24 February 2016

Asset Management Q&A

Asset Management Q&A: Rent increases on 1954 Act renewals, Jonathan Ross answers your questions.

Q:     Your tenant is occupying your premises under a 1954 Act protected lease. It is looking to renew and you are happy to agree to this. The rent under the existing lease is well below the current market rent. Can you seek a rent increase for the period from contractual expiry of the existing lease until the new lease commences?

A:     Not unless:

•    You have served a section 25 notice (or the tenant has served a section 26 notice) at least 6 
      months before the lease expiry date.   Otherwise, the rent will continue at the old rate until 6
      months after you serve a s.25 Notice; or
•    The tenant agrees to a backdated rent increase even though it will be under no obligation to do so.

TIP:     Ensure a section 25 notice is served  at least 6 months prior to the expiry of a protected lease so that your rights to an increase are protected and the tenant will not benefit by seeking to delay renewal. Usually, the new rent agreed or determined will then be backdated to expiry of the old lease so no rent shortfall is suffered.


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