Leasing: Rent reform hangs in the balance: There are fears the Government may be back-pedalling on reforms, writes Sue Fieldman

Click to follow
The Independent Online
FOR MONTHS business tenants have wanted an end to the law that forces them to pay the rent on leases that they sold on years before. There may even be a government announcement by the end of this month.

But in typical Civil Service fashion, likely dates have come and gone. Although Robin Leigh-Pemberton, Governor of the Bank of England, added his voice last week to the calls for reform, there is now a worry that the Government is backpedalling on the whole idea.

At the moment, when a tenant takes on a lease, both he or she and any guarantor are liable for the rent. However, if the tenant then sells the lease and the new tenant subsequently goes bust, the landlord can still claim the rent from the first tenant or the guarantor.

There could be a string of sales of the lease but if any of the tenants go bankrupt and the landlord cannot recover the rent from the others, he or she may go back to the original one.

If the lease has a rent review, the new rent payable may well be beyond the means of the original tenant. And to add insult to financial injury, although the landlord can look to the original tenant for the rent, the landlord does not have to allow him or her back to the property.

John Samson, property partner with Nabarro Nathanson, solicitors, said: 'There is an urgent need for a code of practice but we are no further forward now than when reform was first mooted in the beginning of the 1980s.'

The property slump prompted calls for change. By the time the Law Commission reported in 1988, the property market had picked up and there was no pressure for reform.

The current recession, with the daily failure of businesses and the slump in the letting market, has put the subject back in the limelight.

For months there has been a growing clamour for change. In June 1992 a spokesman for the Lord Chancellor - whose department will put forward any proposals for change - said there should be an announcement in that month or the next. In July the Lord Chancellor was on holiday so it should be September - that became October, then November.

In November there was some light on the horizon. The matter was 'with the ministers'. Two months later, 'the matter is under intense consideration by ministers'.

The latest comment from a spokesman is: 'Hopefully, we will be saying something at the end of January.' However, one MP recently received a letter which intimated that reform was by no means a foregone conclusion, as the landlords' interests had also to be taken into account.

Meanwhile, for every day there is no decision another business collapses and another tenant may find himself on the receiving end of a demand for rent for a lease parted with years ago.

Mr Samson said: 'The uncertainty about what the changes, if any, will be, means that many people are not making commitments to take on leases and others are not investing in property.'

There is, however, a silver lining to the cloud. The Scottish development agencies have an ideal opportunity to develop their own back yard, because under Scottish law there is no ongoing liability for the tenant.