Times Change – Can Leases Flex To Reflect Current Market Conditions

There are many leases that last a long time – possibly 100 years or more, and landlords usually impose an obligation on a tenant to only use the property in certain specified ways.

However, a use imposed at the start of the lease may not be appropriate years later. Obviously if the landlord agrees, then both parties can agree to vary the use to reflect current market conditions, but what if the landlord doesn’t agree? Is the tenant stuck with an uneconomical use?

A tenant can apply to a Tribunal to apply for the restrictive use to be varied or modified where the lease term is longer than 40 years and the first 25 years of the lease have passed. A recent case, Shaviram Normandy Ltd v Basingstoke and Deane Borough Council [2019], is one such example. In this case, a long lease of 150 years granted in 1985 was granted which specified only office use. Over time the building fell into disrepair. A developer purchased the long lease and attempted to negotiate with the landlord for the change of use to convert the building into residential flats. The landlord was not prepared to agree to the change and so the developer tenant applied to the Upper Tribunal to cancel or vary the restriction on use. The Upper Tribunal considered length of the unexpired term, rent, other covenants and landlord’s other neighbouring interests and decided that the restriction on use should be modified.

This case is a useful indicator for developers facing restrictions which prevent or restrict development.

If you require assistance with leases please contact the Commercial Property team.