UK: Statutory Notices: The Impact of the Reforms to the Landlord and Tenant Act 1954

Commencing on 1st June 2004, statutory notices served by parties under a lease must comply with the reforms to the Landlord and Tenant Act 1954 which have been introduced by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. Revised notices will be introduced by Statutory Instrument prior to June 2004.

A landlord who wishes to terminate a tenancy protected by the 1954 Act must serve a Section 25 notice stating whether or not he is opposed to renewal and, if so, on which of the grounds under Section 30(1) of the 1954 Act. Similarly, a tenant who wishes to bring his current tenancy to an end and seek a new one must serve a Section 26 notice.

• A landlord’s Section 25 notice must state his proposals as to the property to be comprised in the new tenancy, the rent and other terms of the tenancy. The form of the notice will make it clear that the tenant is not bound to accept the landlord’s proposals.
• A tenant need not serve a counternotice to a Section 25 notice stating whether or not he is willing to give up possession.
• Following service of a "negative" Section 25 notice or having given a "negative" counternotice to a tenant’s Section 26 request, a landlord may apply to the court for an Order terminating the tenancy without a new one being granted.

At present a landlord does not have to state his proposals for a new tenancy until responding to a tenant’s court application for a new tenancy. Early disclosure of a landlord’s proposals is intended to speed up negotiations and enable a tenant to make a commercial decision at an early stage as to whether to remain in occupation.

Over the years many tenants have lost their rights to renew their leases by failing to serve a counternotice to a landlord’s Section 25 notice stating whether or not they intend to give up possession of the premises on the date specified in the landlord’s notice. This was not what was intended by the original statutory provisions. Furthermore, a landlord cannot rely on a counternotice given by a tenant stating that he does not intend to give up possession as the tenant can still terminate his tenancy by vacating on or before the contractual term date and is not bound to apply to renew his lease having given such counternotice. Therefore, the Regulatory Reform Committee found that the potential detriment to a tenant in failing to serve a counternotice and losing his rights outweighed any benefit to a landlord in receiving a counternotice upon which he could place little reliance.

The objective of the legislative changes is to encourage the regeneration of the affairs of individuals and businesses following an insolvency situation.

• A tenant will not need to serve notice stating that he will vacate on or before the expiry of the term. This enshrines in statute the Court of Appeal’s decision in Esselte AB -v- Pearl Assurance Plc in 1997.
• A tenant who is holding over following the expiry of the contractual term of his tenancy need only serve three months’ notice. The notice need not expire on a quarter day.
• Upon the determination of a continuation tenancy between quarter days, rent will be apportioned and a tenant will only have to pay for the period of his occupation.

The absence of the need for notice to a landlord of a tenant’s intention to vacate the premises is clearly favourable to tenants but provides landlords with no indication of a tenant’s intention concerning the premises. This will increase the risk of rental voids as landlords will often have little or no notice before having to market vacant premises.

• A Section 40 notice served by a landlord on a tenant seeking information will also require the tenant to state whether there has been a contracting out of any sub-letting or whether a Section 25 or Section 26 notice has been served.
• A Section 40 notice served by the tenant on the landlord will require the landlord to state, where there is a superior lease, whether a Section 25 or Section 26 notice has been served.
• If within six months beginning with the date of service of a Section 40 notice the party responding becomes aware that information is not, or is no longer correct, he must give the correct information within one month of becoming aware of it.
• A recipient of a Section 40 notice who has transferred his interest and given notice of the transfer and the name and address of the transferee will cease to be under any duty imposed by Section 40.
• Breach of the duty to provide information may lead to proceedings to breach of statutory duty leading to a claim for damages.

The amendments will not be retrospective and where a Section 25, Section 26 or Section 27 notice was given prior to the coming into force of the Order, the current statutory provisions will apply to the steps taken in consequence of service of the notices and the 2003 Order will not, therefore, take effect.

© RadcliffesLeBrasseur

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