Does your lease correctly exclude the right to renew under the Landlord and Tenant Act 1954 (LTA 1954)?
It is common knowledge that under the Landlord and Tenant Act 1954 (“the Act”) any tenant with a lease of business premises for a term of more than six months will automatically have a right to renew the lease unless expressly excluded.
In order to exclude the above rights landlords will need to ensure the correct process under the Act is followed. That effectively involves a prescribed form warning notice being given to (served on) the tenant explaining the proposed exclusion and the tenant making a declaration to confirm the notice and exclusion is understood and accepted. Where this process is not strictly followed, the proposed exclusion will be void and the tenant will take the benefit of the protections irrespective of the intention of the parties.
Whether a lease has the benefit of the protections can have a profound impact on the position of both the tenant (when looking to renew) and the landlord (whether looking at renewals and/or site disposals) and is therefore of significant interest to both. Given the significance of the protections, it is not surprising that numerous cases have been bought over the years centring on the exclusion process.
A recent example of a tenant seeking to challenge the validity of the contracting out procedure can be seen in the case of TFS -v- Designer Retail 2019 EWHC 1363 (CH) and is a useful reminder of the importance of the exclusion process being correctly adhered to. In this case, TFS (The Fragrance Shop) was tenant under 6 leases all of which were contracted out of the protections of the Act and all coming up to expiry. Despite the fact TFS had confirmed its intention to renew the leases the landlord decided instead to pursue new leases of the premises with TFS’s main competitor. As TFS did not have the benefit of the protections under the Act there was nothing to stop the landlord from doing this as TFS had no statutory right to renew. As a result of this, TFS sought to challenge a number of procedural and technical deficiencies in the contracting out process with the intention of having the proposed exclusion declared void and therefore securing the statutory right to renew. Whilst the application was dismissed by the court, the case does highlight some important points to consider when dealing with the exclusion process, including;
(i) Whether a tenant’s solicitor is duly authorised to accept service of the requisite warning notice on behalf of the tenant.
In considering this point the court, rather helpfully for the landlord, held that as the heads of terms confirmed the leases would be excluded from the Act and also gave the solicitors details it was reasonable to conclude the solicitor was indeed instructed to accept service. Notwithstanding this and to avoid an argument similar to that presented here, it is obviously prudent to seek specific confirmation on this point and, if not forthcoming, to arrange for the notice to be served on the tenant direct for the avoidance of any doubt.
(ii) Whether the person making the declaration is duly authorised to do so by the tenant.
Again, whilst more relevant in the case of a declaration being made on behalf of a company otherwise than by a director, this is a point which should be specifically checked and confirmed, with evidence of any authority being supplied with the sworn declaration prior to completion.
Whilst the above case dealt with a scenario where the landlord simply wanted to re-let the premises to a competitor, it is important to note the same principles will apply on all proposed exclusions – including, for example, where a landlord is looking to redevelop a site in the future and wants to avoid any issues down the line which may frustrate or delay a proposed sale.
If you have any questions regarding your lease agreement, the landlord or tenant act 1954 or any questions regarding your property generally please contact Craig Burton or the landlord and tenant team and we will be happy to help you.
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