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21 December 2020

Leasing conundrums and the Landlord and Tenant Act 1954

Question

I am the landlord of commercial premises let on a lease, contracted out of the Landlord and Tenant Act 1954, which expires on 24 March 2021. On reviewing the documentation we noticed the tenant’s statutory declaration states the commencement date is “a date to be agreed”. Does this invalidate the contracting out procedure?

Answer

The purpose of the requirement to state the contractual commencement date of the lease is so the relevant tenancy can be identified and the tenant confirms the statutory protections will not apply. Provided the statutory declaration sufficiently describes the tenancy it should be capable of being relied on. However, a case on this point is subject to an appeal to be heard later this year.

Explanation

The procedure for contracting out is set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (SI 2003/3096). There are three key elements to the procedure: the landlord’s warning notice, the tenant’s declaration (simple or statutory) and an endorsement on the lease or other instrument creating the tenancy.

The RRO requires the declaration to specify the term commencement date for the lease. This date may be uncertain: it may depend on when the lease is completed; or the lease may not be capable of starting until some other event has occurred such as the grant of planning permission. A further problem may arise where, often for management reasons, the lease term is calculated from a date that precedes the date of execution. A form of words that refers to a lease clause which states the commencement date or contains a formula for its calculation may provide a solution but, as yet, this is untested.

In TFS Stores Ltd v Designer Retail Outlet Centres and others [2019] EWHC 1363 (Ch); [2020] EGLR 32, the court was asked to consider six statutory declarations that expressed the term commencement date in a variety of ways: the date on which the tenancy was granted; the date on which the tenant would be given access under an agreement for lease; and a date to be agreed between the parties. The High Court confirmed all the formulations were valid and compliant with the RRO. The purpose of this part of the declaration is to identify the tenancy in respect of which the warning notice is given, so the tenant confirms it understands the tenancy will be excluded from the protection of the Act. The tenant has obtained permission to appeal the decision and the appeal will be heard in December 2020.

Question

I am a landlord of commercial premises, the ground floor of which is let on a tenancy protected by Part II of the Landlord and Tenant Act 1954. The contractual term will end soon and the tenant wishes to renew. We plan to oppose renewal on the basis that we intend to demolish and reconstruct the basement and ground floor. Basement works have already started. Both the redevelopment and removal of the tenant are, from our perspective, commercially beneficial. The tenant has indicated they will seek an injunction to stop the works on the basis of interference with their quiet enjoyment. Will this mean that we cannot rely on ground (f)?

Answer

No. You will need to show at trial that: (i) you had a genuine intention to carry out the works, (ii) you would practically be able to carry out the works; and (iii) you would still carry out the works if the tenant left voluntarily. Therefore, provided you can show there is a reasonable prospect of carrying out the works despite the potential injunction claim, it will be possible to resist renewal.

Explanation

A similar issue arose in London Kendal Street No 3 Ltd v Daejan Investments Ltd [2019] EGLR 43, where the landlord of a commercial building intended to carry out works to the basement and ground floor business unit occupied by the tenant. The tenant argued the landlord’s ground (f) challenge should fail because it would be able to obtain an injunction to halt the basement works. The court rejected the tenant’s claim, finding the landlord would still practically be able to carry out the works. Such proceedings were capable of being resolved, and, even if an injunction were granted, its terms would not be so absolute as to prevent the landlord from carrying out the works.

The tenant may seek, relying on S Franses Ltd v Cavendish Hotel (London) Ltd [2018] UKSC 62; [2019] EGLR 4, to argue the third criterion is not met because the motivation for the works is removing the tenant. But Lord Briggs in Franses made clear that a landlord’s desire to remove a tenant does not disqualify them from relying on ground (f), as long as they would still carry out the works if the tenant left voluntarily.


This article was first published in Estates Gazette on 13 October 2020 and written by real estate disputes partner Louise Clark at Charles Russell Speechlys LLP and barrister Admas Habteslasie at Landmark Chambers. For more information, please contact Louise on +44 (0)20 7203 5037 or at louise.clark@crsblaw.com.

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