UK: The Calculation of Interim Rent Following the Reforms to the Landlord and Tenant Act 1954

Last Updated: 27 September 2004
Article by Stephanie Thomas

Originally published July 2004

When the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 came into force on 1st June 2004, the provisions of the Landlord and Tenant Act 1954 relating to interim rent changed.

However, if a landlord served a Section 25 Notice or a tenant served a Section 26 Request before 1st June 2004, the 2003 Order will not apply.

A Summary of the Changes relating to Interim Rent

  • either a landlord or a tenant may apply for the determination of an interim rent, so for the first time a tenant will be able to make such an application;
  • an application for an interim rent must be made within 6 months of the termination of a tenancy;
  • interim rent is payable from the earliest date of termination which could have been specified in the landlord’s Notice or the earliest date which could have been specified in the tenant’s Request.

The aim of this aspect of the reforms is for the interim rent in most unopposed renewals to be the same as the rent payable under the new tenancy. The reason for this is to discourage landlords from opposing renewal arbitrarily. The "cushioning effect" of the discount to the open market rent, which would have applied before the coming into force of the reforms, has been removed. Therefore, if the landlord does not oppose renewal, he will receive rent for the interim period at the same level as that for the new tenancy.

Circumstances in which the presumption that the interim rent will be the same as the new rent will apply:-

  • the tenant must have occupied the premises for business purposes at the time of service of the Section 25 or Section 26 Notice;
  • the landlord must not be opposing renewal;
  • the new tenancy must relate to the whole of the property comprised in the current tenancy.

Circumstances in which the Court may vary the presumption that the interim rent will be the same as the new rent

  • the rent will be assessed on the date on which interim rent became payable if there was a substantial difference between the rent which the Court would have assessed as the new rent at the date the interim rent would be payable, namely on the earliest date of termination which could have been specified in the landlord’s Notice or the earliest date which could have been specified in the tenant’s Request;
  • if the terms of the new tenancy differ substantially from the terms of the old tenancy so as to affect the rent, the Court would determine interim rent which it deemed reasonable for the tenant to pay while the old tenancy continued. The Court would have regard to the rent payable under the old tenancy and to the rent payable under any subtenancy of part of the premises.

Where a new tenancy is ordered but not taken up

If the Court makes an order for the grant of a new tenancy and orders payment of interim rent but either revokes the Order at the tenant’s request, or if the landlord and tenant agree not to act on the Court Order, either party can apply to the Court for the determination of a new interim rent. The reason for this is that if a tenant decides to vacate the premises because he cannot afford the new rent imposed by the Court, the Act permits him to vacate and it is only fair that under those circumstances he should not be bound to pay an interim rent which is at the same level as the new rent.

In circumstances where the interim rent is to be the same as the new rent, the old provisions relating to the assessment of interim rent will be applied and the amount of interim rent to be paid will be the amount which is reasonable for the tenant to pay while the tenancy continues pursuant to Section 24 of the 1954 Act. The Court will have regard to :-

  • the rent payable under the current tenancy;
  • the provisions of Section 34 of the 1954 Act;
  • the rent payable under any subtenancy of part of the premises because if part of the premises is sublet, there could be an unfair impact on the intermediate tenant and it was not possible to definitively provide for this in the reforms.

The aim of the reforms relating to interim rent is to discourage landlords from opposing renewals without good reason and to make the procedure quicker and fairer, although the emphasis on fairness has led to the basis of the calculation of interim rent becoming more complex than under the old regime.

© RadcliffesLeBrasseur

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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