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Charity Tenant

QUESTION: The 42-year lease on my restaurant/pub is coming to an end. The tenants refitted the building. Should the new rent disregard the original fit–out, and is the lease outside the 1954 act because I have charitable status?

Charitable Status does not exempt the lease from the 1954 act, but the new rent should probably disregard the fit-out works.

Subject to certain exceptions, part 2 of the Landlord and Tenant Act 1954 applies to any tenancy of premises that are occupied by the tenant for business purposes. The status of the landlord is largely irrelevant to this question.

The identity of the landlord may only matter if it is a public body that owns the land, and that body certificates that the act should not apply as a matter of national security or other public interest. This is unlikely to extend to charities.

If the act does not apply to the lease, and a notice or request is served to end it leading to a new tenancy, the parties should try to agree to the new rent. If a rent is agreed in principle, section 36 of the Charities Act 1993 requires your client to obtain advice from a surveyor that the deal is on the best terms it can reasonably obtain.

If the parties cannot agree the new rent, the court will set it by applying the valuation formula in the 1954 act. The formula refers to certain matters that are to be disregarded when determining the new rent. Among these are tenants’ improvements that are not pursuant to an obligation to the landlord.

It is likely that the tenant’s fit-out works will be caught by this, and therefore disregarded when setting the new rent.

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