Business Tenancies in Northern Ireland: Guidance and Information, Study notes of Business

Download Business Tenancies in Northern Ireland: Guidance and Information and more Study notes Business in PDF only on Docsity! Cleaver Fulton Rankin Business Tenancies Guidance & Information  This booklet has been produced for general information purposes and further advice should be sought from a professional advisor. If you require any further advice in respect of the Business Tenancies Order please contact a member of our Property team. T:\COMMERCIAL PROPERTY\LEGAL FOCUS\BUSINESS TENANCIES IN NORTHERN IRELAND GUIDANCE AND INFORMATION.DOC 2 BUSINESS TENANCIES GUIDANCE AND INFORMATION INTRODUCTION The Business Tenancies (Northern Ireland) Order 1996 ("the 1996 Order") came into force on 1 April 1997. It has introduced significant changes to business tenancies law and practice in Northern Ireland. It repealed the provisions of the Business Tenancies Act (Northern Ireland) 1964 ("the 1964 Act"). We have prepared these notes as general guidance. The 1996 Order is in broad respects similar to the original English legislation on business tenancies contained in the Landlord and Tenant Act 1954 (Part II). Accordingly what follows with regard to Northern Ireland will be familiar to those acquainted with the English system, though there are at points important differences, which we shall note. These Notes are drafted primarily to assist clients (whether landlords or tenants) with the Northern Ireland business tenancies legislation, whether they are already established in business in Northern Ireland or are contemplating a business interest in Northern Ireland. For further information Joe Marley, Kathryn Collie or Alan McAlister will be pleased to help. This booklet has been produced for general information purposes and further advice should be sought from a professional advisor. If you require any further advice in respect of the Business Tenancies Order please contact a member of our Property team. T:\COMMERCIAL PROPERTY\LEGAL FOCUS\BUSINESS TENANCIES IN NORTHERN IRELAND GUIDANCE AND INFORMATION.DOC 5 terms of the lease or in written instructions from the landlord to the agent. Again this is a matter upon which we should be consulted so that the correct procedure may be followed for issuing and serving the notices. It is also important to have regard to the terms of the lease and to the provisions of statute as to the correct place and mode of service, and we should be consulted at an early stage as to the correct procedure. As explained in section 2, even though the term of a tenant's lease has come to an end, the tenant is still entitled to continue as a tenant in accordance with the 1996 Order but at the same rent, terms and conditions as the previous tenancy (subject to determination of an interim rent) until the procedure under the 1996 Order for termination has been completed. Accordingly, if the landlord has not served the Notice to Determine, the tenant may continue as a Tenant without taking any steps. It is of course open to the landlord to serve at any later date the Notice to Determine, and the procedure under the 1996 Order then applies. At the end of the specified term of the lease the tenant may not wish to continue the tenancy. In such circumstances we should be instructed to serve the necessary notice on the landlord under Article 8 of the 1996 Order that the tenant does not wish the tenancy to continue. Alternatively, the tenant may wish the tenancy to continue. In addition, the tenant may have good business reasons to clarify and establish the terms of the new lease at the earliest possible date even if this will be likely to involve some increase in rent. The tenant is entitled to take the initiative and establish through the procedure of the 1996 Order the terms of the new tenancy including rent, rather than leaving the matter to the landlord at some later date. In such case the tenant should instruct us to serve the necessary notice under Article 7 of the 1996 Order, being a Tenant's Request for New Tenancy, and a similar procedure then ensues. (It should be noted that if a landlord wishes to object to a Tenant's Request for a New Tenancy or to the rent or other terms mentioned in such Request, the landlord must serve a counter-notice to that effect on the tenant within 2 months of service of the tenant's request.) The Act does not prevent the termination of a tenancy by forfeiture or surrender, though any provision contained in a tenancy compelling a tenant to surrender would be void. (See also Section 11 – Agreements to Surrender Tenancies). Sometimes a lease may provide that either the landlord or the tenant (and sometimes both) may by notice in certain circumstances terminate the tenancy at a date earlier than the full term of the tenancy. Such provisions are not prohibited under the 1996 Order but do not exclude the operation of the 1996 Order. In effect such notice reduces the specified lease term of the tenancy but does not otherwise affect the parties' rights under the 1996 Order. This booklet has been produced for general information purposes and further advice should be sought from a professional advisor. If you require any further advice in respect of the Business Tenancies Order please contact a member of our Property team. T:\COMMERCIAL PROPERTY\LEGAL FOCUS\BUSINESS TENANCIES IN NORTHERN IRELAND GUIDANCE AND INFORMATION.DOC 6 TENANTS RESPONSE TO LANDLORDS NOTICE TO DETERMINE A tenant who receives a Landlord's Notice to Determine should consult us and we can check whether the notice has been validly prepared and served in accordance with the 1996 Order and the terms of the lease. It should be noted that under the 1996 Order the tenant need no longer serve a