B&M Retail Ltd v HSBC Bank Pension Trust (UK) Ltd (2023), the Court considered the position where the landlord required an immediate landlord’s redevelopment break right. The Landlord had missed the opportunity to serve a counter-notice to the tenant’s request for a new tenancy owing to an administrative error arising during lockdown. The Court allowed the insertion of an immediate landlord’s development break right on the basis that the Court should not frustrate or delay redevelopment.

In Clipper Logistics Plc v Scottish Equitable Plc (2022), the County Court considered the approach to be taken to 'green lease' terms. The landlord sought terms which would:

(a) prohibit the tenant from carrying out alterations or additions to the property which would result in the property having an energy performance rating below Band E;

(b) required the tenant to indemnify the landlord for the cost of obtaining a new EPC certificate for alterations which adversely effected the EPC; and

(c) obliged the tenant to maintain the current EPC rating and return the premises to the landlord with the current EPC rating.

The Court found that all these clauses would place too high a burden on the tenant. They decided instead that a reasonable provision was that the tenant should be required toreturn the premises to the Landlord with the same EPC rating as at the date of the Lease.

How we can help

We have a wealth of experience and can act for you, either as landlord or tenant.

• Our Commercial Real Estate team will seek to negotiate and agree the terms of your lease to best protect your position, whether inside or outside of the Act.
• Once the lease is in place, our Real Estate DR team can provide proactive strategic and practical advice in connection with any Act renewal or termination.