Fast-tracking London lease renewals


Author: Karen Mitchell


On 1 January 2018 the Central London County Court (“CLCC”) commenced a pilot scheme to deal with unopposed business lease renewals pursuant to the Landlord and Tenant Act 1954 (“1954 Act”). Landlords and tenants of Central London properties need to be aware of this.

1954 Act

If a tenant occupies premises for the purpose of its business and the lease has not been contracted out of the 1954 Act, the tenant has the right to:

  1. remain in the premises at the contractual expiry of its lease; and
  2. be granted a new lease.

If the landlord is not opposed to granting the tenant a new lease, the parties can commence negotiations for the terms. The starting position is that, other than the rent which is to be the open market rent, the terms are to be similar to the existing lease subject to reasonable updating. If either party wants to change the existing terms then they need to show good reason for doing so. If agreement cannot be reached either party can make an application to the court to determine the terms of the new lease.

In the majority of cases, even where proceedings are issued, a court determination is rare because the parties eventually reach agreement. Where agreement is not reached, it can take a long time to get before a judge and incur significant cost. Even then, the judge may not be a property specialist.

Pilot scheme

In order to address the above and because the court considers such applications should be able to be dealt with quickly, any unopposed lease renewal application now issued in the CLCC will automatically be transferred to the First Tier Tribunal (Property Chamber) (“FTT”) to be dealt with. The FTT will issue standard directions and aim to deal with each application within 20 weeks of the date of issue. The tribunal judge will determine the application alongside a valuer (but London valuers are excluded due to potential conflicts).

The standard directions will include the following:

  • one three-month stay to allow for alternative dispute resolution. No further stay will be granted save in ‘exceptional circumstances’ (and this will not include ‘being close to settlement’ or ‘only a couple of lease terms remaining in dispute’);
  • the tenant will have the opportunity to provide one round of amendments to the landlord’s draft lease;
  • valuation experts are required to exchange comparables and meet before the tenant has responded to the draft lease;
  • no provision for disclosure or witness statements; and
  • the application will be listed in a block 2-day period together with a number of other applications.

Advantages

  • If one party is deliberately delaying, there may be a tactical advantage in issuing a court application and implementing a tight court timetable if the issuing party is prepared and ready to proceed.
  • A tight court timetable will focus the parties minds and the limited directions will reduce costs.
  • The FTT judges are property specialists and will be assisted by a valuer.

Disadvantages

  • Once issued, there is a tight and rigid timetable which cannot be stayed by agreement. Both parties have to comply with the timetable and will incur costs.
  • If terms other than rent are in issue:
    • valuers are required to meet and exchange comparables without knowing the other terms of the lease which does not seem practical; and
    • disclosure and witness statements may be necessary but are not provided for so separate applications will need to be made for these.

Future

If overall, the scheme is a success, it may be rolled out to the regional courts and all unopposed lease renewal applications. Parties will therefore need to focus on unopposed lease renewals at an early stage and be aware that, once issued, proceedings will move quickly.

Karen Mitchell, Associate, Fladgate LLP (kmitchell@fladgate.com)

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