John McKee and Son Solicitors

Introduction

The Landlord and Tenant (Amendment) Act 1980 (the 1980 Act) as amended by the Landlord and Tenant (Amendment) Act 1994 (the 1994 Act) introduced a statutory right to a new tenancy in certain circumstances. These rights may apply in respect of premises which come within the legal definition of tenement and where the tenant can prove his/her entitlement under one of the following headings:

• Business Tenancy.
• Long possession Tenancy.
• Improvement Tenancy.

Tenement as defined under the Act is a premises which complies with all of the following conditions:

• It consists of land covered wholly or partly by buildings.
• If it consists of land covered in part only by buildings, the portion of the land not so covered is subsidiary and ancillary to the buildings.
• It is held by the occupier under the Lease or other Contract of Tenancy express or implied.
• The Contract of Tenancy is not a letting made and expressed to be made for the temporary convenience of the Lessor or the Lessee.

It should be noted that buildings of a makeshift or temporary nature have been found to come within the legal definition of tenement.

Business Tenancy

A tenant has business equity if there has been occupation and bone fide total or partial use of the premises for the purpose of carrying on a business for a continuous period of five years and the tenant (or his predecessor in title) was the tenant immediately before he makes his application for relief.

Business is very broadly defined in the act as meaning any trade, profession or business whether or not it is carried on for gain or reward, any activity for providing cultural, charitable, educational, social or supporting services and to the carrying out by Local Authority of any of its functions.

Indeed, the definition is so wide that almost anything could fall within its ambit until the contrary is proven.

As a result the standard short-term letting agreement is no longer than four years and nine/eleven months.

The period of occupation must also be continuous. However, the Court has discretion, if it considers it reasonable, to disregard the temporary break in user. For example, the Court may disregard the traditional two weeks summer holiday period for a business or break in user while the premises is being renovated or repaired.

The only effective way of preventing renewal rights arising is a complete lock, stock and barrel physical break of occupation for a trading period (not just a weekend) of at least a week or more followed by a further renewal of the lease. Merely closing the premises for a period would not be sufficient as the court has discretion to disregard a temporary break.

Long Possession Tenancy

A tenant has long possession equity if there has been continuous occupation for twenty years by a person or his predecessor in title. Unlike the business equity, the long possession equity applies to both business and residential property.

Improvement Tenancy

A tenant has improvement equity if improvements have been made on the tenement and the value of the improvements carried out by the tenant is not less than one half of the letting value of the tenement when the application for relief is made.

Terms of the New Tenancy

Once the tenant can prove one of the foregoing equities he is entitled to a new tenancy, on the termination of his previous tenancy, the terms of such new tenancy to be those as may be agreed between the landlord and the tenant or in default of agreement is fixed by the Court.

(i) Term

Where the right to a new tenancy is based on a business tenancy, the duration of the new tenancy will be fixed at twenty years or such lesser term as the tenant may nominate, but will not be fixed for a period of less than five years without the landlord’s agreement. The landlord and tenant may agree to a lease of less than five years, but if the landlord does not agree, the tenant will be entitled only to a lease of between five and twenty years as the tenant nominates.

If the right to a new tenancy is based on a long possession or improvement tenancy, the term of the new tenancy may be thirty five years or such lesser term as the tenant may nominate.

(ii) Rent

The rent set down by the Court will effectively be the full market rent, i.e. the rent the property would obtain if let on the open market.

Restrictions and Right to a New Tenancy

The 1990 Act provided that any provision contracting out of the Act would be void. The 1994 Act changed the position somewhat by providing for the renunciation of statutory renewal rights byoffice tenants. For the renunciation to be effective the terms of the lease must provide for the use of the premises wholly and exclusively as an office. The tenant must execute a Renunciation prior to the commencement to the tenancy and the tenant must also receive independent legal advice in relation to the renunciation.

The tenant also loses his entitlement to a new tenancy where there has been breach of a covenant in the Lease.

The Act also provided grounds for the landlord to refuse to grant a new tenancy under certain circumstances which are irrespective of the tenant’s actions or conduct:

• Where he has agreed to pull down or rebuild or reconstruct the whole or part of the building which includes the tenement and has planning permission.
• He needs a vacant possession of the premises to carry out his scheme of development and has planning permission.
• Where for any reason the creation of a new tenancy would not be consistent with the good estate management.

The terms good estate management has given rise to a considerable amount of litigation and it has been found that this concept is dependant and is to be defined in the light of the circumstances prevailing at the time of the hearing.

If a business is entitled to a new tenancy and has been refunded one on the basis of one of the foregoing grounds, the tenant is entitled to compensation for disturbance. This compensation is not available to residential tenants.

The contents of this article are provided for information purposes only and do not constitute legal or other advice.

© Copyright John McKee & Son Solicitors, 2008. All rights reserved.