The Practical Lawyer

Landlord and tenant – commercial

Lease renewal – no Pt 36 counter-offer!

An L who is involved in LTA 1954 lease renewal negotiations should avoid becoming involved in the pitfalls of CPR Pt 36.

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Guarantee – pitfall

An assignment of a lease can lead to a long guarantee obligation for the assignor. If a post-1995 Act lease is assigned, the assignor may become a guarantor by virtue of entering into an Authorised Guarantee Agreement (AGA) if required by the lease.

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Disclaimer – summary

When can an insolvent T disclaim its lease? The answer is that only a liquidator or trustee in bankruptcy can disclaim a lease. Thus, disclaimer does not apply if T is in administration, if a receiver has been appointed, or if there is a voluntary arrangement.

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Double value – double rent

Do not confuse ‘double value’ with ‘double rent’. The entitlement to either can arise under 1730’s(!) legislation:

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Rent – non-payment

We all know that the scope of distress is likely to be severely curtailed when Tribunals, Courts and Enforcement Act 2007 comes into force later this year. In any event, the usefulness of distress as a remedy always depends on the nature of T’s business (ie does he have sufficiently valuable assets to cover the rent? Does the stock and equipment actually belong to T – as opposed to being leased or being subject to retention of title clauses?).

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Lease Code – update

Most Ls pay some lip service to the provisions of the Lease Code, although there is often a tendency to take issue with one or two points in the Code and then use that as justifying a blanket rejection of all its provisions. But many Ts (especially in a declining market) are becoming quite aggressive about insisting on some of the major provisions being used.

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Administration – advice to L

Administration is an IA 1986 procedure which gives a company a breathing space – it has the protection of a statutory moratorium that limits the legal action that third parties (including Ls) can take against the company. The goal is to rescue the company as a going concern, and the administrator has effective control over what happens to any leasehold property.

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Vacant possession – alterations

There are currently two alternative tests to decide whether goods left at the premises by T, or alterations not reinstated, will defeat a requirement for ‘vacant possession’. Typically, this will be important in deciding whether or not T has given vacant possession when purporting to exercise a break clause in a lease.

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Premises – mixed

The normal remedies available to L against a defaulting commercial T are:

  1. Court action to recover unpaid rent.
  2. Serve a statutory demand (if there is no dispute over the amount owed).
  3. Levy distress.
  4. Forfeit the lease.
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Service charges – late recovery

Under many leases, L will prepare an estimate of the service charge for the forthcoming year, and T will then make payments on account. At the end of the service charge year, L will prepare a final statement based on actual expenditure and T will have to pay any balance due (or receive a credit for overpayments).

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