Terms of a renewed lease pursuant to the Leasehold Reform Housing and Urban Development Act 1993

Any Lease under the 1993 Act should generally be on the same terms as the existing lease. However, there is provision in the 1993 Act for either party to require that any term of the existing lease is excluded or modified insofar as would be necessary to remedy a defect in the existing Lease or would be reasonable in the circumstances due to a change in law since the date that the renewed Lease would be entered into.

One term that the writer has found arises from time to time is the change in the law brought about by the Landlord and Tenant (Covenants) Act 1995. Where as previously tenants were on the hook for tenant covenants throughout the duration of the term granted by the lease, the 1995 Act changed the law to allow tenants to be released on assignment of the lease meaning that the landlord can only seek to pursue breaches against the current tenant from time to time. The case of Huff -v- Trustees of the Sloane Stanley Estate (no.2) 2007 was an unreported decision in the Leasehold Valuation Tribunal wherein it was successively argued that it would be reasonable to extend the qualified covenant against assignment of the lease in the last 7 years of the term to any assignment during the duration of the lease. The majority of residential leases do not require the landlord’s consent on assignment, although it is more common for valuable leases in private estates in central London. If you have a lease granted prior to October 1996 and you wish to extend it, it may be considered by the tribunal reasonable to insert an appropriate term in the extended lease so the landlord retains this right, not under statue but in the expressed terms of the lease.

In the view of the writer, it would be fairer for the extended lease to include a requirement for a guarantee from the outgoing tenant guaranteeing the observance of any future tenants of the Lease in respect of the tenant covenants. This would not place either the landlord or the tenant in any worse situation than either was in under the terms of the existing lease. Perhaps it might be argued that the tenant would be on the hook for a longer period than had been granted under the existing lease but perhaps the counter argument here would be that if the landlord had renegotiated a lease extension outside of the statutory procedure, they might be free to require an authorised guarantee agreement in compensation of the change of the law following Landlord and Tenant (Covenants) Act 1995. In reality, landlords do not do this. We find that they are not interested in the covenant of any outgoing tenant and instead focus on the forfeiture provisions in the lease and would take action in this respect against the outgoing tenant. However, food for thought.

If you have any queries with regard to leasehold extensions or enfranchisement, please contact Nicky Cleightonhills on nc@meaby.co.uk or 0207 7035034.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply