Thousands may lose out despite leasehold reform

BUSINESS groups have broadly welcomed the Government's intentions regarding the law that holds business tenants liable for rent even years after they may have sold leases on. But it will be some time before those affected can rest assured.

The Lord Chancellor, Lord Mackay of Clashfern, announced two weeks ago that the law of commercial property would be changed to stop tenants being held liable for rent arrears on future leases, in line with the recommendations of a 1988 Law Commission report, Landlord and Tenant Law: Privity of Contract and Estate.

There are no details yet, but it seems clear that the change will not help the thousands of small businesses responsible for payments due on existing leases. Some of them may benefit, however, from the intention to require landlords to issue claims against former tenants within nine months of the date when payment becomes due.

Judith Vincent, head of company and commercial law at the Confederation of British Industry, said: 'This is a tremendous breakthrough for all those leaseholders who have been severely penalised - and in some cases bankrupted - by being expected to meet the costs of rent, repairs and service charges for property they assigned to subsequent tenants.'

However, John Samson, property partner with Nabarro Nathanson, the solicitors, said the move had done nothing to help thousands of people who were in even worse positions than the one whose case prompted the Law Commission study. In the mid-Eighties a former tenant could take back a delinquent lease and sell it again, but that is not an option in today's depressed market.

He said the Government could have abolished the law retrospectively, or - since that is rarely done - introduced a system of relief for those suffering hardship as a result of the law. He also predicted that landlords would get around the nine-month limit by issuing notices to tenants as soon as any arrears began, regardless of whether they intended to claim against the former leaseholder. As a result, he said, many retired business people could be unnecessarily alarmed.

Indeed, the CBI has called for the nine-month period to be reduced to three months, and for former tenants to be given a number of rights, including early information on the default of the current tenant, immediate possession of the property and exemption from liability for costs of repairs.

Mr Samson added that, by announcing the intention to introduce legislation rather than issuing an immediate order, the Government had prolonged the uncertainty.