The Practical Lawyer

Landlord and tenant – commercial

Virtual assignment – alienation breach?

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.

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Service charge – ‘promotion’ costs

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).

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Right to inspect – intrusive

A typical lease will allow L, on giving reasonable notice, ‘to enter upon premises generally to inspect and examine the same to view the state of repair and condition thereof’.

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Insolvency – L’s remedies (1)

This table summarises L’s remedies when dealing with an insolvent individual (non-corporate) T.
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Inspection – drilling bore holes

A typical lease will allow L to inspect the premises (on giving reasonable notice). But, does that right to inspect mean that L has the right to drill bore holes?

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Renewal lease – planning breaches

A recent case is of interest because it shows that serious planning breaches by T may be sufficient grounds for refusing to grant T a new lease (under LTA 1954).

In this particular case, T had ignored a planning Enforcement Notice (and had been convicted in the magistrate’s court); he had also had a Breach of Condition notice served on him. As a result, the vast majority of the activities carried out by T on the premises had been unauthorised, and therefore illegal. In the court’s view, T’s ‘appalling past record of breaches of planning control’ and ‘unreliability as a witness’ meant it was unlikely that ‘if he was granted a renewal of his tenancy, he would continue to act lawfully’. Accordingly, L’s opposition to the new tenancy was upheld, with T’s planning breaches coming within the scope of ‘any other reason connected with T’s use or management of the holding’ (under s30(1)(c) LTA 1954). It is not clear from the report whether T’s use of the premises was in breach of the user clause in the lease; if it was, then one would assume that L would be taken to have waived those breaches by continuing to accept rent. But, subject to that point, the case does illustrate that planning breaches can be relevant on a 1954 Act renewal. ?Fowles v Heathrow Airport [2008] EWCA Civ 1270. Source: TLT Solicitors.


Rent – limitation periods

What are the limitation periods for claiming rent from a defaulting T? In practice, Ls are unlikely to allow rent to be unpaid for a long period of time, and a more relevant issue will be the length of the limitation period for enforcing any judgment obtained against that defaulting T.

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Remedies – Third party

If T defaults, then L will consider what remedies there are against third parties, such as former Ts and guarantors. Particular points to bear in mind are:

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Contracting out – ‘term of years certain’

Be aware of a major trap for L’s when drafting leases. The CA recently held that contracting out of LTA 1954 was not possible if a lease defines the term as a fixed period, together with ‘any period of holding over or extension, whether by statute or common law or by agreement’.

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Corporate L – individual T

A new PD imposes a code of conduct for debt claims by corporate claimants against individual defendants. It will therefore apply to corporate Ls who are trying to recover debts from individual Ts or guarantors.

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