PLP LIKELY EXAM TOPICS / SAMPLE ANSWERS: LEASEHOLD
SECURITY OF TENURE
[X TENANT] CAN SERVE A NOTICE ON [X LANDLORD] TO GRANT THEM (THE TENANT) A NEW
LEASE. IS THIS TRUE? ARE THERE ANY REQUIREMENTS WHICH NEED TO BE SATISFIED WHEN
SERVING SUCH A NOTICE?
The notice being referred to is a tenant’s S.26 Request for a new lease. Only a tenant
protected by Part II of the Landlord and Tenant Act 1954 (‘The 1954 Act’/ LTA 1954) is
entitled to serve a S.26 Request.
S.23(1) of the 1954 Act outlines the requirements for the Part II of the 1954 Act to apply:
there needs to be a tenant in occupation for the purposes of a business. On the facts
provided, [X Tenant] has a lease and is a tenant occupying [X premises] under its lease which
it uses for the purpose of [X use], meaning the criteria under S.23(1) LTA 1954 are satisfied.
The lease between [X landlord] and [X tenant] is not one of the excluded tenancies
contained in S.43 LTA 1954, and there is nothing on the facts to suggest that the lease has
been contracted out from protection under the 1954 Act by S.38A. However, to be certain
that the lease has not been contracted out of it would be necessary to obtain a copy of the
lease from [Client’s name] and see if it contains clause stating that that Ss.24 – 28 of the
1954 Act have been excluded.
S.24(1) of the 1954 Act gives a tenant two layers of protection. Firstly, the tenant has the
right to hold over on the lease, which means they can stay in occupation of the premises the
lease after the contractual expiry date (CED). Here, the CED is [X date] and the lease will
continue until it is ended by service of a notice under the LTA 1954. Secondly, the tenant
also has the right to apply to the Court for an order for the grant of a new lease of the
premises.
Despite a tenant being able to serve a S.26 Request provided the above criteria apply and
the lease is not excluded or contracted out, it is also necessary to check whether the
landlord, [X landlord], has already served a S.25 Notice under the 1954 Act. Only if the
landlord has not served a S.25 Notice can the tenant make a S.26 Request.
When serving a S.26 Notice for a new lease, [Tenant’s name] must ensure this is done using
the prescribed form and served on a competent landlord. In the S.26 Request the tenant
must set out that they would like a new tenancy and set out the terms proposed for this
new tenancy. The S.26 Request must also clearly set out when it would like the proposed
commencement date (PCD) to be, following the rules set out in S.26(2). Firstly the PCD
specified in the request must be between 6 and 12 months’ from the date the request is
served, and secondly the PCD cannot be before the contractual expiry date (so here it would
need to be after [X date].
As [X tenant] want to stay in the premises, they want to renew their lease under the 1954
Act. They will want the new lease to start as soon as possible, as market rents have fallen
the new lease would be a market rent, which would be at a lower rent than the current
lease provided there isn’t a clause in the lease contract preventing the rent from decreasing.
As today’s date is [X date] and the CED is [X date] which is approximately [X] months away.
As the CED is [X] months away and this is the earliest date that the new lease can
commence from, as this is more than 6 months away but less than 12 months away, a S.26
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,PLP LIKELY EXAM TOPICS / SAMPLE ANSWERS: LEASEHOLD
Request should be served my [X Tenant] today setting out the PCD of [X date] (this being the
same as the CED date), so that the new lease will start on the date that the current lease
expires.
THE CLIENT HAS ASKED YOU TO DRAW A TIMELINE SHOWING:
I. TODAY’S DATE
II. WHEN THE CURRENT LEASE ENDS (CED); AND
III. (ASSUMING WE SERVE NOTICE TODAY) THE BEST DATE TO SPECIFY IN THE
NOTICE AS THE PROPOSED COMMENCEMENT DATE (PCD) FOR THE NEW LEASE
TO START TO ACHIEVE [TENANT’S] OBJECTIVE.
E.g.
Today = CED 29.09.2020 [Tenant’s] objective – As market rents
01.02.2020 and this is the have fallen the tenant would want the
best date for new lease to start as soon as possible so
S.26 Request the PCD they can take advantage of the new
served lower rents.
Remember:
o The PCD cannot be before the CED (it can only be on or after the CED); and
o The S.26 Request must be served no less than six and no more than 12 months
before the PCD set out in the S.26 Request.
WHAT IS THE LATEST DATE WE COULD SERVE A NOTICE TO START THE LEASE ON THE DATE
YOU HAVE IDENTIFIED ABOVE? IS THERE ANY FINANCIAL RISK TO US IF WE DO WAIT?
