The new business rating valuation list takes effect from 1 April 2017. This determines the amount of compensation payable to a tenant on the termination of a business tenancy. Depending on whether you are a landlord or tenant of a commercial lease, for purely commercial purposes, you may wish to carefully consider the timing of serving notices, for terminating business tenancies, protected by the Landlord and Tenant Act 1954 (the ‘Act’), in advance of the introduction of the new rating valuation list.
A tenancy, protected under the Act, will not end automatically at the expiration of a lease for a fixed term, nor, if it is a periodic tenancy, can it be ended by an ordinary notice to quit given by the landlord. Instead, such a tenancy can only be terminated in one of the ways prescribed by the Act, including (but not limited to) the following:
a) by the service of a landlord’s statutory notice (a ‘section 25 notice’); or
b) by the tenant’s request in statutory form (a ‘section 26 request’).
If a tenant satisfies statutory criterion for a business lease renewal protected by the Act, the tenant has a statutory right to a lease renewal at the end of the contractual term. A landlord can oppose a tenant’s statutory right to a lease renewal on certain statutory grounds. If the landlord opposes the lease on a “no fault” ground, the tenant may be entitled to compensation, provided it has security of tenure.
That compensation is calculated by applying a multiplier to the rateable value of the property. The compensation will be doubled if the tenant and any predecessor have been in occupation of the property for the purpose of the same business for 14 years or more. Calculations for compensation are as follows:
- Less than 14 years occupation: the rateable value of the property X the appropriate multiplier X 1.
- 14 years or more occupation: the rateable value of the property X the appropriate multiplier
The rateable value of the property is established by reference to the valuation list that is in force on the date of service of the landlord’s notice, under section 25 of the Act, or the landlord’s counter-notice to the tenant’s request, under section 26 of the Act.
31 March 2017 is the final day that the current valuation list will be in force. If the rateable value of premises is higher in the new list than the old list (as is expected for properties in London and the South of England), where a notice is served on or after 1 April 2017, the amount of compensation payable to a tenant will be higher.
For further information regarding this topic or any other property and construction matter, please contact Joanne McIvor – Partner, Hayley Cloherty – Associate, or any member of the Edwin Coe Property or Construction teams.
Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.