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Landlord’s Failure to Extend Its Own Lease Leaves Subtenant in Place

19th August, 2012

When a lease of commercial premises expires, the tenant under the lease has the right to request a new lease from its landlord if the lease has not been excluded from the protection of the Landlord and Tenant Act 1954 (“LTA”). The landlord is only entitled oppose the request for the grant of a new lease on a limited number of grounds specified in the LTA. One of the grounds (contained in section 30(g) of the LTA) available to a landlord wishing to oppose the grant of a new lease to the tenant is that the landlord requires the property for the purpose of carrying on its own business.

A recent case in the Court of Appeal (Frozen Value Ltd. v Heron Foods Ltd. [2012] EWCA Civ 473) highlights one of the difficulties that can arise for a landlord seeking to rely on this ground to refuse to grant a new lease. The landlord in this case opposed the application of its tenant for a new lease on the basis that the landlord wanted to occupy the property for the purposes of carrying on its own business. The tenant argued that the landlord could not do this, relying on a provision in the LTA that prevents a landlord from relying on the ground that the landlord requires the property for the purpose of carrying on its own business, if the landlord has not been the tenant’s ‘competent landlord’ for the purposes of the LTA for the previous five years.

In this case, the landlord (Heron) was itself a tenant under a head-lease and the head-lease was shortly coming up for renewal. At the time the tenant requested the new lease, the landlord had not yet taken action to renew the head-lease. This proved fatal to the landlord’s attempt to oppose the tenant’s application for a new lease. The LTA requires that to be the competent landlord for the purposes of the LTA, the landlord has to have at least 14 months’ left to run on its head-lease of the property (either under the existing head-lease or a combination of the existing head-lease and a new head-lease granted at least 14 months before the existing head lease expires). Because the landlord had allowed the head-lease to have less than 14 months left to run before the head-lease was renewed, the landlord had ceased, for a period, to be the tenant’s ‘competent landlord’ for the purposes of the LTA. As a result, the landlord was unable to show it had been the tenant’s ‘competent landlord’ for the previous five years and as a result, the landlord was unable to oppose the grant of a new lease on the ground that ground that the landlord required the property for the purpose of carrying on its own business.

In this case, the landlord should have renewed its head-lease at least 14 months before the existing head-lease expired if the landlord wanted to seek to oppose the grant of a new lease to the tenant on the ground that the landlord required the property for the purpose of carrying on its own business. The landlord will now have to wait until the tenant comes to the end of its new lease before the landlord can seek to oppose the grant of a further new lease on the ground that the landlord requires the property for the purpose of carrying on its own business.

Objecting to the grant of a new lease to a tenant under the LTA is not straightforward and care must be taken to ensure that the landlord does not inadvertently prevent itself from opposing the grant of a new lease to its tenant.

Contact Andrew Lees at [email protected] for advice on leases or any other property matters.

 

 

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