OVERSTAYING YOUR WELCOME – EXCLUDED TENANCIES
OVERSTAYING YOUR WELCOME – EXCLUDED TENANCIES

12 July 2019

Commercial Property Solicitor Matthew Morris-Ashton looks at The Landlord and Tenant Act 1954 following a recent court case involving perfume retailer The Fragrance Shop (TFS).

The retailer had entered into Leases at six retail outlets at different locations where a contracting procedure had been followed.

When the Leases came to an end the landlord had decided not to renew the them but let the stores out to a competitor.

TFS wanted to remain in the properties and claimed that the Leases had not been validly contracted out and that it was entitled to be granted new Leases for the stores.

However, the judge concluded that the leases were validly contracted out and therefore TFS had no right to remain in the properties.

The Landlord and Tenant Act 1954 (the Act) gives tenants of commercial property a right to remain in occupation after the end of the term of their Lease. The Act also affords tenants the right to renew their Lease on similar terms save as to the rent payable. However, some commercial tenants agree to give up these rights by agreement with the Landlord before the Lease commences.

If the original Tenant who is party to the Lease agrees to give up the right to renew the Lease, the Lease is said to be “outside the act”. If there is no such agreement, the Lease is labelled as “inside the Act”.

If “inside the Act” the tenant will benefit from ‘security of tenure’ and the only way for the Landlord to get their property back at the end of the contractual term, is by relying on limited statutory grounds.

Not surprisingly the process of granting a lease “outside the Act” is not straight forward. If mistakes are made, the Landlord may have problems getting their property back.

The recent case High Court case of TFS Stores Limited v The Designer Retail Outlet Centres (Mansfield) General Partner Limited and others looked at the validity of procedures commonly used by lawyers to contract “outside the Act”

TFS Stores trading as “The Fragrance Shop”, entered into a number of Leases with a landlord at different locations across the UK. All the Leases were contracted “outside the Act” by following the statutory procedure of service of a “warning notice” by the Landlord and a declaration by the tenant that they accept the lease is “outside the Act”.

At the end of the term, the Landlord opposed the granting of new Leases to TFS. TFS commenced legal proceedings, citing that the Leases had not been validly contracted “outside the Act”.

Lawyers for TFS submitted the following three grounds in an attempt to show the leases were “inside the Act”:

  1. TFS’s solicitors did not have authority to accept service of the warning notice;
  2. TFS’s representative who signed the statutory declaration did not have authority to do so; and
  3. the Landlord’s warning notice was not valid as it did not specify the term commencement date.

The Court’s decision

The Court’s decision reassures Landlord’s and their lawyers that the procedure commonly used adheres to the law. Dealing with each submission in turn.

Authority of TFS’s solicitors

In relation to whether TFS’s solicitors had authority to receive the warning notices, the judge concluded that he was “entirely satisfied that there was actual authority…to accept service of the relevant Warning Notices “. The judge considered that this “can be analysed as express authority to accept service of the Warning Notices as part of the authority to do everything necessary to bring the matter to completion or as implied authority, incidental to the express authority, to bring the matter to such completion“.

Authority of signatory to the Statutory declaration

the Judge was wholly satisfied that TFS’s representative, Mr Thompson, had actual authority to sign the declarations, in his capacity as retail director. In addition, Mr Thompson had apparent authority to sign the declarations. TFS’s solicitors had authority to represent to the landlord’s solicitors that Mr Thompson had authority to sign and this was evidenced by the signed declarations.

No fixed term date

The Leases in question did not specify a fixed term commencement date. The judge concluded that the failure to include a fixed term commencement date in the declarations did not invalidate them. The judge considered that the purpose of the wording in the declaration was to allow the tenancy in question to be identified and so using either the date that the interest under the lease commences or the date from which the term is calculated are both “adequate identifying badges of the prospective tenancy“.

Impact of decision

Where the term commencement date of the lease is unknown at the time of service of the notice, as long as the tenancy can be identified by the warning notice and declaration, the notice to contract “outside the Act” will be valid. Landlord’s and their lawyers can be reassured that the procedure commonly used has been deemed valid and effective.

For further advice in relation to security of tenure and other aspects of landlord and tenant law, please contact Matthew Morris-Ashton of Phillips Solicitors on 01256 854678 or by email at [email protected]

 

Disclaimer

This article is current at the date of publication set out above and is for reference purposes only. It does not constitute legal advice and should not be relied on as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.

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