Recent reforms to part II of the Landlord and Tenant Act 1954 change the rules governing how a tenancy is excluded from the protection of the legislation. Therefore, it is important that landlords ensure procedure is satisfied before any agreement for lease is entered into, says Jason Hunter


As all landlord and tenant lawyers should now know, changes to part II of the Landlord and Tenant Act 1954 were introduced on 1 June. The reforms are contained in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 - SI 2003 No. 3096 (RRO).



The Act, its procedures and time-limits, have caused many problems in the past; notwithstanding the changes, there is still scope for negligence.



Perhaps the most significant change introduced by the order is the procedure for contracting out. Under the law and procedure - which was current until 31 May - for a tenancy to be excluded from the protection of the Act, the parties must jointly apply to court for an order under section 38(4).



From 1 June, the court-based scheme ceased to apply (except in relation to pre-existing agreements to seek such an order). From now on, the protection of the Act can be excluded by a notice and declaration procedure, summarised as follows:



- Before the proposed tenancy is entered into or the parties become contractually bound to do so, the landlord must give to the tenant a notice in the form set out in schedule 1 to the order.



- If the notice is given 14 days or more before the proposed tenancy is entered into or the parties become contractually bound to do so, the tenant (or someone duly authorised to do so on his behalf) must make a simple declaration in the form set out in paragraph 7 of schedule 2 to the order.



- If the schedule 1 notice is given less than 14 days before the proposed tenancy is entered into or the parties become contractually bound to enter into a tenancy, the tenant (or someone duly authorised to do so on his behalf) must make a statutory declaration in the form set out in paragraph 8 of schedule 2 to the order.



- In either case, a reference to the notice, the requisite declaration and the agreement under new section 38A(1) of the Act must be contained in or endorsed on the instrument creating the tenancy.



If any of these requirements are not met, the tenancy may not be excluded from the protection of the Act. Therefore, it is a matter of concern to the landlord and any advisers to ensure that the procedure is satisfied.



Under the old regime, parties would often enter into an agreement for lease conditional on then obtaining the necessary court order. It would seem that, by the use of the words 'becomes contractually bound to [enter into a tenancy]', such an arrangement will no longer work and the new procedure should be followed before any agreement for lease is entered into (although it may be conditional for other reasons).



The position in relation to agreements to surrender tenancies that are already protected by the Act are similar and set out in schedules 3 and 4 to the order.



An important requirement of the Act is that a protected tenancy can only be brought to an end (otherwise than by, say, forfeiture) by operating the procedures for termination contained in sections 25 and 26. New provisions apply where a section 25 notice or section 26 request is given on or after 1 June 2004 and what follows in this section only applies in those circumstances. If a notice or request has been given before then, the old procedure will continue to apply.



There are two new section 25 notices - one where the landlord does not object to the tenant having a new tenancy and another where it does - and a new section 26 request (see schedule 2 to the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004 - SI 2004 No. 1005)



Under the pre-1 June procedure, a tenant was obliged to give a counternotice in response to a landlord's section 25 notice. Under the procedure introduced on 1 June, a tenant does not have to do so.



The landlord had to give a counternotice to a tenant's section 26 request (but only if the landlord wished to object to the tenant having a new tenancy on one of the grounds in section 30(1)). Now the landlord still needs to do so.



Formerly, only the tenant could apply to court not less than two months or later than four months from the giving of the section 25 notice or section 26 request. Failure to do so resulted in the loss of an entitlement to seek a new tenancy.



Since 1 June, either the landlord or the tenant may apply for a tenancy. As before, the failure to apply to court (whoever does it) will result in the loss by the tenant of an entitlement to seek a tenancy. Furthermore, the landlord may apply for the termination of the tenancy where it has objected on one of the statutory grounds.



A permitted application must be made before the end of the 'statutory period', which is the date specified in the section 25 notice or the day before the date specified in the section 26. That period can be extended by written agreement entered into before the end of the statutory period. There can be further similar extension agreements.



In addition, applications for interim rent will be capable of being made by either the landlord or the tenant. There are some complex provisions concerning the date from which interim rent is to be paid and the amount it will be (see sections 24A, 24B, 24C and 24D).



With the changes to the Act by the order, the part 56 Civil Procedure rules require modification. They will only apply where the new regime applies, namely where a section 25 notice or section 26 request is given on or after 1 June 2004.



So, there will be two types of procedure running in tandem for what may be some years. Possibly the most important of the changes to the new procedure is that the automatic three-month stay of proceedings that, under the old system, could be obtained by a landlord, will no longer be available.



The changed rules also deal with the possibility of a multiplicity of proceedings since it is possible that both the landlord and tenant could issue proceedings.



Jason Hunter is the head of contentious property at London-based law firm Russell-Cooke and chairman of the Property Litigation Association. He is the author of Business Tenancies: A Guide to the New Law, published by Law Society Publishing in June. The book provides practical guidance on the recent changes to part II of the Landlord and Tenant Act 1954 and can be ordered direct from Marston Book Services, tel: 01235 465 656