The Practical Lawyer

Landlord and tenant – commercial

Assignment to guarantor – void!

The High Court has held that any assignment by T of its lease to its guarantor will be void – even if T and its guarantor want it to be valid. This is the effect of the ‘generous’ anti-avoidance provisions in s25 Landlord and Tenant (Covenants) Act 1995.
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Lease renewal – compensation

If L is opposing T’s statutory right to renew under LTA 1954 then T may be entitled to statutory compensation. That compensation will be calculated at the rateable value of the property, but doubled if T and any predecessor in business has been in occupation for 14 years or more.
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Break date – after quarter day

If L wants to negotiate the inclusion of a break clause in a lease, the L would be well advised to demand that the surrender date be just after (not before) a rent payment date.
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Surrender – handing back the keys?

Can T (or more usually, an administrator) surrender a lease by simply handing the keys back to L? If L accepts the keys, then L may have inadvertently carried out an act that amounts to an unequivocal acceptance of the surrender and the termination of the lease.
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Air-con – consent?

When acting for T, it is important to consider the scope of any fitting-out works (or future works) and whether L’s consent will be needed.
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CPSE – standard enquiries

The importance of giving accurate replies to the standard enquiries under the Standard Commercial Properties Conditions is illustrated by a recent case.

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Arrears – s17

Section 17 Landlord and Tenant (Covenants) Act 1995 imposes a six-month time limit for claiming ‘fixed charges’ from a former T or guarantor. If L misses the deadline for serving an s17 notice, then the former T or guarantor cannot be held liable for the fixed charge. That six-month period runs from the date when the fixed charge became due.

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Dilapidations – L’s intention irrelevant

 It has become well established in recent years that T will only have to pay dilapidations if L actually intends to carry out the necessary repairs. However, the Scottish CA has recently reversed this approach, upholding a lease provision that allowed L to recover dilapidations without showing that it would actually carry out the work. This was because the money would be paid under a payment clause rather than a damages clause.

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Lease renewal – whole demise?

 Under LTA 1954, when T’s lease expires, T has a right to a new lease of the premises originally demised, which T actually occupies for the purpose of its business.

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Administration – forfeiture

 If T is in administration, then IA 1986 imposes a statutory moratorium. This means that L cannot exercise its right of forfeiture by peaceable re-entry except with the consent of the administrators or permission of the court. This gives the administrators ‘breathing space’ to enable the business to continue to trade (and ultimately to maximise value for creditors). But, the existence of the moratorium can be said to interfere with L’s proprietary rights – and there are arguments that the system is being misused through the use of pre-packs where the business is sold on day one of the administration, with the buyer therefore getting an unjustified benefit at the expense of L.

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