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Contracting Out of the Landlord and Tenant Act 1954 A Word of Caution
It has for a long time been possible to contract out of the security for tenure provisions of the Landlord and Tenant Act 1954. This means when entering into a business lease the parties can agree that the Act will not apply. Therefore at the end of the contractual term the tenant will not have the right to obtain a new lease, or compensation if the landlord objects on the grounds of wishing to use the premises for his own business or wishing to carry out substantial works of reconstruction etc.
These provisions can only apply where the lease to be excluded from the protection of the Act is for “a term of years certain”, i.e. a fixed period.
In a case called Newham LBC v Staden, decided in 2008, the Court of Appeal ruled on this point, and the decision has caused some consternation and surprise within the property litigation world.
In that case, the Lease was granted for a “fixed term” from 1st January 2004 to 28th September 2004. Because this pre-dated the recent changes enabling the parties to contract out without an Order of the Court, an Order of the Court was obtained on 11th December 2003 excluding the provisions of the 1954 Act.
On the face of it, therefore, a perfectly straightforward situation.
The landlord would be entitled to possession at any time after 28th September 2004 and the tenant had no right to remain.
However, the Lease defined “the term” as being a period from 1st January 2004 to 28th September 2004 but went on to say that the expression “the term” would include any period of holding over or extension of it whether by statute or common law or by agreement.
This kind of wording is not unusual. It is there to protect the landlord when there is a holding over so that all of the obligations of the tenant continue during the holding over period.
However, as this particular Lease was contracted out of the 1954 Act, the standard wording relating to holding over by statute was clearly incorrect.
The Court had to decide whether there was a term of years certain or not. It decided that the Lease created a period which was fixed up to 28th September 2004 plus a further period which was uncertain.
Therefore, despite obtaining a Court Order excluding the Lease from the Act, it was held that the tenant did enjoy the protection of the Landlord and Tenant Act 1954!
This was clearly not what the parties had intended or expected. The parties had intended to exclude the 1954 Act. Any extension beyond the initial fixed term or holding over could only have been by agreement. This would have required a new form of agreement and would have created a new interest.
However, this decision, on the particular wording and particular facts of this case, does now represent the law (unless it is reversed by the House of Lords).
Therefore it is important, if you are a landlord, to check any leases which have been excluded from the Act and take advice.
FROM OUR PROPERTY LITIGATION TEAM:
Alan Langleben, Philippa Dolan
David Liebeck, Paul Dunbar,
Laura Sterling
Issue 25 – April 2009
If you require advice or assistance on the contents of this briefing please contact Alan Langleben or Paul Dunbar on 020 7544 2424
The information and any commentary on the law contained in this “In Brief” is provided free of charge for information purposes only. No responsibility for its accuracy or correctness, or for any consequences of relying on it, is assumed by Rochman Landau. This “In Brief” does not amount to legal advice and is not intended to be relied upon. You are strongly advised to obtain specific, personal advice from a solicitor about your case.