Compensation

Compensation for Improvements

Where a tenant leaves premises, because of termination of its tenancy,  it may be entitled to compensation for certain improvements made by it or its predecessor. No right of compensation applies where the tenant surrenders the lease or the lease is terminated by reason of the breach or the non-payment of rent.

The improvements must such that they add to the letting value of the property and must be suitable to the character of the buildings. An improvement notice, as set out separately is generally required.

The compensation is payable by the landlord one month after the date of the agreement or fixing by Court of the compensation or delivery of possession.  The value is the capitalised value of the addition to the letting value of the property, at the termination of the tenant.

The Court has regard to the duration and life of the improvement and relevant circumstances.  The capitalised value may not exceed 15 times the annual value of the addition.

Claiming Compensation for improvements.

A claim for relief limited to a claim for compensation for improvements shall not be maintained unless within the time limited provided a notice of intention to claim relief in the prescribed form is served on the person against whom the claim is intended to be made.

The notice seeing a new tenancy may include a claim in the alternative for compensation. A person who serves a notice of intention to claim relief may, at any time not less than one month thereafter, apply to the Court to determine his right to relief and (as the case may be) to fix the amount of the compensation or the terms of the new tenancy to which he is found to be entitled.  If he does not do so within three months after service of the notice, any person on whom the notice was served may apply to the Court to determine the matters to which the notice relates.

Compensation for improvements payable to a tenant shall be a first charge (in priority to all other mortgages, charges and incumbrances whatsoever) on the interest of the landlord or superior landlord (as the case may be) in the tenement.

Compensation for Disturbance

Where a tenant would be entitled to a new lease but for the non-fault grounds specified above, the tenant is entitled to compensation for disturbance.  This is the loss incurred for moving or in consequence of losing.  It must be paid within one month of being agreed or fixed by Court.

If compensation is not paid an application may be made to renew the tenancy and the landlord may not refuse if compensation is not paid.  If the compensation is not paid there is a right to entitlement to a new tenancy.

Where the Court is satisfied  that a tenant would, but for the non-fault  (scheme of development,  good estate management etc. ) exemptions  be entitled to a new tenancy  and the tenant is entitled to the long occupation equity, the tenant shall, in lieu of a new tenancy, be entitled, on quitting the tenement on the termination of the tenancy, to be paid by the landlord compensation for disturbance.

The measure of the compensation shall be the pecuniary loss, damage or expense which the tenant sustains or incurs or will sustain or incur by reason of his quitting the tenement and which is the direct consequence of that quitting.

Compensation shall be payable on the expiration of one month from the date of the fixing, by agreement or by the Court, of its amount, or the delivery to the landlord by the tenant of clear possession of the tenement, whichever is the later.

Where compensation awarded under this section is not paid within the time limited by this Act, the tenant shall be entitled, after the expiration of that time and before the payment of the compensation, to renew his application for a new tenancy  and the grounds of exclusion of the right to renewal  shall not apply to that application and the granting of the application shall operate as a discharge of the award of compensation for disturbance.

Compensation on termination of tenancy in obsolete buildings.

Where in the case of a tenement—

• either the relevant building is situated in an obsolete area or, having regard to the age, condition and character of the building  the repairing of the building would involve expenditure which would be excessive in relation to the value of the tenement, or  the building could not profitably be used unless it was reconstructed or altered to a substantial extent or rebuilt, and
• the landlord has a scheme for the development of property which includes the tenement, being developed for which planning permission has been granted,

the Court may, by order made on the application of the landlord on at least six months’ notice in the prescribed form to the tenant, terminate the tenancy if it considers it reasonable to do so:

Provided that the lease or other contracts of tenancy under which the tenant, at the time the notice is served on him, holds the tenement is for a term of which not less than three and not more than twenty-five years are unexpired.

Where a tenancy is terminated under this section the tenant shall be entitled, on quitting the tenement, to be paid by the landlord compensation for the termination of the tenancy in accordance with this section.

Where a tenancy is terminated under this provision, the tenant may continue in occupation until the expiration of the period beginning on the day on which the order of the Court is made and ending on the expiration of one year from that day or on the day on which compensation for the termination of the tenancy is paid (whichever is the later) and, so long as he does so, he shall be subject to the terms (including payment of rent) of the tenancy.

Where the Court awards compensation for the termination of a tenancy, the measure of the compensation shall primarily be the pecuniary loss, damage or expense which the tenant sustains or incurs or will sustain or incur by reason of his quitting the tenement and which is the direct consequence of such quitting, but

• such amount as the Court considers reasonable shall be added for the pecuniary benefit accruing to the landlord which is referable to his getting possession of the tenement earlier than he was entitled to under the lease or other contracts of tenancy, and
• such amount as the Court considers reasonable shall be added for any further hardship which the tenant sustains through the making of the order terminating the tenancy.

The provision does not apply where the tenant of the tenement is entitled to a reversionary lease of the tenement.

Set-off of compensation against rent, etc.

Where compensation under these provisions is payable by one person to another and money is due and owing to him by the latter under or in respect of the latter’s lease or other interest in the premises, either person may set off, so far as may be, the one amount against the other.

Where compensation is payable by one person to another and he claims that money is payable to him by the latter under or in respect of the latter’s lease or other interest in the premises and the claim or the amount thereof is disputed or the amount of the claim is unliquidated, he may pay the amount of the compensation into Court, and thereupon the Court may, on the application of either party, make such order in relation to the amount paid into Court as justice may require and, in particular, may retain that amount or any part thereof until the validity of the claim or the amount thereof has been determined.

Where compensation is payable and the interest in the premises of the person to whom the compensation is payable is subject to a mortgage or charge, the mortgage or charge shall extend and attach to the compensation.

Where a person by whom the compensation is payable has actual notice of a mortgage or charge which by virtue of this section or otherwise affects the compensation, he shall either—

• with the consent of the person to whom the compensation is due, pay the compensation to the owner of the mortgage or charge, or
• with the consent of that owner, pay the compensation to the person to whom it is due, or
• where the owner and that person direct that the compensation shall be paid in a particular manner, pay it in that manner, or
• where no such consent or direction is given, pay the compensation into Court.

Where the compensation is paid into Court the Court may, on the application of any person interested, make such order in regard to it as justice may require.

Protection of trustees, etc.

Where a person (a trustee) is entitled to receive the rents and profits of premises as trustee or in any character otherwise than for his own benefit and money is due by the trustee for compensation under this Part or for costs, charges or expenses in relation to a claim for that compensation  the money shall not be recoverable personally against the trustee nor shall he be under any liability to pay it, but it shall be a charge on and recoverable only against the premises and all property, real or personal, held by the trustee on the same trusts or in the same character as the premises.

The trustee shall, either before or after having paid the money, be entitled to obtain from the Court a charge on the premises and all property, real or personal, held by him on the same trusts or in the same character as the premises to the amount of the money and of all costs properly incurred by him in obtaining the charge or raising the amount thereof.

If the trustee refuses or fails to pay the money within one month after the person to whom it is due has quitted the premises, that person shall be entitled to obtain from the Court a charge on the premises and all property, real or personal, held by the trustee on the same trusts or in the same character as the premises to the amount of the money or of so much thereof as is then unpaid and of all costs properly incurred by him in obtaining the charge or in raising the amount thereof.

Any company incorporated by statute and having the power to advance money for the improvement of land may take an assignment of any charge made by the Court under this section, and such company may assign any charge so assigned to them to any person or persons whatsoever.