The Practical Lawyer

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?).

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.

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.

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.

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.

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).

Under a typical turnover rent, T will pay whichever is the higher of a base rent (usually between 70% and 80% of the open market rent) and a turnover rent calculated by reference to an agreed percentage (commonly between 7% and 15%) of T’s turnover.

An Energy Performance Certificate is now needed for virtually all commercial premises. Prior to 6 April it was only buildings with a total useful floor area of more than 10,000 sq m that were covered; in July that was reduced to 2,500 sq m, and as from 1 October all other commercial premises are now covered (other than those of less than 50 sq m).

Suppose that the T of a head-lease wants to assign his interest. Clearly, he cannot pass on the cost to the buyer/assignee since that is prohibited by the Regs. But can T pass the cost on as part of a service charge to sub-Ts?

A business T must be in ‘occupation’ to enjoy security of tenure under LTA 1954. Surprisingly, the word ‘occupation’ is not defined anywhere in the Act.

What happens if premises are closed for a period (eg for a particular season, or for holidays, or repairs)?