A entered into a sale and leaseback transaction with B. B bought A’s property for £210,000 and immediately leased it back to him for 21 years at a low rent. Shortly afterwards, A was made bankrupt and the trustee in bankruptcy sought to set the sale aside on the basis that it amounted to a transaction at an undervalue. It was agreed that the true value of the property was £275,000.

Suppose buyer and seller exchange contracts for the sale of a freehold property. The seller then grants an unregisterable lease (ie a lease of seven years or less) to a third party. Is the buyer bound to take the property subject to that lease?

One of the grounds on which L can object to the grant of a renewal lease to a business T is when L intends to occupy the premises in order to carry out his own business (s3(1)(g) LTA 1954). But, what happens if L claims that he intends to occupy the premises, but is in fact likely to sell the premises within a short period?

If a company is in administration, then no legal proceedings can be started without the permission of the court, or the administrator. So, if L goes into administration, can this ‘statutory moratorium’ be used to prevent T from applying to the court for a new lease?

In a recent case, on expiry of its lease, T had applied to L for a new tenancy under LTA 1954. L opposed the application because it planned to redevelop (Ground (f)). T’s normal response would be to apply to the court for the grant of a new lease, but L then went into administration, and the administrator refused consent to the court proceedings (because it wanted longer to put together a redevelopment scheme – which would probably have increased the value of L’s property from £4m to £6m).

What happens if L recovers possession from T on the basis of a ‘redevelopment’ that never occurs; can T claim compensation?

This is what happened in a recent case where L told T about the planned redevelopment and then served a notice to terminate the tenancy based on the ‘redevelopment’ ground. On the facts, T realised that it would not be possible to remain in possession during the works, and that a court would not grant him a new lease if L did go ahead with the redevelopment. Accordingly, after L had rejected his offer of an increased rent, T vacated the premises and rented elsewhere. But, at the same time, L had been having second thoughts about the redevelopment and decided to accept the advice of an agent that a sale would be better than a redevelopment. However, L did not communicate this to T, who subsequently vacated.

A CA decision reported earlier this year has resulted in many contracted-out tenancies not, in fact, being contracted out.

The key point is that LTA 1954 gives security of tenure to a business T (ie a right to a lease renewal on expiry of the original lease). However, that statutory right of renewal can be excluded by consent of the parties; in the old days it used to be via a court order, but these days it will usually be done by a declaration from T. In that situation, T will not have the right to renew the lease.

LTA 1954 allows T to request a new tenancy from L. The grounds on which L can oppose the application is set out in s30(1):

failure to repair or maintain;

persistent late payment of rent;

other substantial breaches or for ‘any other reason connected with T’s use or management of the holding’;

L and T can agree that T will not have the security of tenure provisions that normally apply under LTA 1954. Prior to June 2004, it was necessary for L and T to get a consent order from the County Court; these days, L merely serves a warning notice and T responds by signing a statutory declaration.

In the current declining market, many Ts will not want to renew their existing business leases. From L’s point of view it will be important to get an early decision from T so that L can plan accordingly.