A brief guide to interim rent
Interim rent - what is it?
Interim rent is the rent to be paid by a commercial business tenant whilst a tenancy of a property continues beyond the expiry of the contractual term under section 24 Landlord and Tenant Act 1954 ("the 1954 Act"), a situation which is commonly known as "holding over".
Interim rent is only payable when a party makes an application to the Court for interim rent to be determined. An application for interim rent can only be made provided if either
- the Landlord has served the Tenant with a section 25 notice; or
- the Tenant has given the Landlord a section 26 notice.
If no application is made, there is no entitlement to interim rent, rather the rent due under the lease is paid.
Interim rent applications are usually made in the course of lease renewal proceedings. If the parties agree the terms of a new lease and lease renewal proceedings are not issued, stand alone applications for interim rent can be made if a party sees fit to do so.
Section 24(A)(3) Landlord & Tenant Act 1954 states that an application for interim rent must be made not more than 6 months after the termination of the "relevant tenancy". The commonly held view is that this means that an application mist be filed within 6 months of the date that the tenancy would end under the provisions of the Landlord and Tenant Act 1954.
Interim rent - when is it payable from?
Where a Landlord's section 25 notice has been issued, the interim rent is payable from the earliest date that the existing lease could have been terminated.
Where a tenant has served a section 26 notice requesting a new lease, interim rent is payable from the earliest date that could have been given for the commencement of the new lease.
This highlights a subtle difference between the two notices. A section 25 notice records the date of termination of the existing lease, whereas a section 26 notice records the date of commencement of the new lease. This is something which is sometimes overlooked by tenants when issuing proceedings for a new lease, with tenants on occasion mistakenly believing that the last date upon which they can issue a claim is the date specified in the section 26 notice.
However, this would be too late. Where a section 26 notice is served, unless the deadline by which a claim must be issued is extended by agreement in writing between the parties, the tenancy ends the day before the date specified in the notice. It is by this date, not the date specified in the section 26 notice, that the tenant has to issue its claim for a new lease.
Interim rent - how much is payable?
If the grant of a new tenancy of the whole of the premises is not opposed by the Landlord, the general rule is that the interim rent will be the same as the rent paid under the new lease.
This rule will not be applied if the market conditions have changed considerably between the end of the previous tenancy and the start of the new tenancy, or the terms of the previous leave and the new lease are significantly different. If one or both of the exceptions apply, the interim rent will be such sum as the Court considers it reasonable for the tenant to pay
Where the grant of a new lease is opposed, or the lease is not for the whole of the premises previously let to the tenant, the interim rent will be the rent that the Court determines is reasonable for the Tenant to pay in all the circumstances.
If you have any queries arising from this article, would like to suggest a topic for a future article or wish to discuss a contentious property issue, contact Chris Drinkall, Head of Rollits' Property Dispute Resolution Team on 01482 337367 or firstname.lastname@example.org
Posted on: 24/07/2017
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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