Key Contact: Jennifer Butcher
When a lease of commercial property in England and Wales that is protected by the Landlord and Tenant Act 1954 (“1954 Act”) ends, the tenant is entitled to a new tenancy unless the landlord can prove a valid reason for termination under the 1954 Act. During the period between the end of the lease and the start of the new tenancy, interim rent may be charged. Landlords, especially in markets where rents have decreased (such as high street retail or office space), should be mindful of how the decrease in rental values will affect a tenant’s claim for interim rent.
What is interim rent?
Interim rent is the rent that is paid between the end of the original lease term and the start of the new lease. If either the landlord or the tenant wants to renew the lease under the 1954 Act, they can serve a “section 25 notice” or a “section 26 request,” respectively. Either party can also apply to the court to determine whether interim rent is required and, if so, what the amount should be. An application for determination of interim rent can be included as part of lease renewal court proceedings, or as a stand-alone application.
From what date is interim rent payable?
Interim rent is payable from the expiry of the contractual term of the current tenancy, this, therefore, being the earliest date that could have been specified in section 25 or section 26 notice (whichever is applicable in each given case). Either party giving notice must give notice at least 6 but no more than 12 months before the current tenancy will end. Therefore, the earliest possible date that interim rent becomes payable may not be the same as the termination date stated in the notice or request, if more than 6 months’ notice is given.
Determining the Amount of Interim Rent
The interim rent that is paid during the period between the end of a previous tenancy and the start of a new one, is usually the same as the rent specified in the new lease. However, if the market conditions or the terms of the previous tenancy and the new lease have changed significantly, the interim rent may be different and will be determined by the court based on what it considers reasonable for the tenant to pay. If the landlord opposes the granting of a new lease or the new lease is not for the entire premises that were previously leased to the tenant, the court will also determine the interim rent based on what it considers reasonable in the circumstances.
Maximising Your Negotiation Position with Interim Rent
Being proactive can provide advantages when it comes to interim rent. If a tenant serves a section 26 request for a new lease before the landlord serves a section 25 notice to terminate the tenancy, the tenant can specify a start date for the tenancy that is 12 months after the date of the notice. It is also important to consider the consequences of discontinuing or withdrawing an interim rent application to ensure that there is no risk of losing the claim altogether. The party who makes the application often has more control over the process, which can be a tactical advantage.
If you are a commercial landlord or tenant looking to renew your tenancy or if you have any concerns about interim rent & the process of lease renewal, please reach out to our market-leading Property Litigation Team and we will be happy to help.