The launch of the pilot scheme for unopposed lease renewals under the Landlord and Tenant Act 1954

A business tenant with the benefit of a lease which has security of tenure is automatically entitled to renew after the expiry of its contractual term. Usually, if the new lease terms cannot be agreed then either the landlord or the tenant may apply to Court for the terms to be determined.

Whilst the majority of terms are agreed between the parties, the main issues in dispute tend to be the rent payable under the new lease, the length of the term and whether there should be a landlord or tenant break option. As many landlords and business tenants will know, the Court procedure as it currently stands can be slow.  Quite often the parties will agree a directions timetable between themselves and it is not unusual for a series of stays in the proceedings to be agreed.  The result of this being that it can take at least a year or two for proceedings to complete.

The Pilot Scheme – what is it all about?

A new scheme is shortly due to launch for unopposed lease renewals issued in the County Court at Central London (“CCCL”).   Under the scheme, unopposed lease renewals will be transferred from CCCL to the First Tier Tribunal (“FTT”) after the acknowledgment of service is filed.

The aim of the pilot scheme is to speed up the process and ensure that all cases proceed to a final determination as smoothly and as quickly as possible. The scheme has produced standard Court directions which will mean that parties will progress at a much faster pace than previously.

What changes will the pilot scheme bring?

  • With the exception of an initial 3 month stay in the proceedings, the parties will be unable to agree extensions to the directions timetable;
  • No case management conference or directions hearing will take place;
  • The tenant will only have one opportunity to comment on the draft lease;
  • The standard directions do not include a provision for disclosure, witness statements or the preparation of a schedule of disputed terms;
  • The expert valuers must begin work on their valuation evidence at a much earlier stage (often before the lease terms have been agreed);
  • It should take around 20 weeks from the date of issue of proceedings to reach a final hearing; and
  • A tribunal valuer will sit with a tribunal judge at the trial.

What will be the likely effects of the scheme?

  • Parties will need to be more proactive with their negotiations with an emphasis on seeking to commence the negotiations as soon as a statutory notice is served;

  • It is likely that both sides will make greater use of extensions to the statutory deadline for issuing proceedings in order to allow more time for negotiations to take place3 without having to comply with a strict and tighter timetable;
  • Parties will be unable to use delaying tactics under the new scheme and failure to comply with the standard directions may result in a claim being struck out.

Is the scheme likely to succeed?

There are some concerns arising out of the proposed changes. For example, it is sometimes unavoidable for a party to issue court proceedings at the last minute and an initial stay of 3 months does not allow the parties much time to undertake constructive negotiations and for their valuers to gather their evidence.  In addition, the real issues in dispute are often not clarified until the draft lease has gone back and forth several times.  Asking experts to commence work on their reports during this process might be premature.  The new proposals assume that the only issue in dispute will be the rent.  However, in reality, quite often the issue of length and term is the main sticking point.  As there will be no direction for exchange of witness statements, how will the parties be able to bring evidence?  Whilst the parties can apply for bespoke directions, they may not know that this will be necessary until a much later stage.

The pilot scheme is due to last for a year and after this time it will be evaluated. If successful, it is likely to be rolled out to other county courts and become a permanent arrangement.  Landlords and tenants will need to be much more organised once Court proceedings are issued and parties will need to be more proactive in conducting its negotiations in the future.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.