Termination of Tenancies for Tenant Default - Law Commission

operate, including a recommendation that the rent under the new tenancy
granted by the court should be fixed with reference to the rent under the
terminated tenancy. The court should, the CP provisionally proposed, have
regard to any differences between the extent of the premises demised under the
terminated tenancy and those to be demised under the new tenancy. The court
would, however, only have to decide on the terms of the new tenancy (including
rent) where they could not be agreed by the parties.
6.96 Unlike the current law, the CP provisionally proposed that the new tenancy could,
in appropriate circumstances, exceed the length of the tenancy held by any subtenant
(where that sub-tenant was the applicant). The only restriction on the
length of the new tenancy was that it should not exceed the unexpired residue of
the proceedings tenancy, as this would be unfair to the landlord.
6.97 We received very few specific responses to this provisional proposal, perhaps
because it is already a familiar concept under the current law of forfeiture. We
therefore confirm the CP’s central proposal that the court should have a power to
grant a new tenancy. However, we have reconsidered how the court should
determine what the terms of the new tenancy should be.
6.98 The First Report and the CP anticipated that an application for a new tenancy
would most commonly be made by an existing sub-tenant of the defaulting
tenant. Where the sub-tenant holds a sub-tenancy for the whole of the demised
premises for a similar term as the defaulting tenant, there will in all likelihood be
very little for the court to determine: the new tenancy will have almost identical
terms to the existing tenancy. However, for the same reason, the most
appropriate and proportionate order for the court to make is likely to be a transfer
order, transferring the existing tenancy to the sub-tenant.
6.99 A new tenancy order would therefore be most likely to be made by the court in
circumstances where it would not be appropriate to transfer the current tenancy
to the applicant. This would be because the terms of the applicant’s interest,
typically a sub-tenancy, vary in some significant respect from those of the
tenancy being terminated. This might be because the rent payable under the subtenancy
is much higher or lower than that paid under the head-tenancy, or
because the sub-tenancy was for a shorter duration or only in respect of part of
the premises demised under the head-tenancy. The First Report cites an
example of a sub-tenancy for part only of the demised premises, let at a nominal
rent, where the head-tenancy has been let at a full market rent. There is the
potential for unfairness to both landlord and sub-tenant if the terms of either
letting were to dictate the terms on which the new tenancy should be granted.
6.100 Where this is the case, we consider that it is not possible to determine the terms
of the new tenancy solely by reference to the proceedings tenancy. The court
must take into consideration other factors. We have concluded that it would not
be helpful to attempt to list all the factors that might be relevant. The court is
under an overarching duty when making any order under the scheme to ensure
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