Many commercial landlords inadvertently grant their tenants security of tenure without knowing or intending to do so.
Part II of the Landlord and Tenant Act 1954 (LTA 1954) provides security of tenure for most categories of commercial tenants. This Act gives tenants a statutory right to be granted a new tenancy after the term of their current lease has expired. To obtain possession of such a property without the tenant's agreement, the landlord must apply to the court for possession and prove one or more statutory grounds entitling it to oppose the grant of a new lease. Even if successful, some grounds of opposition require landlords to pay the tenant compensation for disturbance.
It is possible for prospective landlords and tenants to exclude their leases from the security of tenure provisions of the LTA 1954. Indeed this tends to be the preference of most landlords. Where the tenancy is silent on this, the statutory right is automatically granted to the tenant.
The High Court's recent ruling in the case of Alam v Alam & Anor [2023] EWHC 1460 (Ch) is a reminder of how commercial landlords can be caught out. This complex case involved a family dispute over the ownership and control of businesses in various parts of the country. The parties to the claim were brothers, all involved in the family business in some capacity. One aspect of the litigation involved a claim possession of a business premises. The Defendant to the possession proceedings had been in occupation of the premises, paying rent, but had not been granted a formal lease. It contended that it had a periodic tenancy and was consequently entitled to security of tenure under the LTA 1954.
The Judge referred to Javad v Aqil [1991] 1 WLE 1007, in which it was held that 'where one party permits another to go into possession on payment of a rent, they will be taken to have intended to grant and take a periodic tenancy in the absence of any inference to the contrary based on the surrounding circumstances or the parties’.
In this case, the landlord's actions, or lack thereof, amounted to an acquiescence that the Defendant's business could trade from the premises and there was nothing to disapply the principle that its occupation should be taken to be that of a periodic tenant. The security of tenure provisions of the LTA 1954 were therefore engaged.
Owners of commercial landlords are always best advised to ensure that occupiers hold formal, written, leases. If security of tenure is not intended, those leases should be contracted out.
