Landlord and Tenant Act 1954

Schedule 7B Arrangements for renewal of tenancies: prohibited terms

Section 54A Application of this Schedule 1 This Schedule applies at a particular time if, at that time, conditions A to F are met. Condition A: a business tenancy 2 (1) Condition A is met if Part 2 of this Act— (a) applies to the tenancy, or (b) has the potential to apply to the tenancy. (2) In the following paragraphs of this Schedule— (a) the tenancy to which Part 2 applies, or has the potential to apply, is referred to as the “existing tenancy”; (b) the premises let under the existing tenancy are referred to as the “relevant premises”. (3) For the purposes of this paragraph, Part 2 has the potential to apply to the existing tenancy if— (a) Part 2 cannot apply to the existing tenancy because— (i) none of the relevant premises are occupied by the tenant, or (ii) the relevant premises are or include premises which are occupied by the tenant, but none of those premises are so occupied for the purposes of a business carried on by the tenant or for those and other purposes, (b) the terms of the tenancy include terms (the “permitted use terms”) which would permit the tenant to occupy relevant premises for the purposes of a business carried on by the tenant (whether the terms permit occupation for the purposes of business generally, a specific business or a specific kind of business) or for those and other purposes, and (c) if the tenant were to occupy relevant premises in accordance with the permitted use terms (and taking into account all other circumstances), Part 2 of this Act would apply to the tenancy. (4) For the purposes of sub-paragraph (3)(b), terms of the existing tenancy which— (a) would prohibit the tenant from occupying relevant premises for some purposes, but (b) would not prohibit the tenant from occupying relevant premises for other purposes, are to be regarded as terms which would permit the tenant to occupy relevant premises for the purposes which are not prohibited. (5) Sub-paragraph (3) must be construed as one with section 23(1). Condition B: a tenancy renewal arrangement 3 (1) Condition B is met if the tenant under the existing tenancy is a party to a tenancy renewal arrangement. (2) In this Schedule— “new tenancy” means a new tenancy of the whole or a part of the relevant premises; “tenancy renewal arrangement” means an arrangement under which the tenant under the existing tenancy— can require the landlord or another person to grant a new tenancy, or can be required by the landlord or another person to take a new tenancy. Condition C: tenancy renewal arrangement on or after 17 March 2026 4 Condition C is met if the tenancy renewal arrangement is entered into on or after 17 March 2026. Condition D: initial rent not known 5 Condition D is met if the rent payable at the start of the term of the new tenancy (the “initial rent”)— (a) is not known, and (b) cannot be determined, at the time when the tenancy renewal arrangement is entered into. Condition E: terms for determining the initial rent 6 Condition E is met if the tenancy renewal arrangement is subject to terms for determining the initial rent (the “rent determination terms”) (whether or not those terms are included in the same instrument as the tenancy renewal arrangement). Condition F: method for determining the initial rent 7 (1) Condition F is met if the rent determination terms include elements 1 and 2 (whether or not they include any other elements). (2) Element 1: an amount of rent (the “reference amount”) is determined by reference to— (a) the effect of inflation or any other index or multiplier on the rent under the existing tenancy, (b) the amount of either or both of the following— (i) actual rent for premises; (ii) a hypothetical market rent, or other notional rent, for premises, or (c) the amount of the tenant’s turnover. (3) The premises for which rent falling within sub-paragraph (2)(b) is payable may be either or both of the following— (a) the premises demised by the existing tenancy; (b) other premises (whether real or hypothetical). (4) The reference in this paragraph to the amount of a notional rent for premises includes an amount calculated in accordance with the rent determination terms on the basis of actual or assumed information or other assumptions (such as the use of rent determination terms which provide for a turnover rent so as to calculate an amount of notional rent on the basis of actual or assumed turnover). (5) Element 2: the amount of the initial rent— (a) will be different from the reference amount, or (b) could be different from the reference amount (whether or not the amount could, alternatively, be the reference amount). Amount of initial rent to be larger than reference amount 8 (1) This paragraph applies in relation to the new tenancy if the amount of the initial rent determined in accordance with the rent determination terms would be larger than the reference amount. (2) That includes cases where the amount of the initial rent would be— (a) smaller than the rent under the existing tenancy, but (b) still larger than the reference amount. (3) The rent determination terms are of no effect to the extent that they would result in the initial rent being larger than the reference amount. (4) The amount of the initial rent is instead to be the same as the reference amount. Exceptions 9 (1) The Secretary of State may, by regulations, provide for exceptions from paragraph 8 (whether an exception relates to the paragraph generally or to an aspect of the paragraph). (2) Regulations under this paragraph— (a) may include transitional or saving provision; (b) may make different provision for different purposes; (c) are to be made by statutory instrument; (d) may not be made unless a draft of the statutory instrument containing the regulations has been laid before Parliament and approved by a resolution of each House of Parliament. Anti-avoidance 10 An agreement (whether contained in the tenancy renewal arrangement or not) is void if, or to the extent that, it purports to require the tenant to make a payment in respect of any difference in an amount of initial rent which results from the operation of any other provision of this Schedule. Interpretation 11 In this Schedule, in relation to a tenancy— “existing tenancy” has the meaning given in paragraph 2(2); “inflation” means a change in prices or costs (including a change in certain kinds of prices or costs) whether or not calculated by an official index; and here “prices or costs” includes rents; “initial rent” has the meaning given in paragraph 5; “new tenancy” has the meaning given in paragraph 3(2); “reference amount” has the meaning given in paragraph 7(2); “relevant premises” has the meaning given in paragraph 2(2); “rent determination terms” has the meaning given in paragraph 6; “tenancy renewal arrangement” has the meaning given in paragraph 3(2).