Reversionary Lease
Rights to Further Lease
A person who holds or has held land under a lease is entitled to a reversionary lease of the land if the conditions which provide for the acquisition of the fee simple by lessees are complied with.
Where a person is entitled to a reversionary lease his immediate lessor shall be bound to grant the lease to him. If the immediate lessor holds the land for a term which is less than the term for which the reversionary lease is to be granted, his immediate lessor and such (if any) superior lessors as may be necessary shall be bound to join in the grant of the lease.
It is not possible, to contract out of the rights to a new tenancy. Any attempt to do so is void.
Exceptions
Limitations apply to the right to a reversionary lease in some cases. Where there is not a right to buy a reversionary interest, there is generally not a right to buy the fee simple.
A person may not obtain a reversionary lease if the landlord or other necessary party for the granting of the lease satisfies the court that his interest is freehold, or a term of not less than 15 years and one of three alternative grounds exist. The grounds are
- that he intends to pull down and rebuild the whole or a substantial part of the buildings and has planning permission for the work.
- that he acquires vacant possession for a scheme of development of the property which includes the land and have planning permission, and
- the grant of a reversionary interest would be inconsistent with go-to-state management.
Where the planning authority is a party, it may oppose a reversionary leased on the basis that the land is in an obsolete area designated for development and renewal.
In case of a land used for a business, where the local authority is a necessary party, it can require possession of land within five years for the purpose for which it would be entitled to acquired land compulsorily.
Where no Entitlement
Where the above provisions apply, the lessee is entitled to remain in possession on such terms as the court thinks fit until the other person becomes entitled to possession. If the objector does not carry out his intention, within a reasonable time, the court may order punitive damages.
Where any of the above grounds apply, so that a lessee who would otherwise be entitled a lease, is denied a reversionary lease (or freehold) on such ground, the lessee is entitled to compensation.
Determination of Rent & Terms
Where the terms of a reversionary lease cannot be agreed, they are settled by the Circuit Court. The reversionary lease is generally for 99 years.
The rent is to be at least the rent under the previous lease or in certain cases, under a superior lease. The rent fixed by the Circuit Court is to be 1/8th of the gross rent reduced by an allowance for work carried out by the lessee or its predecessor.
The gross rent is the rent which, in the opinion of the court, the willing lessee and lessor, not already in occupation would pay, on the basis of vacant possession having regard to the terms of the reversionary release.
Rent Review
There is a provision for a five yearly review of the rent in a reversionary lease settled by court. The person seeking the review shall serve on the other party notice of his intention to have the rent reviewed. The notice may be served
- where the rent has not previously been reviewed—not earlier than one month before the fifth anniversary of the date on which the terms of the lease were settled,
- where the rent has previously been reviewed—not earlier than the fifth anniversary of the date of service of the notice for the preceding review.
In default of agreement on the rent, the person seeking the review shall be entitled to apply to the court to have the rent reviewed not earlier than one month after service of the notice. On a review of the rent by the court the rent shall be fixed in accordance with the relevant provisions of by reference to the date of service of the notice on which the application to the court is based.
Where the land in a reversionary lease is part only of the land in the previous lease or of the land on any superior lease the lessor under which is required to join in the grant of the reversionary lease, such proportion of the rent reserved by any such lease as is fairly apportionable to the land in the reversionary lease is deemed to be the rent reserved by that lease in respect of the land to be comprised in the reversionary lease.
The covenants and conditions are fixed by court. The tenant should be liable to pay rates and taxes and to ensure he may be obliged to spend money repairing the premises.
If any new covenant restricting the lessee’s rights is included in the reversionary lease, the court may, if it so thinks proper, fix a lower rent. If the court fixes the covenants of the lease, the lessee shall be made liable to pay all rates and taxes in respect of the land and to insure against fire and keep the premises in repair.
Gross Rent
The gross rent shall be the rent which, in the opinion of the court, a willing lessee not already in occupation would give and a willing lessor would take for the land comprised in the reversionary lease—
- on the basis that vacant possession is given and that the lessee pays rates and taxes in respect of the land and is liable to insure against fire and to keep the premises in repair, and
- having regard to the other terms of the reversionary lease and to the letting values of land of a similar character to and situate in the vicinity of the land comprised in the lease or in a comparable area but without having regard to any goodwill which may exist in respect of the land.
If any dispute, question or difficulty arises in regard to the right of any person to a reversionary lease, his failure to proceed with an application for such lease, the terms on which such lease is to be granted, or otherwise in relation to the grant of such lease, any person concerned may apply to the Court and the Court may make such order as justice shall require and, in particular, may fix the terms on which such lease is to be granted.
Expenditure on Repairs
The court may require an applicant for a reversionary lease to expend, within such time as the court thinks proper, a specified sum of money on repairs or to execute specified repairs to the buildings to be comprised in the lease and may authorise the postponement of the execution of the lease until the requirement has been complied with.
If the applicant refuses or fails to comply with the requirement of the court, the court may declare forfeit his right to a reversionary lease and discharge any order granting it to him.
If the court requires or the parties have agreed upon the expenditure by the applicant for a reversionary lease of a specified sum of money on repairs to the premises or the execution by him of specified repairs as a condition precedent to the execution of the lease, the gross rent shall be assessed—
- if under the previous lease the lessee is obliged to keep or deliver up the premises in repair, having regard to the condition in which the premises will be after the repairs have been carried out, or
- if there is no such obligation, having regard to the actual condition of the premises at the date of the application for the reversionary lease.
Continue in Possession
A person who is entitled to obtain a reversionary lease and whose interest in the land has expired shall continue to be entitled to hold the land until either he is declared not to be entitled to obtain a reversionary lease or a lease is executed by his immediate lessor and such (if any) superior lessors as may be necessary, in terms agreed upon between the parties or settled under this part and, during such period, he shall hold the land on the terms (so far as applicable) on which he previously held them, subject to any recoupments or adjustments that may be made under the reversionary lease if granted to him.
Where an application is made in relation to the grant of a reversionary lease and the interest of the applicant in the land expires before the application is heard and determined, the applicant shall be entitled to remain in possession of the land until the application is finally heard and determined on the terms (so far as applicable) on which he previously held them, subject to such recoupments or adjustments as the court thinks proper.