COMMERCIAL PROPERTY – EXAM NOTES
LANDLORD AND TENANT ACT 1954 PART II
CODE FOR LEASING BUSINESS PREMISES 2007
“The fallback position under LTA 54 is that business tenants have rights to renew their lease. It is accepted that
there are a number of circumstances in which that it is not appropriate. In such cases landlords should state at the
start of negotiations that the protection of the 54 Act is to be excluded and encourage tenants to seek early advice
as to its implications”
DOES L&TA1954 PART 11 APPLY?
s.23(1) Must be a tenancy, occupied by the tenant and for the purposes of a business.
1954 Act will apply by using the TOBE TEST:
1) T is it a tenancy?
If occupier has exclusive possession of the property and is paying rent, it is likely that the arrangement
will be declared to be a tenancy
Can include a sublease, an agreement for lease or an agreement for sublease – s 69(1)
2) O is the tenant in occupation?
Cannot be dual occupation – if there is a sub-tenant in occupation, the head tenant cannot be so, and
it will be the sub-tenant who will gain protection of the Act
In the case of sub-letting of part only of the premises, the head tenant will be protected in relation to
the part he still occupies for business purposes
3) B is it a business tenancy?
T must be occupying for the purposes of a business carried on by him
Business user must be the main purpose and not merely incidental to a residential or other purpose
4) E is it an excluded tenancy?
Excluded tenancies are (s 23)
a. Tenancies at will
b. Agricultural and farm tenancies
c. Service tenancies
d. Fixed term tenancies not exceeding 6 months unless there is a renewal provision or the tenant has
been in occupation for over 12 months – s 43(3)
i. Does not matter whether tenant has been in business continuously for over 12 months as long
as they were occupying the property
e. Tenancies where the landlord and tenant have contracted out of the 1954 Act
AVOIDING SECURITY OF TENURE
TENANCIES AT WILL
Both express and implied tenancies at will are excluded
, Tenant let into occupation while negotiations continue for the grant of a new tenancy will be an implied
tenancy at will and thus outside the act
GRANTING A SHORT LEASE (FIXED TERM TENANCIES < 6 MONTHS)
Excluded unless the tenancy contains provision for renewing or extending the term beyond 6 months
Act will apply once a tenant has been in occupation for a period exceeding 12 months
CONTRACTED-OUT TENANCIES
Contracting out of the Act is generally forbidden, s 38(4) allows parties to agree that a fixed-term letting
should be outside the security of tenure provisions
Lease has to be for a term certain – s 38A(1)
o Monthly periodic tenancy would not qualify as a lease for a term certain
o If the term is defined as including “any period of holding over or extension” – means that the lease
is not granted for a term certain and therefore you cannot contract out of the Act – Newham LBC
v Thomas Van Staden
Varying extent of the property or the length of the lease, treated as a surrender and re-grant – Friends
Provident Life Office v BRB – means if you contracted out of the Act in the first version of the lease,
contracting-out does not automatically apply to the variation. Must go through the contracting out process
again.
Break clause to terminate a lease does not mean that the 1954 Act automatically does not apply
Procedure for granting a lease which is contracted out:
Landlord gives the tenant a notice in the prescribed form containing a ‘healthy warning’ warning the tenant
of the fact that he is agreeing to a lease without security of tenure and advising him to obtain professional
advice
Tenant must sign and return this notice, signifying his acceptance of the fact that the lease is to be
contracted out of the Act, before the grant of the lease
If tenant is given the notice less than 14 days before the grant of the lease, the tenant must make a statutory
declaration before an independent solicitor to this effect
Consequences:
No right to a renewal lease
If tenant wants to stay on, landlord can dictate the terms
No right to compensation for loss of premises
GRANT A LICENCE
Although the Act does not apply to a licence, any purported licence will be looked at carefully by the courts,
and the mere fact that it is described as a ‘licence’ will not prevent the courts declaring it to be a tenancy if
that
TERMINATING A TENANCY PROTECTED BY THE 1954 ACT
Protected tenancy will not end automatically
Has to be ended in a stipulated manner
Otherwise will continue on the same terms at the same rent
FORFEITURE
LANDLORD AND TENANT ACT 1954 PART II
CODE FOR LEASING BUSINESS PREMISES 2007
“The fallback position under LTA 54 is that business tenants have rights to renew their lease. It is accepted that
there are a number of circumstances in which that it is not appropriate. In such cases landlords should state at the
start of negotiations that the protection of the 54 Act is to be excluded and encourage tenants to seek early advice
as to its implications”
DOES L&TA1954 PART 11 APPLY?
s.23(1) Must be a tenancy, occupied by the tenant and for the purposes of a business.