The latest date to serve the S.26 Request with a PCD of 29 September 2020 (the best date
for the PCD as identified above) would be 29 March 2020 (i.e. six months before the PCD) as
there has to be at least six months between the date the S.26 Request is served and the
proposed PCD.
The risk of leaving it until the latest date to serve a S.26 Request is that the tenant, [X
tenant], run the risk of the landlord, [X landlord], serving a S.25 Notice which could include a
specified termination date (STD) from the date of its Notice. If [Tenant client] wait until the
latest possible date to serve their S.26 Request and the landlord serves a S.25 Notice before
this, for instance on [X date before latest date for tenant to serve S.26 Request] with the
latest possible termination date [X date – 12 months from notice], then the tenant risk
having to pay an ‘above market level’ from the CED up until [Date of STD given in landlord’s
S.25 Notice].
WHAT WILL HAPPEN AFTER A S.26 NOTICE IS SERVED ON THE LANDLORD? IS THERE
ANYTHING THAT NEEDS TO BE DONE TO PROTECT THE TENANT’S POSITION?
After [Tenant] has served its S.26 Request on [Landlord], the [Landlord] has two months
from the date of service of the S.26 Request to serve a counter-notice on [Tenant]. A
Landlord’s counter notice can either oppose the tenant’s application to the Court for a
renewal lease to be granted or a notice stating that [Landlord] has no objection to granted a
renewal lease to [Tenant]. If [Landlord] chooses to serve a counter notice then this must set
out statutory grounds of opposition under S.30(1) LTA 1954. If [Landlord] does not serve a
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, PLP LIKELY EXAM TOPICS / SAMPLE ANSWERS: LEASEHOLD
counter notice within two months of the tenant’s S.26 Request then it cannot oppose the
rant of a renewal lease, but they can still negotiate on the terms of the renewal lease.
Either the Tenant or the Landlord can apply to the court, however [Tenant’s name], as the
Tenant have more to lose if no court application is made because they would lose the right
to a renewal lease so it is more likely that it will be [Tenant’s name] who makes the
application to the Court. The Court application can be made as soon as [Tenant] receives
[Landlord]’s counter notice, or if the Landlord fails to serve a counter notice then two
months after the date of service of the S.26 Request.
If [Landlord] was opposed to the granting of a renewal lease, they could apply to the Court
for an order that no renewal lease be granted relying on the applicable statutory grounds of
opposition under S.30(1) LTA 1954. If [Tenant] had already applied to the Court then
[Landlord] would similarly rely on the relevant S.30(1) grounds to oppose the Court
application.
Even if [Landlord] is still willing to grant [Tenant] a renewal lease, [Tenant] should still apply
to the Court to protect its rights to a renewal lease and the Court will determine the terms
of the renewal lease in the event that [Landlord] and [Tenant] are unable to agree these
between themselves.
The deadline for any application to be made to the Court is the day before the proposed
commencement date of the renewal lease. Once the Court application has been made by
[Tenant], provided [Landlord] does not oppose the grant of a renewal lease then [Landlord]
and [Tenant] will meet and negotiate the terms of the renewal lease, and hopefully reach an
agreement on these. The Court application would then be withdrawn once the renewal
lease is complete.
[Tenant] should protect the Court application so that any third party purchasing the
freehold of the property from [Landlord] will also be bound by it. As [Landlord]’s title is
registered, [Tenant] would need to lodge a unilateral notice at the Land Registry against
[Landlord]’s freehold title. If the title was unregistered, then [Tenant] would need to use a
pending land action which would let any potential buyers know there is a dispute which may
affect the land.
WILL ANY NEW LEASE BE ON THE EXACT SAME TERMS AS THE CURRENT LEASE? APART
FROM RENT DUE TO LOWER MARKET RATES?
The case of O’May v City of London Real Property Co Ltd [1983] held that the terms of the
current lease are the starting point for the terms of the renewal lease. It is the responsibility
of the party who wants to make any changes to any of the existing lease terms to justify the
proposed changes by reference to changes in circumstances.
If the parties are unable to agree the terms of the renewal lease between themselves then
the Court will. Ss.32 – 35 of the Landlord and Tenant Act 1954 direct the Court as to the new
terms to be ordered. The rent of the renewal lease is dealt with by S.34 LTA 1954. Rent will
be market rent so if market rents have fallen, as they have here, then the rent of the
renewal lease will be less than the rent under the tenant’s existing lease. The Court if
ordering the new Rent will look at the assumptions and disregards.
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