News & Views

New Scheme for Business Tenants


HMCTS have initiated a pilot scheme to introduce a more cost-effective way of dealing with unopposed lease renewals, by transferring them over from the Central London County Court to the First-Tier Tribunal (FTT) Property Chamber. On a positive note, this should reduce unnecessary delays and force parties into focusing on the job at hand but there is some concern that it may not give parties enough time to negotiate effectively, leading to more appeals.

Any tenant who leases and occupies premises for business purposes has an automatic right to security of tenure at the end of the lease (under Part II of the Landlord and Tenant Act 1954). However, in order to renew the lease both parties must agree the terms.

The common disputes between parties relate to the rent payable under the new lease, the length of the term and whether or not a break option should be included. If landlord and tenant cannot reach an agreement, proceedings can be commenced in court for a judge to decide the new terms.

Pilot Scheme

Unopposed lease renewal claims issued in the Central London County Court are now, on a trial basis, being transferred to the FTT (Property Chamber) to agree terms after the acknowledgment of service has been filed.

The main aim is simple – to reduce unnecessary time and costs accrued from the current system. The measures to accelerate greatly the process have widely been welcomed, offering a much smoother service with the Tribunal producing standard directions which are specifically designed to progress the case to trial within just 20 weeks, forcing parties into a more proactive and organised approach.

A speedier process

At the start of the process, the parties will have the option to stay proceedings for 3 months if both parties agree and on condition that they use this time to go through alternative dispute resolution, such as PACT. If they decide not to take this option at the beginning, only under exceptional circumstances can they refer the matter to PACT further down the line.

Once the lease is drafted, the scheme only offers the tenant one chance to comment and make amendments which makes for faster progress, but does raise the concern of the tenant’s best interests not being fully protected.

Disclosure

Under the new directions there is no provision for disclosure, witness statements or the preparation of Scott schedules, significantly reducing the chance of parties dragging their heels. However, parties disputing more legal issues than anticipated may not have the chance to explain their position if this evidence is not allowed to be brought forward. Even if bespoke directions are granted, the parties may not realise this is necessary until negotiations are significantly more advanced.

Engagement of experts:

Under the directions, experts are brought in very early on in the case to exchange evidence while the draft lease is being negotiated. If the case reaches trial, the matter will be heard by a tribunal judge along with the assistance of a tribunal valuer to assess valuation evidence. This is a major benefit as it ensures determination of the dispute by a judge and valuer with an in depth knowledge of the industry.

The general view of the scheme is a positive one, reducing unnecessary delays and forcing parties into focusing on the job at hand. However, due to the fast-paced nature of the pilot, there are undoubtedly going to be issues that arise, one being that it may not give parties enough time to negotiate effectively. The tight timetable means drafts cannot continuously go back and forth, so disputes may not be fully clarified and a quick determination by the tribunal may lead to evidence being overlooked resulting in dissatisfaction and a higher chance of appeals.

On a practical point, if the move is here to stay, parties will have to be willing to adapt their practices. It will require an open mind-set and the ability to accept a different working approach. In the short term, it is now important to check which properties fall under renewal within the Central London area during this pilot period (which is set to last a year) and ensure you are properly prepared to deal with the new expedited process. In the long term, if proved successful after a year, the scheme will be evaluated and could possibly extend to other county courts meaning this could be a permanent set up.

For more information please contact Michael Lewis or the retail team.

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