Stephen Eccles, our Litigation Partner, considers how a property owner can be caught by legislation relating to commercial property.
We have recently encountered a number of cases where a landlord has allowed a tenant into possession of commercial property in exchange for rent and has then been alleged to have created a 1954 Act Business Tenancy which cannot easily be terminated. This can be devastating for a commercial landlord who may not have realised he was creating any such rights. The landlord and tenant often has a good relationship and the informal letting has been done as a favour.
How the 'Landlord and Tenant Act 1954' came about
The background all landlords and tenants should know is that all commercial letting is governed by legislation, and the main Act is the Landlord and Tenant Act 1954, which came into force 10 years after World War II finished. As a result of lack of any building or development works since 1940 and the post war recovery there was a severe shortage of commercial property and established businesses were being kicked out by landlords so they could obtain considerably higher rents. This was having a deleterious effect on the economy.
The 1954 Act introduced the concept of tenant security for the first time in a formal code. A tenancy could not be ended before the end of the Lease, provided terms were complied with, and tenants were given the right to renew the Lease at the end provided they complied with the Act and the landlord did not have any specific grounds to recover possession (there are 5 limited grounds).
Formal Leases not favours
Where a Lease is in place before a tenant occupies there will normally be no issue, but a landlord who informally lets a tenant into possession where the tenant has exclusive possession and pays rent, could easily become an accidental 1954 Act landlord. The protection given to the tenant would prevent the landlord being able to deal with the land occupied. It is therefore critical to get legal advice before letting any tenant into possession of premises and a landlord should not allow possession without proper legal documentation being put into place.
This article was written by Stephen Eccles, Partner at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of March 2019.