Section 25 notices & partial redevelopment (Part 2: Statutory Compensation)

Section 25 notices & partial redevelopment (Part 2: Statutory Compensation)
This two-part blog examines issues that might arise when serving a section 25 notice where the landlord wishes to redevelop part of the property.  In our scenario, a tenant occupies the ground and first floors under a lease, with the first floor being let to a subtenant on an assured shorthold tenancy (AST).  The landlord has served an unopposed section 25 notice which, due to proposed redevelopment, includes a new lease for the ground floor only.
The first part of this blog dealt with the requirement for vacant possession.  In this second part, we discuss the issue of statutory compensation.  That is, if the tenant is happy to give up possession of the first floor, is he still entitled to statutory compensation in respect of that part?
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What is included in the tenant’s ‘holding’?

The tenant’s ‘holding’, for the purposes of ss 23(3) and 32 of the Landlord and Tenant Act 1954 (LTA 1954), includes all the property comprised in the tenancy but excluding any part not occupied by the tenant or an employee for business purposes.  The tenant has no right to a new lease for any part that doesn’t fall within this.

Given that the first floor is sublet, is the holding then limited to the ground floor only?  If so, then the landlord need only offer a new lease of the ground floor and no compensation would be payable for the first floor.

Where the landlord opposes the grant of a new tenancy of the whole

If, however, the holding does include the first floor, then the landlord’s notice will likely be invalid for failing to offer a new tenancy of the whole.  The landlord should instead h

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