1954 Act will apply by using the TOBE TEST:
1) T is it a tenancy?
If occupier has exclusive possession of the property and is paying rent, it is likely that the arrangement
will be declared to be a tenancy
Can include a sublease, an agreement for lease or an agreement for sublease – s 69(1)
2) O is the tenant in occupation?
Cannot be dual occupation – if there is a sub-tenant in occupation, the head tenant cannot be so, and
it will be the sub-tenant who will gain protection of the Act
In the case of sub-letting of part only of the premises, the head tenant will be protected in relation to
the part he still occupies for business purposes
3) B is it a business tenancy?
T must be occupying for the purposes of a business carried on by him
Business user must be the main purpose and not merely incidental to a residential or other purpose
4) E is it an excluded tenancy?
Excluded tenancies are (s 23)
a. Tenancies at will
b. Agricultural and farm tenancies
c. Service tenancies
d. Fixed term tenancies not exceeding 6 months unless there is a renewal provision or the tenant has
been in occupation for over 12 months – s 43(3)
i. Does not matter whether tenant has been in business continuously for over 12 months as long
as they were occupying the property
e. Tenancies where the landlord and tenant have contracted out of the 1954 Act
AVOIDING SECURITY OF TENURE
TENANCIES AT WILL
Both express and implied tenancies at will are excluded
, Tenant let into occupation while negotiations continue for the grant of a new tenancy will be an implied
tenancy at will and thus outside the act
GRANTING A SHORT LEASE (FIXED TERM TENANCIES < 6 MONTHS)
Excluded unless the tenancy contains provision for renewing or extending the term beyond 6 months
Act will apply once a tenant has been in occupation for a period exceeding 12 months
CONTRACTED-OUT TENANCIES
Contracting out of the Act is generally forbidden, s 38(4) allows parties to agree that a fixed-term letting
should be outside the security of tenure provisions
Lease has to be for a term certain – s 38A(1)
o Monthly periodic tenancy would not qualify as a lease for a term certain
o If the term is defined as including “any period of holding over or extension” – means that the lease
is not granted for a term certain and therefore you cannot contract out of the Act – Newham LBC
v Thomas Van Staden
Varying extent of the property or the length of the lease, treated as a surrender and re-grant – Friends
Provident Life Office v BRB – means if you contracted out of the Act in the first version of the lease,
contracting-out does not automatically apply to the variation. Must go through the contracting out process
again.
Break clause to terminate a lease does not mean that the 1954 Act automatically does not apply
Procedure for granting a lease which is contracted out:
Landlord gives the tenant a notice in the prescribed form containing a ‘healthy warning’ warning the tenant
of the fact that he is agreeing to a lease without security of tenure and advising him to obtain professional
advice
Tenant must sign and return this notice, signifying his acceptance of the fact that the lease is to be
contracted out of the Act, before the grant of the lease
If tenant is given the notice less than 14 days before the grant of the lease, the tenant must make a statutory
declaration before an independent solicitor to this effect
Consequences:
No right to a renewal lease
If tenant wants to stay on, landlord can dictate the terms
No right to compensation for loss of premises
GRANT A LICENCE
Although the Act does not apply to a licence, any purported licence will be looked at carefully by the courts,
and the mere fact that it is described as a ‘licence’ will not prevent the courts declaring it to be a tenancy if
that
TERMINATING A TENANCY PROTECTED BY THE 1954 ACT
Protected tenancy will not end automatically
Has to be ended in a stipulated manner
Otherwise will continue on the same terms at the same rent
FORFEITURE
