A landlord of premises let under a tenancy protected by the Landlord & Tenant Act 1954 (“the Act”) and who is intending to oppose the grant of a new tenancy should consider the implications of the business rates revaluation and the possibility of serving notice under section 25 of the Act before 1 April 2017.
The revaluation will be of relevance where a landlord successfully opposes the grant of a new tenancy relying on one of the statutory grounds set out in section 30 of the Act which entitles the tenant to compensation under Section 37. The grounds which attract compensation include those where the landlord intends to redevelop the premises or where the landlord intends to occupy the premises for business purposes or as a residence. Compensation is calculated with reference to the rateable value of the premises and will be equivalent to the rateable value or the rateable value multiplied by two where the tenant and his predecessor have occupied the premises for the purposes of the same business for 14 years or more.
The rateable value is generally derived from the valuation list as at the date the landlord’s section 25 notice is given. Hence if a landlord serves a section 25 notice before 1 April 2017 opposing the grant of a new tenancy any compensation payable will be based on the rateable value of the premises taken from the valuation list prior to 1 April 2017. This could result in a significant saving to the landlord in particular where the tenant and his predecessor satisfy the 14 year rule.
On the other side of the coin a tenant who suspects, for example that his landlord intends to redevelop the premises may wish to wait until after 1 April 2017 to serve any request for a new tenancy under section 26 of the Act. If the landlord wishes to oppose the grant of a new tenancy, the landlord must serve a counter notice in response to the tenant’s request setting out the statutory ground relied on and the rateable value for the purposes of determining compensation will be taken from the valuation list in force at the date on which the landlord’s counter notice is given.
It should be remembered that a notice under section 25 and a request under section 26 of the Act cannot be served more than 12 months before the date on which the contractual term of the tenancy is due to expire. Accordingly it may not be possible for a landlord to serve a section 25 Notice before 1 April 2017 due to the unexpired length of the contractual term. However in appropriate circumstances a landlord should seriously consider serving a section 25 Notice ahead of the revaluation coming into force on 1 April 2017 in order to benefit from statutory compensation payable at a lower rate.
If you would like to discuss any of the information included above, please contact senior associate Alison Sparks from our Property Litigation team on 01892 701152 or by emailing email@example.com.