Arriba Arriba! Lease renewal proceedings at (relatively) breakneck speed!

Our team: Leanne Meredith

If you are a landlord or a tenant under a lease protected by the 1954 Ac, as the end of the contractual term of your lease approaches it is not unusual for you to find yourself at risk of being involved in lease renewal proceedings. This type of proceedings can be issued by a landlord or tenant to ask the County Court to determine the terms of a renewal lease of the property. Proceedings are often issued in circumstances where the parties cannot easily agree the terms of the renewal lease between themselves.

Sweeping changes are being made to the lease renewal process by the courts in an attempt to speed matters up. It may well be worth you being aware of those procedural changes, because they could impact how you negotiate and when you might decide to issue proceedings.

New process for 1954 Act unopposed lease renewals

By way of background, under the existing lease renewal procedure, it is not unusual even where the parties are happy to grant a new lease (i.e. the claim is “unopposed”) for it to take 18 months or more for the Court to resolve an application for it to determine what the terms of that lease will be. Parties had grown very used to the inherent delays under that procedure, which perhaps resulted in proceedings being issued more frequently.

On 1 January 2018 the County Court at Central London started running a pilot scheme for unopposed lease renewal proceedings which aimed to reform the way in which lease renewal proceedings were dealt with when parties were happy to grant a new lease. When unopposed lease renewal proceedings were sent to that Court to be issued, they were referred immediately to the First Tier Tribunal (“FTT”). The standard directions timetable used in the FTT ran over only a 20 week period from issue of proceedings until trial. The anticipated timetable for resolving cases was therefore considerably shorter.

Although there is very little publicly available information on the scheme, it appears that the County Courts consider that it has been a success. We have found that the majority of lease renewal proceedings concerning properties falling within the jurisdiction of the County Court at Central London are still now transferred to the FTT to be timetabled to run in accordance with the rules of the pilot scheme. For unknown reasons some do slip through the net! We have also more recently seen that (on an ad hoc basis) the process is being rolled out at County Courts across the country.

The Lord Chancellor has not yet advised us which County Courts across the country have adopted the pilot scheme, and it therefore seems to be a bit of a lottery at present whether unopposed lease renewal proceedings will end up on the scheme or not. With that in mind we recommend that potential parties to unopposed lease renewal proceedings are always alive to the risk that the scheme could apply.

How would the pilot affect your proceedings?

Firstly, and as above, claims allocated to the new procedure should be resolved much faster than when using the conventional timetable. This adds pressure to the parties to complete a new lease by agreement, or else face an expensive trial.

It is also now not so easy for a party to delay proceedings which are subject to the scheme. Save for in ‘exceptional circumstances’, the Court will only allow one stay of three months to allow time for parties to negotiate. The stay can also only be granted at the outset of the proceedings. The FTT will not be willing to find frequently that ‘exceptional circumstances’ apply.

If the parties cannot agree the rent payable under the new lease, they should be prepared to instruct a valuation expert early. Valuation experts will be due to start exchanging evidence two weeks after the start of a directions timetable.

Finally, costs could also increase quicker – while previously steps in a directions timetable could be delayed, once a timetable is in place the parties cannot usually vary it.

Changes to behaviour

How might you respond to the changes in court procedure when negotiating a 1954 Act renewal?

  • Begin negotiations early – it is advisable for all parties to do what they can to avoid proceedings being issued.
  • If negotiations are progressing, under the old procedure parties have often agreed extensions of the deadline for a tenant to issue lease renewal proceedings. Try as ever to agree extensions of that deadline to avoid the need to issue proceedings.
  • Nonetheless, if you are confident of your position and negotiations stall you may wish to issue proceedings to try to force the other party to quickly concede to your point of view. A settlement may be reached more quickly once proceedings are issued because of the costs involved for both parties.
  • If rent is in dispute, ensure you have a good expert valuation witness lined up well before proceedings are issued.

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