The Practical Lawyer

Landlord and tenant – commercial

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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Mixed use – right to buy

 A seller of commercial properties should bear in mind the complications that can arise if there is a mixed use (eg commercial unit with flats above).

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Lease – breach of covenant

his table sets out the rules applying to common breaches of covenant. Remember that if a breach is ‘once and for all’ and that breach is waived by L, then the right to forfeit the lease is lost forever. Note also that if a covenant (other than a covenant to pay rent) is broken, then L must decide whether the breach is capable of remedy – if so, any s146 notice must require T to remedy the breach within a reasonable time.

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Forfeiture – insolvency

 If T is in administration, then IA 1986 imposes a statutory moratorium. This means that no legal process can be started without the court’s permission. The court will then consider whether forfeiture would impede the purpose of the administration by balancing the interests of the parties (ie those of L and the administrators/creditors of T).

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Forfeiture – steps

What steps must L take before forfeiting a lease? From a contractual point of view, L simply needs there to be a proviso for re-entry (since that sets out the right to forfeit). Conventionally, this will apply to any breach of covenant by T (unless it is rent, when the right to forfeit will usually only arise 14 or 21 days after the rent falls due). It might also extend to matters which do not involve any breach of covenant (eg insolvency of T). But, there are also statutory requirements that have to be complied with:

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Agricultural building – business tenancy?

 If an agricultural building is no longer used for agricultural purposes, then any letting of it will not be a farm business tenancy, but a conventional business tenancy (under LTA 1954). Obviously, this has important security of tenure implications.

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