Chapter 19 Commercial transaction case study

Landlord and Tenant Act 1954, Pt II

Landlord and Tenant Act 1954, Pt II

Our client:
Cambo Ltd - 18 Clover Street London W2

We act for Cambo Limited who has acquired the freehold reversion of 18 Clover Street London W2 for £700,000 subject to, and with the benefit of, two occupational business leases. Completion has recently taken place (30 August 2015) and our client is anxious to renew one of the occupational business leases, the lease of ground floor of 18 Clover Street as soon as possible in order to secure a higher rent than is currently being received (the rent was last reviewed in 2013). The ground floor lease will expire in 13 months' time (29 September 2015).

With regard to the other business lease (lease of first and second floors) the business tenant has a history of late payment and is in breach of its repairing obligations. Our client would like to evict the tenant as soon as possible and let the property to another interested tenant with a better covenant. The lease of first and second floors of 18 Clover Street ends in six months' time (25 March 2016).

Click on the links below to access Section 25 Notices.

Our advice re ground floor lease

Our client should serve a non-hostile s.25 notice on the tenant specifying the last day of the contractual term as the termination date in the notice. However the s.25 notice must be served between six and 12 months before the termination date specified in the notice so our client cannot serve the notice until 12 months before the contractual expiry date, i.e. 30 September 2015. We should prepare the s.25 notice in readiness for service at the appropriate time.

See Section 25 notice re ground floor lease.

Our advice re lease of first and second floors

Our client should serve a hostile s.25 notice on the tenant specifying the last day of the contractual term as the termination date in the notice. This can be served immediately as the lease has less than twelve months left to run (it expires on 25 March 2016).

The grounds of opposition will be ground (b) (persistent delay in paying rent) and ground (a) (breach of repairing obligations). Our client should be advised that both grounds are discretionary and so the court may allow the tenant to renew in any event, e.g. if the tenant can convince the court that it will mend its ways. In respect of the repairs the court may accept an undertaking from the tenant to carry out the repairs within a reasonable period. If our client is successful in obtaining possession based on grounds (b) or (a) then our client will have no liability to pay compensation to the tenant for disturbance.

See Section 25 notice re first and second floor lease.

As an alternative to the above our client could consider seeking forfeiture of the lease for breach of the tenant's covenants. In respect of the repairs breach, a notice under s.146 of the Law of Property Act 1925 will be required to be served on the tenant accompanied by a schedule of dilapidations.