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London lease renewals to end in First Tiers

A one-year pilot scheme will launch in early 2018 to transfer unopposed lease renewal applications issued in the Central London County Court to the First Tier Tribunal (Property Chamber) in London. The aim is to determine the applications as smoothly and quickly as possible.

Background

Under the Landlord and Tenant Act 1954 (“54 Act”), a tenant occupying premises for business purposes has a statutory right to renew their lease, unless it is excluded from the provisions of the 54 Act or the landlord successfully opposes the renewal on one or more of seven statutory grounds. If the landlord does not oppose the renewal of the lease, either party can apply to court for a determination of the terms of the new lease. In almost all unopposed renewals, the terms of the new lease are eventually agreed between the parties without the need for a court determination. However, when a court determination is required, the progress to trial can be slow and the judge is not always an expert in property matters.

The scheme

From early 2018 (the commencement date has recently been postponed from 1 December 2017), any unopposed lease renewal application issued in Central London County Court concerning a property in the jurisdiction of that Court will automatically be transferred to the First Tier Tribunal (Property Chamber). Standard directions will then be issued with the aim of determining the application within 20 weeks.

The main features will be:

• No provision to stay the proceedings other than a potential three-month stay to allow for referral to the Professional Arbitration on Court Terms scheme or another recognised dispute resolution service. Once the directions have been issued, a deferment will only be granted in exceptional circumstances.

• Provision for only one round of amendments to the landlord’s draft lease by the tenant.

• Valuation experts are required to exchange comparables and measurements, and meet to clarify the issues in dispute before the tenant has responded to the draft lease.

• No case management conference or pre-trial review, but a listing questionnaire must be completed.

• No provision for disclosure by lists of documents (any specific disclosure required must be requested as soon as possible) or for the exchange of witness statements.

• The application will be listed to be heard in a two-day period together with a number of other cases, and determined by a tribunal judge assisted by a tribunal valuer.

Benefits

• Provides for potential quick and efficient determination, which should reduce costs for both parties.

• Tribunal judge should be experienced in dealing with 54 Act renewals and will have assistance from valuer in determining the application.

• Focuses the minds of the parties and avoids the potential for parties to waste time and resources on disclosure and witness evidence that is often irrelevant to the issues to be determined.

Limitations

• New standard directions assume that rent is likely to be the only issue in dispute. Directions for witness evidence and, potentially, disclosure are likely to be required if length of term or inclusion of break clause are in dispute.

• 54 Act requires the rent to be based on the terms of the new lease. Front-loading of preparation of valuation evidence means that the valuation experts will be working on their evidence without knowing which other lease terms, if any, are in dispute.

• Doesn’t factor in that both parties may not want proceedings to move quickly once issued, for either practical reasons (e.g. application was only made because one party was late in responding to the other party’s request for an extension of the deadline to apply to court) or commercial reasons (e.g. developments since issue of proceedings mean that neither party wants the application to proceed quickly to determination).

• Only currently applies to properties in the jurisdiction of the Central London County Court.

Way forward

If the scheme is a success in the eyes of the court and the court users, there is obviously the chance that an updated version of the scheme, factoring in some of the limitations highlighted above, will be rolled out nationally using regional tribunals.

Published: December 2017


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