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Lawry
Lawry, Solicitor
Category: Property Law
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On commercial lease, my landlord is only offering first

Customer Question

On commercial lease, my landlord is only offering first right of refusal, as opposed to security of tenure protection under the 1954 Act. Please let me know what's the difference?
Submitted: 12 days ago.
Category: Property Law
Expert:  Lawry replied 12 days ago.

Hi,

My name is ***** ***** I will try and help you today.

First right of refusal means that your tenancy is not protected by the Act you have contracted out but hon the termination of your lease he will offer the new lease to you first before looking for new tenants.

Under the 1954 Act you enjoy greater security in that he can only evict you at the end of the term based on one of the seven grounds provided for in Section 30 of the Act. If you oppose this he needs to apply to court to prove the relevant ground. There is a fixed procedure to deal with the notices and time scales are strict.

Some grounds are mandatory and if proven the court must grant possession others are discretionary.

For the sake of completion and the avoidance of doubt they are listed below:

Ground A: Breach of repairing covenant

This is a discretionary ground.

Proof of the tenant's failure to keep the premises in good repair does not alone entitle the landlord to have the tenant's application dismissed.

The landlord must show that the tenant "ought not to be granted a new tenancy" in view of the state of repair of the premises.

The court may take into account an offer by the tenant that the new tenancy should contain a covenant obliging the tenant, immediately to repair the premises as the original lease required.

Ground B: Persistent delay in paying rent

This is a discretionary ground.

The landlord must show that the tenant, "ought not to be granted a new tenancy" in view of its persistent failure to the rent at the time stated in the lease.

The court's main consideration will be whether the landlord will be able to rely on the tenant to pay the rent promptly in the future

In a case in 2002, the Court of Appeal held that a landlord who habitually accepted the late payment of rent from a tenant and the tenant's failure to comply with his repairing obligations, was not permitted to insist on strict compliance with the terms of the lease unless and until the tenant was given clear and reasonable notice that the landlord now required strict compliance.

In this case, the current landlord was an assignee of the property. It was the previous landlord who had accepted the lackadaisical approach by the tenant. The new landlord was obliged to tell the tenant that he required compliance before he could complain to the court and apply for possession. The tenant's application for a new lease was, therefore, granted.

Ground C: Breaches of other obligations

This is a discretionary ground.

The landlord must show that the breaches are such that the tenant, "ought" to be deprived of a new tenancy

Any waiver of, or acquiescence in, a breach by the landlord will influence the court against the refusing of a new tenancy on the grounds of the breach.

The court will consider all the circumstances surrounding the breach and the past conduct of the tenant.

Ground D: Availability of alternative accommodation

The Court has little or no discretion.

The landlord must show that he has offered suitable alternative premises to the tenant on lease terms that are reasonable in the round.

You may have to think quickly on this one, because if you fail to accept an offer which the court upholds, then you will be out, with no premises anywhere. You should apply to the court for an undertaking from the landlord to provide specific premises, available for inspection by you, before the court makes any order refusing the grant of a new lease.

Ground E: Sub-tenant - possession required for letting or disposing of whole of property

This is a discretionary ground.

The landlord must show that the tenancy was formed by sub-letting part of the superior tenancy and the superior landlord is able to let the whole premises for more than the parts.

This is conditional on proof by landlord that the superior tenancy will have come to an end by the date on which the applicant's current tenancy is due to terminate.

Ground F: Landlord intends to demolish or reconstruct

This is a mandatory ground.

The landlord must show that he intends to either demolish or reconstruct the premises comprised in the holding or a substantial part of those premises, or to carry out a substantial work of reconstruction which he could not reasonably perform without obtaining possession of the premises.

The landlord must be genuine in his intention with firm plans.Often architects plans, any planning consents and works estimates will be required as evidence too as well as the landlord's financial ability to complete the scheme.

It is more likely that the court will be convinced if the premises are old and becoming dilapidated.

Ground G: Landlord intends to occupy the premises himself

This is a mandatory ground.

The landlord must show that he intends to occupy the premises for the purposes of his own business, or as his residence.

The landlord must have owned the premises for at least five years before the termination of the current tenancy.

Compensation

The Landlord and Tenant Act 1954 states that the tenant is entitled to compensation if a new tenancy is refused because the landlord:

  • requires possession of the property for letting or disposing of the property as a whole (Ground E)
  • intends to demolish or undertake major reconstruction (Ground F)
  • intends to occupy the premises for his own business or residence (Ground G)

Thus you are better protected by remaining in the Act but you also need to consider the commercial aspects of the deal.

I hope this helps.