Outside LTA54 and upward/downward rent review
18 July 2025(2025 Jul) – Although Bill 2025 applies to rent reviews in leases outside the Landlord and Tenant Act 1954, more leases granted outside LTA54 is suggested as a likely consequence of upward/downward rent review.
The only times a lease can be granted outside LTA54 is on a new letting, or by agreement with an existing lease. An existing tenant might agree where the landlord wants to redevelop the property and will pay part of the statutory compensation in advance in exchange for the lease being outside the Act.
Outside the Act, (strictly, excluding s24-28 LTA54, involving a legal procedure which must be done correctly, failing which it is invalid) means that on expiry of the contractual term the tenant has no legal right to remain in occupation. Consequently, the landlord can dictate terms – including the new rent.
It’s not as simple as that. Being able to dictate terms doesn’t mean the tenant has to agree. So if the landlord would like the tenant to stay and the tenant would also like to stay, then the tenant’s bargaining power depends upon the value to the landlord of the tenant’s investment covenant.
Corporate tenants in particular are well aware of the value of their investment covenant. A landlord therefore has to weigh up the cost and hassle of finding a new tenant – costs which include, but are not limited to, void period, hefty insurance premium for unoccupied premises, deemed supply unit rates for electricity and gas, empty property rates, agent’s commission for reletting, longer rent-free period, etc – against agreeing the tenant’s offer.
On expiry of the contractual term, having no legal right to remain in occupation, doesn’t mean the tenant would vacate. Ignoring the possibility of trespass, the occupation is a tenancy-at-will, but only while negotiations are ongoing. In the absence of negotiation, after a year the occupancy would become a periodic tenancy and qualify for renewal rights under the LTA54, entitling the tenant to at least 6 months notice either under s25 or s26. So, if the landlord isn’t careful, and whether or not rent is demanded or accepted, an outside the Act lease could be become an inside the Act tenancy, meaning that the only way the landlord could be rid of the tenant is to oppose on one or more of the grounds in LTA54 s30. And since to oppose means to successfully oppose by passing the tests of case law, the tenant would have to be satisfied or else the landlord would end up in court.
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