Archive for November, 2013

Improvement albeit from a low base

Although improvement is very slow, there can be no doubt that the commercial property market is gradually improving.  However, as the British Property Federation Property Data Report 2013 underlines, it is coming out from a low base – office rents generally, for instance, are lower now than 10 years ago.

In consequence, many landlords have, over the past few years, granted leases on terms, which, although they enabled a letting, they would not want repeated for too long a period. Lease terms have shortened and, states the BPF, three quarters of new commercial leases granted now have durations of five years or less. This must lead, in the future, to some difficult negotiations when leases come up for renewal.

A tenant of premises which it occupies for the purposes of its business is, generally speaking, protected by Part II of the Landlord and Tenant Act, 1954 unless of course granted outside the renewal provisions of the Act. Protection enables a tenant to continue in occupation of the premises beyond the end of its contractual term on its existing terms, until the tenancy is terminated in accordance with the Act. The tenant can then make application for a new tenancy on similar terms (excepting as to the rental level payable) to those in its expiring lease. In 1983 the House of Lords held that the burden of persuading the court of a change in those terms, against the will of the other party, is upon the party proposing a change (see O’May v City of London Real Property Co. Ltd [1983] 2AC 726).  In that case, both the Court of Appeal and the House of Lords refused to sanction a shifting of the burden of maintenance and repair of the building to the tenant through the service charge provisions in exchange for a reduction in the rental paid.  There must be many a landlord wishing to see an unlikely relaxation of that principle.

Will this lead to an increase in the number of lease renewal actions being taken to the courts?  Time will tell.