Lease Renewal for Tenants: a Snapshot Lease Renewal Procedure under the Landlord and Tenant Act 1954 (the “Act”) Nadia Milligan, Counsel Development Hilton Worldwide Legal Department

Footer 1. xxx 2. xxx 3. xxx Notes: xxx Source: xxx HILTON LEGAL LEGAL AND COMPLIANCE TRAINING 1. A tenant has the right to apply to court for a new lease; and 2. A tenant has the right to remain in occupation at the end of the contractual term of a lease. Meaning - The lease will continue on the same terms and conditions as the contractual lease until it is terminated in one of the ways specified by the Act. © 2015 Hilton Worldwide Confidential & Proprietary 1 A Tenant’s Statutory Right to a New Lease Security of Tenure under Part II of the Act ‘Security of Tenure’ means that:

© 2015 Hilton Worldwide Confidential and Proprietary HILTON LEGAL LEGAL AND COMPLIANCE TRAINING A Tenant’s Statutory Right to a New Lease Qualifying Criteria for a Tenant to have Security of Tenure A tenant who has a commercial lease will have security of tenure if: The tenant occupies the premises; The tenant occupies the premises for the purposes of a business; and The lease has not been contracted out/excluded from the Act. 2

© 2015 Hilton Worldwide Confidential and Proprietary HILTON LEGAL LEGAL AND COMPLIANCE TRAINING Initiating the Renewal Procedure Under the Act Procedure Must be Conducted Between the Tenant and the ‘Competent Landlord’ 3 Section 25 Procedure Section 26 Procedure Landlord initiates procedure Tenant initiates procedure Allows the landlord to start a procedure which will either grant a new lease to the tenant or in the tenant vacating Must be served not more than 12 months nor less than 6 months before the contractual expiry of the current lease Cannot be served after the tenant has served a s26 notice Landlord must comply with statutory requirements The Landlord should specify the proposed termination date of the current lease in the s25 notice Must be served by the tenant’s ‘Competent Landlord’ Must be served not more than 12 months nor less than 6 months before the contractual expiry of the current lease Cannot be served after the Landlord has served a s25 notice Landlords have a right to object and regain possession on certain specific grounds (rare for landlords to object) The tenant should specify the proposed commencement date of the new lease in the s26 notice.

© 2015 Hilton Worldwide Confidential and Proprietary HILTON LEGAL LEGAL AND COMPLIANCE TRAINING Example – Understanding when a s25 or s26 can be validly served 4 Expires 31 December 2016 Tenant serves s26 notice Landlord serves s25 notice 31 August 2015 Landlord serves s25 notice 25 March 2016 Tenant’s Lease 31 January 2016 VALID. 11 months prior to the expiry of the contractual term of the lease Tenant has already served a valid s26 notice. Invalid. 15 months prior to the expiry of the contractual term of the lease. Invalid.

© 2015 Hilton Worldwide Confidential and Proprietary Tenant Initiating Renewal – Statutory Requirements for Service of the Section 26 Notice Serving a Valid Section 26 Notice Section 26 Notice Service by the tenant Service on the ‘Competent Landlord’ Validly serve the notice Timing of service Use prescribed form of notice 5

© 2015 Hilton Worldwide Confidential and Proprietary How do you Identify the ‘Competent Landlord’ 6 Obtain official copy entries from the Land Registry Consider serving a ‘Section 40 Request’ A ‘Competent Landlord’ is: 1. The first party in the leasehold structure with an interest in the property; 2.That interest is either: a) Freehold; or b) Leasehold with more than 14 months left to run. and

© 2015 Hilton Worldwide Confidential and Proprietary 7 Immediate Landlord 1 – lease expires 31 December 2016 Tenant’s lease expires 31 December 2015 Freeholder Superior Landlord 1 – lease expires 31 January 2016 Example – Identifying the Competent Landlord Superior Landlord 2 – lease expires 31 December 2019 = ‘Competent Landlord’

© 2015 Hilton Worldwide Confidential and Proprietary How do you Validly Serve a Section 26 Notice? Section 26 Lease Renewal e.g. fax Obtain proof of delivery e.g. courier Recorded delivery or special delivery Leaving the notice at the last place of work or residence/register ed office Personal service Registered post Methods of service prescribed by the lease Other methods of service 8

© 2015 Hilton Worldwide Confidential and Proprietary The Prescribed Form of the Section 26 Notice Section 26 Lease Renewal Notice must contain all three parts Tenant’s request Schedule containing terms for a new lease Important note for the landlord 9

© 2015 Hilton Worldwide Confidential and Proprietary Landlord’s Counter Notice of Opposing Renewal Section 26 Lease Renewals Specify grounds in S30(1) of the Act Form of Notice Timing The landlord requires the premises for development purposes or to occupy himself/itself. The tenant has a history of non- compliance. If the premises have been split and sub- let, where the whole premises would command a higher rent if let under one lease. No prescribed form. Must be in writing. Must be served within 2 months of the Tenant serving a section 26 notice. If the landlord misses this deadline, it will no longer have a statutory right to object to the grant of a new lease. 10

© 2015 Hilton Worldwide Confidential and Proprietary Applications to Court to Determine the Terms of the New Lease Section 26 Lease Renewal Either party can initiate applications to Court Deadlines for making Court applications – ‘statutory period’ Court application procedure – obtain legal advice 11

© 2015 Hilton Worldwide Confidential and Proprietary HILTON LEGAL LEGAL AND COMPLIANCE TRAINING Section 26 Lease Renewal Negotiating the Terms of the New Lease Without going to Court/Court proceedings ongoing Mark correspondence on a “without prejudice” basisMark correspondence “subject to contract” Save costs and mitigate your relationship with your Competent Landlord

© 2015 Hilton Worldwide Confidential and Proprietary HILTON LEGAL LEGAL AND COMPLIANCE TRAINING Re-Cap Step-by-Step: Practical Steps to Lease Renewal by a Tenant under the Act 7. If neither party issues a claim before the expiry of the “statutory period” or any agreed extension to this, then the lease will terminate when the statutory period expires and the tenant will have no right to remain in the premises. The Competent landlord may take steps to recover possession of the premises. 6. Note the deadline for making an application is the end of the “statutory period”. This is the termination date specified in the section 25 notice, the day before the commencement date specified in the section 26 request or the date specified in the last of any agreed extensions of this time limit. 5. Check whether any notices have already been served under the Act. If the Competent Landlord has already served a valid section 25 notice, the tenant cannot serve a section 26 notice and vice versa. 4. Approach the Competent Landlord to establish whether the Competent Landlord agrees to grant a new lease. 3. Confirm the identity of the “Competent Landlord”. 2. Consider whether the tenant qualifies for security of tenure. If it does not, it has no statutory right to a new lease under the Act. 1. Check the contractual expiry date of the lease.