Commercial Landlords beware

For the first time in six years the rateable values for commercial property is set to change. The VOA has released the future rateable values taking effect from 1 April 2023. This will have a direct effect on any statutory compensation payable to tenants on a termination of their lease under the Landlord and Tenant Act 1954, as this is linked to rateable values.

In short, this means landlord should consider serving any hostile section 25 notices now before the rateable values change. If the rateable value is set to increase, landlords will save money by serving the notice before 1 April 2023. Of course it might be that the rateable value is set to decrease instead, in which case the landlord is better off waiting.

The new rateable values are based on a valuation at 1 April 2021 to reflect the impact of the pandemic. This has resulted in some rateable values decreasing (most notably hotels and shops) and others increasing (such as storage, distribution and industrial properties).

For context, the 1954 Act provides that, if the landlord terminates a protected lease relying on one of the no-fault grounds (most often because the landlord intends to redevelop), then statutory compensation will be payable to the tenant. This is usually one times the rateable value unless the tenant has been in occupation for more than 14 years in which case it’s twice the rateable value. The rateable value is calculated at the date of the landlord’s notice (or if the tenant has served a section 26 request, on the date of the landlord’s counter-notice).

For advice and assistance  with any lease termination or lease renewal matters please do not hesitate to contact Sabina Haag who is a Partner in our Dispute Resolution Team specialising in property disputes.

If you would like some further information about the contents of this article, contact us today on 01502 532300 or email us using the 'make an enquiry' form.

This is not legal advice; it is intended to provide information of general interest about current legal issues.