The Practical Lawyer

When a lease comes to an end, whether by forfeiture or termination, T will be liable to L for any want of repair. In principle, the damages recovered by L will be the cost of the necessary repair works.

LTA 1954 gives T a statutory right to renew its business tenancy at the end of the term. However, L and T can contract out of that right provided the tenancy is going to be for a ‘term of years certain’. Typically, this will be a fixed-term lease, or a fixed term with a break clause.

Suppose L is granting a lease of a small retail unit which T will fit out (the unit will have capped-off water, gas and electricity supplies that will be separately metered and which will not be shared with L). T will be installing its own heating and cooling, and the question then arises as to whether L needs to provide an Energy Performance Certificate?

In today’s market, what should T be looking for when entering into a new lease? The obvious answer is that good quality Ts are highly sought after. Accordingly, T should illustrate its financial strength to the potential L and then seek concessions (eg rent-free periods or a contribution to fit-out costs).

If you act on behalf of T who is renewing a lease with LTA 1954 protection, it is important to consider the issue of interim rent (ie the rent that will be paid between the expiry of the existing lease and the start of the new lease).

T was in arrears, so L served a statutory demand in respect of the arrears. Shortly afterwards, L presented a bankruptcy petition against T, but that was adjourned on several occasions. Subsequently, L became aware that T was in breach of various lease obligations.

Suppose T has paid a rent deposit that has been put in a separate designated account and charged to L (usually called the ‘charging form’). In that situation, can L access the rent deposit money if T goes into administration?

The insolvency of T can have a direct impact on L’s financial arrangements. Indeed, non-payment of rent by T may mean that L is in breach of an interest cover covenant, or a loan-to-value covenant.

If a lease requires rent to be paid in advance, then T cannot apportion the final rent payment (unless the lease says otherwise). This is particularly important on the expiry of a lease – whether it be by passage of time, forfeiture, surrender, or exercise of a break clause.

On an insolvency administration, how do you balance the competing interests of L (who wants to enforce the terms of the lease) and the creditors (who want to maximise the business value)?