The new interim rent procedures in LTA 1954 are mainly relevant in the context of unopposed renewals. Basically, the new s24C will apply if (i) T occupies the whole of the property, (ii) L does not oppose a new tenancy, and (iii) L’s s25 notice (or T’s s26 request) applies to the whole of the property. In these ‘unopposed renewals’ the interim rent under s24C will usually be the same as the rent for the new tenancy.
In effect, this removes the previous cushioning effect enjoyed by a T in a rising market. The justification is that where the market is stable, and there are no significant changes in the terms of the new tenancy, this method will produce a rent broadly in line with the open market rent over the period during which the interim rent was payable.
However, it is possible for the interim rent to be different from the final rent. That is possible if either there are changes in the terms of the new lease, or if there has been a ‘substantial’ change in the market. So, if T can show that the interim rent ‘differs substantially’ from the final review rent (the ‘relevant rent’) then he will pay the interim rent until the new rent comes into force. Thus, T should consider two different valuations – the rent as at the date when the interim rent becomes payable and the rent at the date when the new tenancy commences.
Illustration: passing rent £10,000pa, with interim rent being payable on 1 December 2004. The new tenancy starts on 1 December 2005, but by then the market has risen substantially so the rent under the new tenancy is £100,000pa. T shows that the rent for the new tenancy would have been £20,000pa if granted on 1 December 2004. Since the difference between £20,000 and £100,000 is ‘substantial’ the interim rent will be £20,000pa.
Unfortunately there is no definition of ‘differs substantially’ and it will be for the court to decide whether the interim rent should be payable, or whether the final (‘relevant’) rent should be backdated.
