Leasehold and Freehold Reform Act 2024

Reduction of rent under intermediate leases

9 In Schedule 11 to the LRHUDA 1993 (procedure where competent landlord is not tenant’s immediate landlord), after paragraph 11 insert—

“Part 3 Reduction of rent under intermediate leases

12 (1) This paragraph applies if at the relevant date—

(a) relevant rent is payable under the existing lease,

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

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

(2) But if the existing lease is a shared ownership lease—

(a) this paragraph does not apply if, at the relevant date, none of the relevant rent payable under the existing lease is payable in respect of the tenant’s share in the flat;

(b) if the existing lease does not reserve separate rents in respect of the tenant’s share in the flat and the landlord’s share in the flat, 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 relevant flat,

(b) the lease is immediately superior to—

(i) the existing lease, 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;

but a lease is not a qualifying intermediate lease if it is superior to the lease whose landlord is the competent landlord.

(4) But any lease that must be surrendered under paragraph 10(3) is to be treated for the purposes of this paragraph as if it had been surrendered immediately before the relevant date.

(5) The landlord or the tenant under a qualifying intermediate lease may, by giving notice to the competent landlord and other landlords before the grant of the lease under section 56, 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 existing lease, or

  (b)

  a qualifying intermediate lease;

• “relevant flat” means the flat and any garage, outhouse, garden, yard and appurtenances that are to be demised by the lease granted under section 56;

• “relevant reduction” means—

  (a)

  in relation to the existing lease, a reduction resulting from that lease being substituted by the lease at a peppercorn rent granted under section 56;

  (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 relevant flat.”