The Tenant's automatic entitlement to a new lease

The Landlord and Tenant Act 1954 (LTA 1954) automatically entitles tenants to a new lease, on the same terms and conditions of the existing lease once the contractual term has come to an end. 

This automatic right can only be excluded before the completion of the lease and is subject to the statutory requirements contained in the LTA 1954 that the landlord must provide written notice to the tenant recording the rights that the tenant is abandoning and the tenant must subsequently sign a written declaration confirming the receipt of the notice and the tenant’s intention not to be covered by the LTA 1954 in relation to the automatic entitlement to a new lease (in certain circumstances this declaration needs to be a statutory declaration).

A recent case has highlighted what happens if the right is not excluded and at the end of the contractual term the landlord opposes a tenant’s application for a new lease, relying on the tenant’s breaches of covenants as opposition to granting a new lease.

In the recent case of Harmonhinder Singh Gill (as trustee of the Gillcrest UK Pension Scheme) v the Lees News Limited (2023), the Court of Appeal considered the following grounds cited by the landlord when opposing a tenant’s application for a new lease.  The grounds cited by the landlord in opposition to the granting of a new lease were:-

1. The tenant had breached its repairing obligations in the lease;
2. The tenant had consistently paid rent late; and
3. The tenant had committed other material breaches of the covenants contained in the lease.

It is widely accepted that the intention behind the renewal provisions of the LTA 1954 is to protect business tenants by entitling them to security of tenure.  Therefore, despite the grounds for opposition, a court may still decide to grant a new lease even if a landlord establishes its grounds for opposition.

In this particular matter, the  initial Judge held that the tenant should be granted a new lease.  The landlord appealed this ruling but the Court of Appeal also agreed, the material reasons for doing so being:-

1. In this case the tenant had remedied its breach of repairing obligation within the time of the date of the notice of renewal and the date of the hearing;
2. The delay in payment of rent was a minor delay;
3. Other breaches of the lease were too minor to preclude the tenant from the right to a new lease;
4. The wording of the particular section of the LTA 1954 entitled the courts to take a broad approach as to whether the tenant ought not to be granted a new lease and therefore the courts could decide to grant a new lease even if the tenant was in breach of the covenants contained in the lease.

Beware the Landlord

Where the premises are in disrepair, the tenant may have many months before a trial date is set and therefore in theory ample time to remedy any disrepair.  The Court of Appeal did, however, state that if a tenant had a poor record of performance and only put things right at the last minute, then the court could legitimately take this into account in exercising its discretion whether or not to grant a new lease. 

Although the courts are under a duty to consider the LTA 1954 fairly for both parties, it is widely accepted that the LTA 1954 is an interference with the freedom of contract as it requires a landlord to enter into a new legal relationship with a tenant when it does not necessarily wish to do so.

Conclusion

If you need assistance in understanding how the security of tenure provisions of the LTA 1954 may impact you, either as a landlord or a tenant, please contact the Biscoes Commercial Property Department for advice specific to your situation.