Although recent changes to the Landlord and Tenant Act 1954 have removed many of the old pitfalls, they have also created a number of new traps that may ensnare the ill-informed and the unwary, says Jonathan Cantor

Significant reforms to the Landlord and Tenant Act 1954 came into force on 1 June 2004, introducing procedures and time limits relating to the termination and renewal of leases of business premises.


These reforms, which have taken the best part of ten years to become law, strive to redress much of the unfairness in the legislation in an effort to find a balance between the competing and conflicting interests of landlord and tenant.


Some of the rigidity of the process has been relaxed, shifting a sizeable amount of administrative burden away from the courts and making it the responsibility of the tenants and landlords. But, while many of the changes are to be welcomed, both tenants and landlords will need to observe the procedures and deadlines meticulously to avoid problems, and it is to be expected that the legal costs and level of associated litigation involving this Act will rise dramatically.


The Landlord and Tenant Act 1954 has been on the UK statute book for 50 years, with the only previous amendment made 35 years ago. The workings of the Act have become well understood by practitioners in compliance and their insurers on non-compliance.


A number of the 2004 reforms affect areas of the Act that have worked well for many years and represent a major shift in the working practices of property practitioners. Professionals dealing with commercial property in the UK need to know how these changes will affect the renewal of business leases and landlords seeking to obtain vacant possession through an opposed renewal.


The procedure for obtaining a court order authorising the parties to enter into a tenancy, excluding security of tenure or sanctioning an agreement for the surrender of an existing tenancy, has been abolished. It has been replaced by a procedure that operates between the parties - and this has to be closely followed, or the landlord will be at risk of granting a new tenancy that still enjoys the protection of the original Act.


The legal costs incurred by the parties in ensuring compliance with the new procedures are likely to exceed the costs they would otherwise have incurred in obtaining the sanction of the court.


Before the changes, only tenants could make applications to the court for a new tenancy. Now landlords are able to make applications too. This new right is particularly valuable where a landlord wants to bring a tenancy to an early conclusion - for example, in order to redevelop the premises.


There is also a new form of section 25 notice. If the landlord does not oppose renewal, it must set out proposals for the rent period and other terms of the new tenancy. The landlord must also make sure these proposals (particularly regarding rent) are reasonable, or its notice may be held to be invalid and of no effect.


Changes in the timescales will mean that landlords must now get their strategy worked out early. Previously, a landlord had to wait up to four months after serving a section 25 notice to see whether a tenant applied for a new tenancy. Under the reforms, landlords no longer have to wait and can force the issue and apply to the court at an earlier date, depending on whether the grant of a new tenancy is opposed. This is likely to speed up the process. If the tenant does not want a new tenancy, it should inform the court and the landlord’s application will then be dismissed.


There is potential danger for a landlord who opposes the grant of a new tenancy and then has a change of mind or is unable to proceed with the original plan. As the law now stands, this landlord could face a claim by the tenant for compensation.


Tenants can now apply for compensation where no application for renewal is made because of misrepresentation or concealment or an application is withdrawn because of misrepresentation or concealment.


The failure by tenants to serve a counter-notice within two months of the date of a landlord’s section 25 notice was previously the cause of many claims for negligence, with tenants being forced to vacate their business premises. Under the reforms, tenants are no longer required to serve a counter-notice. They now have the right to apply for an interim rent, which previously could only be ordered following a landlord’s application. This new provision will be of particular value to a tenant where premises are over-rented.


A tenant is also no longer required to make an application to the court for a new tenancy between two and four months after the serving of a section 25 or section 26 notice. In the absence of an agreement with the landlord to extend time for making application concluded before the section 25/26 notice termination date, the tenant must still make an application to the court. If that deadline is not met the tenant will lose the statutory right to a new tenancy.


Tenants who wish to end a tenancy can do so by vacating the premises before the contractual term date of the lease. If tenants remain in occupation after the contractual term date has passed (provided no section 25/26 notice has been served) they can now bring the tenancy to an end by giving three months’ notice expiring at any time. The old regime required at least three months’ notice, expressed to expire on one of the usual quarter days. Failure to get the timing right was often costly for a tenant.


An enormous amount of time and effort has been invested in updating the Landlord and Tenant Act 1954. The resulting reforms represent a major change in property practitioners’ working practices. While many of these changes are to be welcomed, the net effect in the short term will be to increase litigation, as new issues fall to be determined. Associated costs for both landlords and tenants will also increase while the parties come to terms with the new regime.


Jonathan Cantor is a consultant at the London office of law firm Portner & Jaskel