The Landlord and Tenant Act 1954 (“LTA 1954”) gives business tenants who have not excluded their leases from the security provisions of the LTA 1954 (please see our articles about protected leases below) a statutory right to renew their lease when it expires. This protection balances the interests of landlords and tenants, but it does not guarantee a “like-for-like” renewal and parties are free to agree to terms which differ from the existing lease between themselves. When negotiating a new lease which is protected under the LTA 1954, if parties cannot agree terms and this results in court proceedings, the court can adjust the wording to reflect modern market practice and current realities of occupation. This is what is often referred to as “reasonable modernisation”.
You will often see heads of terms for lease renewals include wording such as “lease to be as per existing, subject to reasonable modernisation” as parties look to include more modern drafting in the new lease, but what does this really mean?
Reasonable modernisation typically includes:
- Updating the permitted use to reflect updates in planning law
- Updating insurance provisions – often to include uninsured risks provisions
- Updating repair and decoration obligations – modern standards may expect compliance with up-to-date building regulations or energy efficiency requirements which may include obligations to share data relating to efficiency of utilities at the property.
- Inserting modern statutory compliance clauses – for example obligations relating to health and safety, fire safety, EPCs, and environmental regulations.
- Excluding obsolete references – for example references to outdated legislation or practices no longer in use.
When renewing a protected lease under the LTA 1954, the existing lease should be the starting point, and any departures from the terms of the existing lease will need to be agreed between both parties, taking into account any suggestions of reasonable modernisation. Landlords often try and insert new, potentially more onerous, terms in the renewal lease under the guise of ‘reasonable modernisation’, so it is important to understand what does and does not constitute reasonable modernisation when signing up to a new lease.
If you are looking to renew your lease, or if you are unsure whether your lease is protected by the LTA 1954 please get in touch with our Real Estate Team and we would be happy to assist.
