Leasehold and Freehold Reform Act 2024

Reduction of rent under intermediate leases

8 (1) Schedule 1 to the LRA 1967 (enfranchisement and extension by sub-tenants) is amended as follows.

(2) In paragraph 11—

(a) after sub-paragraph (1) insert—

“(1A) Any surrender or provision for the surrender, in accordance with this paragraph, of a tenancy comprising property other than the house and premises, is to be limited to the house and premises.”;

(b) omit sub-paragraphs (2) to (5).

(3) After paragraph 12 insert—

“12A(1) This paragraph applies if at the relevant time (see section 37(1)(d))—

(a) relevant rent is payable under the tenancy in possession,

(b) that relevant rent is more than a peppercorn rent, and

(c) there are one or more qualifying intermediate leases.

(2) But if the tenancy in possession is a shared ownership lease—

(a) this paragraph does not apply if, at the relevant time, none of the relevant rent payable under the tenancy in possession is payable in respect of the tenant’s share in the house and premises;

(b) if the tenancy in possession does not reserve separate rents in respect of the tenant’s share in the house and premises and the landlord’s share in the house and premises, any rent reserved is to be treated as reserved in respect of the landlord’s share.

(3) For the purposes of this paragraph a lease is a “qualifying intermediate lease” if—

(a) the lease demises the whole or a part of the house and premises,

(b) the lease is immediately superior to—

(i) the tenancy in possession, or

(ii) one or more other leases that are themselves qualifying intermediate leases,

(c) relevant rent is payable under the lease, and

(d) that relevant rent is more than a peppercorn rent.

(4) But any lease that must be surrendered under paragraph 11(1) is to be treated for the purposes of this paragraph as if it had been surrendered immediately before the relevant time.

(5) The landlord or the tenant under a qualifying intermediate lease may, by giving notice to the reversioner and other landlords before the grant of the lease under section 14, require the rent payable under the qualifying intermediate lease to be reduced in accordance with sub-paragraphs (8) to (10).

(6) If—

(a) under sub-paragraph (5) the rent under a lease is required to be reduced in accordance with this paragraph, and

(b) that lease is superior to one or more other qualifying intermediate leases,

the rent payable under the other qualifying intermediate lease or leases is also to be reduced in accordance with sub-paragraphs (8) to (10).

(7) The landlord and tenant under a qualifying intermediate lease must vary the lease—

(a) to give effect to a reduction of the rent in accordance with sub-paragraphs (8) to (10), and

(b) to remove any terms of the lease which provide for an increase in the rent, or part of the rent, so reduced.

(8) If the whole of the rent under a qualifying intermediate lease is relevant rent, the rent under that lease is to be reduced to a peppercorn rent.

(9) If only part of the rent under a qualifying intermediate lease is relevant rent—

(a) that part of the rent is to be reduced to zero, and

(b) the total rent is to be reduced accordingly.

(10) But the amount of the reduction in a person’s rental liabilities as tenant is limited to the amount of the reduction in that person’s rental income as landlord; and here—

(a) “reduction in a person’s rental liabilities as tenant” means the reduction in accordance with sub-paragraph (8) or (9) of the rent payable by the person as tenant under the qualifying intermediate lease;

(b) “reduction in that person’s rental income as landlord” means the amount (or total amount) of the relevant reduction (or reductions) in rent payable to that person as landlord of one or more other reduced rent leases.

(11) In this paragraph—

• “reduced rent lease” means—

  (a)

  the tenancy in possession, or

  (b)

  a qualifying intermediate lease;

• “relevant reduction” means—

  (a)

  in relation to the tenancy in possession, a reduction resulting from that tenancy being substituted by the tenancy at a peppercorn rent granted under section 14;

  (b)

  in relation to a qualifying intermediate lease, a reduction resulting from this paragraph;

• “relevant rent” means rent that has been, or would properly be, apportioned to the whole or a part of the house and premises.”