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Does the Act apply?

This page contains information relating to various topics to consider when deciding whether or not Part II of the 1954 Act applies to the tenancy:
  • Occupation - amount required.
  • Periods at the beginning or end of the term when there is a limited amount of occupation.
  • Can occupation of a car parking space be sufficient?
  • Leaving prior to end of the term so that the Act no longer applies - Esselte revisited.
  • Residential properties sublet by business tenant.
  • Tenancy by estoppel
  • Section 43 - 12 months occupation

Lease or licence

The principles of Street v Mountford applies to business premises. The essential consideration is whether or not the occupier has been granted exclusive possession. See further the "Lease or licence" page in the Landlord and tenant (general) section of the site.


Occupation

Section 23(1) of the Landlord and Tenant Act 1954 provides as follows:
    "Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes."
Amount of occupation required

Flairline Properties v Hassan
[1999] 1 EGLR 138 Anthony Hacking QC, Deputy High Court Judge.

Tenant who was absent from his restaurant premises as a result of a fire but who continued to claim his right to occupy continued to a business tenant even though he had opened other premises round the corner.

Occupation for short period at end of term - car parking spaces

Pointon York Group plc v Poulton
[2006] EWCA Civ 1001

Issues

There were two issues in this case:
  • Were the parking spaces that the tenants had the right to occupy under the lease "premises" that could be "occupied" for the purposes of their business? Held: yes.
  • Was occupation for three days at the end of a lease, after a sub-lease of the whole had come to an end, sufficient occupation for the purposes of s23? Held: yes.
Parking spaces

Parking spaces are "premises" that can be "occupied" for the purposes of s23 of the 1954 Act. See in particular paras 16 and 29 of the judgment of Arden LJ; and paras 24 and 25:
    "I reject the submission that an incorporeal hereditament cannot constitute premises for the purposes of section 23. That conclusion may in some cases lead to the conclusion that a tenancy may qualify under section 23 even though only the incorporeal hereditament is occupied for business purposes. But I do not see why in such a case that should not be possible if the incorporeal hereditament is capable of being occupied. It is possible to have a business use of the incorporeal hereditament alone, such as where a house is let with right to use garages or stables which are occupied used for business purposes. It is difficult to see why this business use should not be protected even though the house is not used as part of the business. Section 23 expressly applies where only part of the premises is occupied for business use.."
On the facts of this case, the judge found that the tenant had occupied the parking spaces during business hours; and that was sufficient.

Occupation during end of sub-lease and end of head-lease

The issue of a short gap between the tenant's physical occupation and the end of the lease was considered by the CA in the context of compensation in the case of Bacciocchi v Academic Agency Ltd [1998] 3 EGLR 157 (see the page dealing with compensation. In this case, the CA has confirmed that Bacciocchi applies for the purposes of s23 and establishes that:
    "..a tenant need not be physically present in the premises if he is using them in some other way as an incident in the ordinary course or conduct of business life, provided that the premises are occupied by no other business occupier and are not used for any non-business purpose." (para 31)
Prior to the end of the sublease, the subtenants employed contractors to decorate the offices and put in new carpets. While this work was being carried out T's staff went to the premises to check on the progress of the work. T intended to use the premises for their own business after expiry of the sublease and wanted to plan how the offices could be used in the future. The decorating and re-carpeting was finished the day after the sublease expired. On that day a director of the tenant went to the premises and spoke to the carpet layers. He confirmed that the works were suitable for the company's business occupation. It was also necessary to put in new wiring and computer systems but this could not be done in the few days between the end of the sublease and the end of the lease and were left to be carried out shortly afterwards. This was sufficient to constitute occupation and the landlord's action in evicting T the day after the expiry date in the headlease was unlawful. The lease had continued under Part II of the 1954 Act.

Tenant vacates prior to end of term - Esselte revisited - s64

Single Horse Properties Ltd v Surrey CC
[2002] EWCA Civ 367

Introduction

In Esselte AB v Pearl Assurance plc [1996] EWCA Civ 911; [1997] 1 EGLR 73 the CA famously held that the 1954 Act ceases to apply if T vacates before the expiry date specified in the lease. It is not necessary for the tenant to serve a s27(1) notice. Where a s25 notice has been served and the tenant applies for a new tenancy the effect of the notice is, to paraphrase, to terminate the tenancy 3 months after the date of the hearing (s64).

Facts

In this case L served a s25 notice dated to expire on the last date of the term in the lease. T served a counter-notice and applied for a new tenancy but then vacated prior to the last day of the term. The claim was struck out and L claimed a further 3 months rent.

Held

As T had vacated prior to the expiry of the tenancy the Act did not apply and the s25 notice was of no effect. Accordingly s64 was not brought into play. T was not obliged to pay any more rent. However, a tenant would usually be well advised to tell the landlord that he has vacated. If he does not an estoppel might possibly arise (depending on other factors) making him liable for continuing rent.

Citation

Arden LJ:
    "37. .. since ... section 25 refers back to section 24, the conclusion in the Esselte case must apply for the purposes also of section 25(1). A notice under section 25(1) is thus of no effect if the tenancy is not continued by section 24(1). The tenancy is not so continued if it expires on the term date by effluxion of time (the Esselte case). Whenever the notice is served, there would be nothing for the landlords termination to bite on. Mr Lewisons argument amounts to reading into Part II of the 1954 Act a concept whereby a tenancy is continued beyond its term date if by then the tenant has invoked the jurisdiction of the court by making an application to it. In my judgment, there is no room in section 25 for such a concept.

