Select Committee on Regulatory Reform Second Report


Report by the Office of the Deputy Prime Minister on later responses to consultation on the proposal

Summary of additional responses received since the end of the consultation on reforms to Part 2 of the Landlord and Tenant Act 1954

The Government's consultation on reforming the Part 2 of the Landlord and Tenant Act 1954 ended in June last year. Since then, the Department has received a small amount of additional correspondence on the proposals.

The 14-day notice procedure

There were concerns that the Department's proposals for landlords to serve a notice to exclude security of tenure would 'inevitably' lead to litigation because the terms of the lease could change within the notice period; and that the statutory declaration procedure where the 14-day notice period was not possible, would 'antagonise' prospective tenants.

The Department does not share either view. Our view is that where the terms of the lease change within the notice period, it would be open to a landlord to serve a fresh 14-day notice or use the statutory declaration procedure. The reason for the notice period is to obviate the situation where a tenant is 'bounced' into a new lease.

On the second point, the Department is particularly concerned about the small business sector where tenants may take on a lease at short notice without considering the consequences and without adequate professional advice. Though the need for tenants who are fully aware of their rights to sign a statutory declaration could be irksome, the Department feels that it is cheaper and simpler than the present procedure of a joint application to court.

The Department is not persuaded by the further comments that the proposals for excluding security of tenure need to be changed.

Agreements to surrender

Initially the Department proposed that the health warning for agreements to surrender a lease should be endorsed on the lease. One correspondent suggested it would be better to endorse the agreement itself. This point was also picked up by our Sounding Board.

On further consideration the Department accepted that an endorsement on the agreement would overcome any difficulties with oral leases or if the original lease were lost.

The Department now proposes that the health warning for agreements to surrender a lease should be endorsed on the agreement rather than the lease itself.

The Esselte and Singlehorse decisions

There were concerns that these decisions allow tenants to leave before or at the end of the lease's term without giving a landlord notice.

Following discussions with the Sounding Board, the Department is satisfied that its proposals clarify what tenants need to do at the end of a lease, while giving landlords the opportunity to ascertain their intentions. Business tenants would be able to quit premises by or on the contractual term date without having to give prior notice or incur further liability for rent beyond that date.

Landlords have no guarantee that even tenants who are apparently keen to renew will actually do so, as a tenant granted a new lease may apply to have the tenancy revoked.

The Department proposes to give landlords the right to apply to the courts to renew a lease and this should help landlords discover whether their tenants wish to renew or not where they have been unable to ascertain a tenant's intentions.

Limited liability partnerships

Limited liability partnerships (LLPs) and the perceived problem of separate legal personalities was raised. This point was aired with the Sounding Board whose view was that at present there are very few LLPs and so a change in the law to accommodate them would not be justified.

However, the position of LLPs as business tenants will be kept under review.

Interim rent

This has proved to be one of the most technically difficult issues to emerge from the Government's reform proposals: striking a balance between complexity which produces a fair result to both parties, and simplicity which could produce rough justice.

The concern was how tenants at lower end of the market would fare and whether it would be cost effective for tenants to go to court to challenge a landlord's proposals. Also, there was the fear that in a rising market, landlords would be tempted to spin out proceedings and get a windfall in interim rent.

We hope that our current proposals would deter landlords from spinning out interim rent negotiations and we believe that these coupled with the Civil Procedure Rules will also make for a speedier settlement.

This is a difficult area but we consider that our current proposals achieve a reasonable balance.

Section 40 Notices

One correspondent questioned why it was proposed only to extend Section 40 Notices to cover a landlord's break clause and not a tenant's.

We did not think it would be relevant to cover a tenant's break clause as a tenant exercising a break clause would normally do so with a view to ending the tenancy. However, when a landlord exercises a break, the tenant may well wish to continue in occupation and seek a renewal of the tenancy, in which case either party may use Section 40 to get the information needed to use the statutory procedures.

Office of the Deputy Prime Minister

October 2002

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Prepared 19 December 2002