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Statutory Compensation under the Landlord and Tenant Act 1954

A tenant who enjoys the benefits of security of tenure under the Landlord and Tenant Act 1954 (the Act) could be faced with a Section 25 Notice from their landlord that opposes a new tenancy.  In such circumstances the landlord would have to specify the grounds on which they oppose such a renewal and the tenant may be entitled to compensation.

If the tenant has been in occupation for less than 14 years the tenant becomes entitled to the compensation of one times the rateable value of the property when they quit the property.  If however they have been there for 14 years or longer they would be entitled to twice the rateable value.  In light of the imminent changes to rateable values, a common question is whether compensation will be payable at the old or new rateable value.  The rateable value in effect at the time the notice is served will be the relevant figure for compensation.

Where a tenant is entitled to compensation they should be careful not to compromise their position.  Section 23 of the Act states that the property must be occupied by the tenant for the purposes of business. A potential risk to a tenant who has been served with a S25 Notice is that they could lose the protection of the act by vacating their property early or winding up their business from the current property before the expiry of the S25 Notice.  A landlord who wants to avoid paying compensation could claim the statutory right had been lost in these circumstances and so no compensation is due.  This leaves the tenant in a position where they have to make a claim for the compensation and would have to prove that they had continued to satisfy the criteria under Section 23. 

A tenant who is entitled to statutory compensation should be prepared to remain in occupation until the expiry of the S25 Notice unless they are able to formally agree an earlier date and receive the compensation on leaving the property early.  If they leave immediately after the S25 Notice expires, the tenant would automatically be entitled to compensation.  If the tenant vacates earlier they open themselves up to the risk of having to prove their entitlement to compensation in court, and so should only vacate early if they have received the compensation payment.

To speak to one of our friendly, knowledgeable solicitors about your Commercial Property case give us a call on 0208 768 68 69 or come to visit us in any of our offices in Crystal PalaceBromleyCamberwell or Raynes park


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