Exemption from the 1954 Landlord and Tenant Act

Exemption from the 1954 Landlord and Tenant Act

The Landlord and Tenant Act 1954 is an important piece of legislation that offers security of tenure to business tenants.

Under normal circumstances, tenants have the right to remain in their business premises at the end of their lease and request a new lease, unless the landlord has specific grounds to oppose this.

The legislation was designed to protect successful business owners from being taken advantage of by their landlords. Imagine opening a new shop and making a great success of it, only at the end of the lease to be told you can't remain, or that you have to pay double the rent.

In many cases though, it's not appropriate for commercial tenants to have the right to remain in the property which can be done by making the lease 'exempt' from the Landlord and Tenant Act 1954. You have to follow very specific steps to make sure it is though.

What Does Exemption from the Act Mean?

Exempting a lease from the 1954 Act means that the tenant does not have the automatic right to renew the lease at the end of its term. This provides landlords with greater flexibility and control over their properties.

Key Consequences:

• No Automatic Renewal: Tenants do not have an automatic right to remain in the property once the lease expires.
• Flexibility for Landlords: Landlords can decide whether to offer a new lease or reclaim possession without needing to justify the decision.
• Potential Uncertainty for Tenants: Tenants may face uncertainty about their business location and might need to relocate at the end of the lease term.

How to Ensure a Lease is Outside the Act

To ensure a lease is exempt from the 1954 Act, specific steps must be followed:

Agreement to Exclude: Both parties must agree to exclude the lease from the Act before it is granted.

Serve Formal Notice: The landlord must serve a formal notice (Section 38A Notice) on the tenant, informing them that the lease will be excluded from the Act.

Tenant Declaration: The tenant must sign a declaration confirming receipt and understanding of the notice, agreeing to the exclusion.

Include in Lease Agreement: The lease document must explicitly state that the parties have agreed to exclude the lease from the Act.

Special Consideration: Tenant Moving in Sooner than 14 Days

If the tenant is moving into the property sooner than 14 days after receiving the Section 38A notice, a more formal process is required:

Steps for Exclusion When Moving in Sooner than 14 Days:

Serve Section 38A Notice Promptly: Serve the notice as soon as possible before the lease is granted.

Statutory Declaration: The tenant must make a statutory declaration in the presence of an independent solicitor or commissioner for oaths, confirming receipt and understanding of the notice and agreeing to the exclusion.

Steps to Ensure Compliance

Inform the Tenant: Ensure the tenant fully understands the exclusion and its implications.

Serve Notice and Arrange Declaration: Serve the Section 38A notice and help the tenant arrange for the statutory declaration if necessary.

Document Everything: Keep copies of the notice, the statutory declaration, and any related correspondence.

Lease Agreement: Clearly state in the lease agreement that the lease is excluded from the 1954 Act provisions.

When Tenants Are Not Excluded from the Act: Understanding Rent for New Leases

When a tenant is not excluded from the Landlord and Tenant Act 1954 and wishes to renew their lease, the process for determining the rent for the new lease is governed by the provisions of the Act.

Can the Landlord Set Any Rent?

No, the landlord cannot arbitrarily set any rent they wish. The rent for the new lease must be fair and is subject to specific guidelines set out in the Act.

How Is the Rent Determined?

The rent for the new lease is typically determined through negotiation between the landlord and tenant. However, if an agreement cannot be reached, the rent can be determined by the court.

Key Factors Considered:

Market Rent: The rent should reflect the market value of the property at the time the new lease is granted.

Property Condition: The condition of the property and any improvements made by the tenant may be considered.

Lease Terms: The terms and conditions of the new lease will also influence the rent.