The Practical Lawyer

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)?

As administration becomes more commonplace, it is important for Ls to be aware of the empty property rates implications of a property being occupied by a T in administration.

The standard definition of ‘repair’ dates from Lurcott [1911]:

‘The restoration by renewal or replacement of subsidiary parts of a whole. Renewal, as distinguished from repair, is the reconstruction of the entirety, meaning by the entirety not necessarily the whole of the subject matter but substantially the whole of the subject matter.’

A ‘virtual assignment’ is a side arrangement (not involving L) by which all the economic benefits and burdens of a lease are transferred without there being an assignment of the lease, and without there being a change of occupier.

It will often be in the mutual interest of both L and T for L to spend money promoting a large shopping centre or complex. Typically, shopping centre leases will contain provisions whereby ‘promotion’ costs form part of the service charge, but with L having to make a contribution in respect of such items. Indeed, the Trafford Centre in Manchester has just such a provision (with L having to make a 50% contribution).