#3214 - Contract Issues - Commercial Property

• Part of the land is occupied by private sector / short term tenancies

• These tenancies have statutory protection security of tenure [Landlord and Tenant Act 1954]

Tenancies created PRIOR to 15^th January 1989

• Protection by Rent Act 1977

• A protected tenancy: one that is protected by the RA 1977 [contractual]

• A statutory tenancy: once the protected tenancy has terminated under common law, the occupier [or the successor if T1 has died] is entitled to remain under a statutory tenancy.

Non-assignable and cannot be left by will.

• A regulated tenancy: this encompasses both protected & statutory tenancies.

Tenancies to which the Act applies:

A tenancy [not merely license]; and

Separate dwelling-house [purpose of the tenancy must be residential and must be a single unit]

i.e. a protected tenancy

How can Landlord obtain possession – Grounds for possession:

LL does not have right to possession.

LL can terminate tenancy by Court order – available on limited grounds. LL must apply for ‘Cases’

1. S.98(1) Rent Act 1977:

• Court is satisfied that suitable alternative accommodation is available for T and will be available when the order takes effect.

• Circumstances specified in Cases in Part I of Schedule 15 to this Act applies. [Discretionary]. Fault grounds:

• It must be reasonable to grant possession to LL

2. S.98(2): Circumstances in any of the Cases – Schedule 15, Part II of the Act applies. [Mandatory]. Does not need to be reasonable

Tenancies created AFTER 15^th January 1989

• Protected by Housing Act 1988

• Rights of succession are restricted

• Tenancies the Act protects:

Statutory rights of succession

A big problem for landlords! Significant rights under the Rent Act – later curtailed by Housing Act. To give LL greater rights – ensuring there will be more properties available for rent.

• When a Tenant of a protected tenancy dies –

Succession rights under Housing Act

• The Act erodes the rights of successors

• S.17 – confers rights of succession following the death of an ASSURED tenant

1. Option Agreements

• Buyer enters into a agreement in which the seller gives the buyer an option to purchase [on payment of a no-refundable fee]

• Buyer has choice whether to exercise the option within the “option period”

• Buyer is not bound to exercise the option

• To exercise the option – buyer must serve a “option notice” – only then is there an enforceable sale contract that binds both parties.

• Option agreement can specify a price or agree on setting price at market value when option is exercised.

2. Conditional Contracts

• Standard contract with a condition [Condition precedent to performance – e.g. planning permission granted] that it will not become enforceable until there is a satisfactory grant of planning permission.

• Parties will both be bound on exchange – neither can change their mind

• Suitable for when the BUYER is anxious to avoid losing the property to another buyer but is not yet in a position to commit itself irrevocably to the purchase.

• Provides more certainty for both parties

• Condition precedent to performance: a binding contract is immediately made, but if the condition is not fulfilled the contract is not enforceable.

• Drafting considerations: set out what is required to be done, by whom, and by when in order for contract to become unconditional. [Certainty!]

E.g. “Acceptable Planning permission” – set out what this exactly means!

• CC likely to have shorter time frame Long-stop date: the condition must stipulate a date within which condition must be fulfilled. Also state when completion will take...