counter- notice on the landlord. We will describe later in these Notes the procedure on a notice where the landlord is seeking repossession. In the more common cases where the landlord is not seeking repossession, but wishes to enter into a new lease with the tenant, it is still vital in our view for the tenant to go through the entirety of the procedure specified in the 1996 Order. The reason for this is that the tenant has the right under the procedure, providing that it is correctly followed, to have the terms - including rent - of the new lease determined by the Lands Tribunal for Northern Ireland in the event that the parties themselves cannot reach agreement. Providing that the procedure is correctly followed, this is a very important defence for a tenant against a landlord imposing a disproportionately increased rent or other new and onerous terms. However, in order to avail itself of this protection the tenant must ensure that an Application for New Tenancy is prepared and served in the Lands Tribunal and also on the landlord prior to expiry of the tenancy. It is common enough at this stage for negotiations to be entered into between the tenant and the landlord's agent, but in our view it is still essential as a protection for the tenant that the Lands Tribunal application should be issued and served. The tenant should ignore suggestions of the landlord's agent that such procedure is not necessary in that the landlord's agent is 'sure' that the parties will reach agreement. No doubt this may well be true, but it will be appreciated that the balance of advantage in the negotiations very much swings to the landlord's side if the tenant has foregone the statutory right of application to the Lands Tribunal. The costs of application to the Lands Tribunal are minimal, and we can attend to this on behalf of a tenant and arrange for adjournment of the proceedings without the necessity of a hearing or the preparation of evidence, providing that the parties are in negotiations. Similarly, we can act for a landlord where a tenant has made the application to the Lands Tribunal. If it appears that negotiations are abortive or are being deliberately delayed by the tenant, we can press for the matter to be brought on for hearing in the Lands Tribunal. Where the Lands Tribunal fixes the terms of the renewal the rent fixed is the open market rent calculated as set out in the 1996 Order. We can arrange for the client (whether landlord or tenant) to obtain agent's valuation advice on the open market rent. This booklet has been produced for general information purposes and further advice should be sought from a professional advisor. If you require any further advice in respect of the Business Tenancies Order please contact a member of our Property team. T:\COMMERCIAL PROPERTY\LEGAL FOCUS\BUSINESS TENANCIES IN NORTHERN IRELAND GUIDANCE AND INFORMATION.DOC 7 LANDLORD'S APPLICATION TO LANDS TRIBUNAL An innovative (but in our view not fully thought through) provision of the 1996 Order is the right of the landlord to apply to the Lands Tribunal for a ruling that the tenancy should not be renewed. This may be done at any time after service of a Landlord's Notice to Determine or Tenant's Request for New Tenancy. Such application should be considered by the landlord where the tenant is prevaricating in negotiations for a new lease or refusing to make application to the Lands Tribunal. Thereafter the Landlord may not unilaterally withdraw such application to the Lands Tribunal without the Tenant's consent. However, it should be noted that any such application by the landlord may only be made where the landlord considers that the tenant is not entitled to a new tenancy. There is no provision for such application where the landlord accepts that the tenant may renew the tenancy, but objects to the terms of the new tenancy (e.g. rent or term) proposed by the tenant. This may therefore provide the tenant with an opportunity to prevaricate in negotiations and we should be consulted by landlords facing this difficulty as there is often a way round the problem. It should also be noted that a landlord is now entitled to damages under the 1996 Order where the tenant withdraws or fails to proceed with the Tenant's Application. PROCEDURE FOR LANDLORD TO OBTAIN VACANT POSSESSION Where the landlord wishes to obtain vacant possession at the end of a lease it is important that we should be consulted at the earliest stage to advise on the correct ground or grounds to be set out in the prescribed notice. This is very important because, as will be seen, there are only a small number of specified grounds. Once the landlord's notice or application has been issued it is difficult, if not impossible, to achieve a change of the grounds, and the tenant may thereby be entitled to apply to the Lands Tribunal for a new tenancy on the basis that the landlord cannot sustain the grounds of objection thereto. The specified grounds are as follows:- 1.1. The state of repair of the premises resulting from the tenant's failure to comply with its obligations in respect of the repair and maintenance of the holding. 1.2. The persistent delay by the tenant in paying rent which has become due. 1.3. Other substantial breaches by the tenant of the tenant's obligations under the current tenancy or for any other reason connected with the tenant's use or management of the holding. 1.4. Alternative accommodation has been offered by the landlord and:- the terms on which it is available are reasonable having regard to the terms of the current tenancy and to all other relevant circumstances and the accommodation and the time at which it is available will be suitable for the tenant's requirements (including the requirement to preserve goodwill) having