A recent consultation exercise carried out by the Property Litigation Association has identified that a substantial proportion of its membership is in favour of retaining Part II of the Landlord and Tenant Act 1954.
In that year, Winston Churchill became the first UK prime minister to celebrate his 80th birthday in office, the first UK Wimpy Bar opened in London, Under Milk Wood received its first broadcast and meat finally came off ration. It was a very long time ago – before most of us were born.
In the almost 70 years since the 1954 Act came into force, there has been little legislative amendment; by and large the original drafting remains intact and operational. It is widely perceived as a good piece of work. But, like all quite old instruments, it may have become blunted over the years, and less fit for the operations it is required for.
It is therefore timely that this March the government announced that the Law Commission would be undertaking a review of the Act. As law commissioner professor Nick Hopkins noted in these pages at the end of last month, now is the right time to hold up this critical piece of legislation for inspection and to make sure it is working as it should in the modern world. In a market with a huge number of business tenancies and, on average, relatively short lease terms, anything that can be done to reduce costs, delay and uncertainty before a lease can commence and, later, on its renewal, has the potential to provide significant benefits.
With those words in mind, and as busy practitioners in the field of business tenancy renewals, we have carried out our own consultation exercise in chambers to identify those areas of the Act which could do with a bit of sprucing up – or even discarding altogether.
Contracting out
The original cumbersome procedure for side-stepping the protection afforded by the Act was simplified in 2003, to avoid the need for court involvement in the process. The simplified procedure remains fairly complex, with many cases in court illustrating the pitfalls that arise.
Our first suggestion is that the procedure be stood on its head, so that the protection of the Act only applies where parties expressly contract in, and at any rate only where the tenancy agreement is in writing. That may strike some as radical, but it seems to us to be in tune with the current market, where tenants appear to be better able to pick and choose. But if that seems a step too far, then we suggest that the procedure be simplified further, by doing away with the need for different statutory declarations (or replacing them altogether with a suitable term in the lease) and allowing the procedure to embrace periodic tenancies.
PACT
Professional Arbitration on Court Terms has worked well but has not been widely adopted, despite the fact that it seems obvious that experts in the field of valuation should decide rental disputes, rather than judges. We think that the main reason for the lack of take-up is that reference to PACT is voluntary, and we consider that the number of disputes would be diminished if parties’ experts realised that their views could be required to be held up to scrutiny by their peers. Moreover, the scheme could be extended to deal with those unopposed renewals with other terms in dispute besides rent.
Interim rent
In the original version of the Act, there were no interim rent provisions. That position changed on amendment in 1969, when 226 words were drafted in to deal with the perceived problem of changing values over the renewal period. A further raft of amendments was made in 2004, increasing the text to 1,183 words. In practice, the process of working through what the drafters have devised for us is widely ignored, with parties routinely agreeing that the interim rent should be the same as the new rent. Against that background, we ask: why not just get rid of the whole rigmarole and revert to the position in 1954, with parties having to get a move on if they feel that a delay might be to their disadvantage?
Rent
Let’s start with the iniquity (yes) of the valuation under section 34 being carried out on the basis of a rent that reflects the disadvantage of the hypothetical tenant not receiving an inducement to fit out – when, of course, the actual tenant continues in occupation, needing no such inducement. Even if that is the right interpretation of the Act (and we think it may well not be), there is an easy drafting solution to fix this, and it is high time that it be introduced.
Secondly, can we please, please have an express statutory recognition of the acceptability of turnover rents? If that is market practice, and a party makes a good case for it, then why should the Act not accommodate it?
Minimum Energy Efficiency Standards
We do not advocate a particular solution here, but confine ourselves to drawing attention to the forthcoming impact on renewal of these standards, which prompt a number of questions. First, if works to comply with MEES are triggered by the grant of a new lease, (1) will the landlord be able to contend that the remedial works form part of any ground (f) case it wishes to put forward; or alternatively (2) what terms in the new lease will need to be included to enable the works to be undertaken; and (3) what will be the impact of the required works on the new rent? We think these matters may require legislative attention.
Notices
Finally, we repeat a plea we have made before in these pages. The Act contains many notice requirements. Experience shows that parties and their representatives frequently fail to satisfy those requirements – and the only people that benefit ultimately (apart from the lucky party that did not receive the notice) are the insurers. It should not be beyond the wit of the drafter to devise a procedure that does not penalise inadvertence in this way.
Guy Fetherstonhaugh KC and James Tipler are barristers at Falcon Chambers