    38. It follows from this conclusion that in the present case the section 25(1) notice was of no effect for the purpose of terminating the tenancy and that accordingly it did not have the effect of terminating the tenancy within three months of the final disposal of the tenants applicaton to the court as required by section 64(1)(c). Accordingly, section 64(1)(c) was not satisfied, and there was not, and could not be, any interim continuation of the tenancy under the operative part of section 64(1). It follows that the tenant was not liable for rent referable to any period after the term date (24 June 2000) and that the appeal must be allowed.

    40. A tenant who has served a counter-notice under section 25 and made an application to the court should inform the landlord if he ceases to occupy the demised premises before the term date so that the application to the court can be dismissed. If a tenant fails to do this, and the landlord is led by the tenants conduct to believe that the tenant continues in occupation there is a risk that, in the events which happened, as in Benedictus v Jalaram, the tenant will be held to have estopped himself from denying that he was in occupation at the term date and be liable for continuing rent accordingly."
(Note that Esselte has been given statutory effect under the reforms to the 1954 Act - see the new s27(1A))

Residential properties sublet by "business" tenant

Smith v Titanate [2005] 20 EG 262
Judge Roger Cooke at Central London County Court.

Facts

Property divided into six flats. The tenant ran a business of letting out flats. The longer term lettings were on standard assured shorthold tenancies. Other lettings were on terms that included the provision of services but the judge held that these were tenancies. Question: Was the tenant in occupation of the individual flats for the purpose of a business?

Held

No. The 1954 Act did not therefore apply. (Graysim Holidngs Ltd v P&O Property Holdings Ltd [1996] AC 329 applied). The judge analysed three different types of situation that might arise:
  • Cases where flats are let on conventional terms, with the landlord doing no more than receiving the rents and performing the landlords covenants. In those cases there is no business occupation of the flats.
  • At the other end of the spectrum cases such as common lodging houses, or hostel / student halls of residence, where there is a high degree of control and the services are performed in circumstances in which the landlord has an unfettered access to the rooms for that purpose.
  • Cases in the middle where there is some degree of control and/or less restricted access and/or a greater degree of intrusive service provision. Depending on the facts these may fall on either side of the line.

Tenancy by estoppel

Bell v General Accident Fire & Life Assurance Corporation Ltd
[1997] EWCA Civ 2962

Introduction

A tenant by estoppel of business premises can invoke the protection of the 1954 Act.

Key Facts:
  • 1960 GA Life Assurance Ltd bought freehold
  • 1978 an associated company GA Fire & Life Assurance Corporation plc let the property - tenancy by estoppel
  • Fire & Life served a s25 notice
  • T applied for a new tenancy Fire and Life served an answer and s24A application.
  • T withdrew application Fire and Life continued the s24A application.
  • T sought to strike out the application for interim rent.
T arguments:
  • Conceded that there had been a tenancy by estoppel.
  • Argued that strict wording of the Act did not apply: s44(1)(b) and s69
    44(1):"..in this part of this Act the expression the landlord means the person who is the owner of that interest..
    (b) that is either the fee simple or a tenancy ".

    69(1): ".. tenancy means a tenancy created either immediately or derivatively out of the freehold .."
Decision:
  • The arguments failed to understand the common law doctrine of estoppel and the doctrine of relativity of title.
  • The circumstances of Ts occupation were such that both parties regarded the Act as applying and conducted themselves accordingly.
  • If T was right corporate landlords could easily circumvent the Act.
(See also Keepers etc. of John Lyon School v Mayhew [1996] EWCA Civ 1192 - T estopped from denying validity of Ls s25 notice after he had applied for a new tenancy.)


Section 43 - Twelve months occupation

Cricket Ltd v Shaftesbury plc
[1999] 2 EGLR 57

Introduction

Occupation extended by tenancy at will so as to exceed 12 months does not bring the tenant within the Act. Section 43(3):
    "This Part of this Act does not apply to a tenancy granted for a term certain not exceeding six months unless:
      (b) the tenant has been in occupation for a period which, together with any period during which any predecessor in the carrying on of the business carried on by the tenant was in occupation, exceeds 12 months."
Key Facts:
    Licence agreement to occupy from 26/11/97 to 30/4/98 (5 months)
  • Further agreement 1/5/98 to 30/9/98 (5 months)
  • Negotiations for a contracted out lease C remained in occupation not rent paid yet.
  • 2/12/98 C sends a cheque to cover period from 29/9/98
  • D says sign lease or get out
  • Notice to terminate whatever right of occupation C had also sent.
  • C sought a declaration that it was a tenant under the 1954 Act.
  • It was conceded that the licences were tenancies.
Cs problem

During the period after the second tenancy expired during negotiations there was a tenancy at will (Javad v Aqil [1991] 1 All ER 243). The Act does not apply to tenancies at will (Hagee v Erikson [1975] 3 All ER 234).

Cs argument

He relied on the literal words of s43(3)(b), ie that he had been in occupation for more than 12 months.

Decision

The argument was rejected. It would retrospectively have revived the tenancy. See the opening words of s43(3)(b) the tenant.

Citation

Neuberger J:
    "Thereafter the plaintiff remained in occupation of the premises but not as a tenant. It was a tenant at will. It seems to me that whether it was a tenant at will, a licensee or a trespasser, it cannot be right that a period of occupation in any of those capacities could retrospectively resurrect a tenancy that had expired by effluxion of time and bring it within the 1954 Act."
Left over question

Where the tenant has taken over a business of a person who was not a tenant (e.g. a freeholder or licensee) can one take into account the previous period of occupation by the predecessor?

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