Perfume retailer The Fragrance Shop has lost a legal dispute that it has been fighting with the Designer Retail Outlet and other large shopping centre owners.
The retailer had argued that it should be entitled to security of tenure on some of its stores, despite having opted out more than 10 years ago, because it did not accurately fill in the opt-out form.
The dispute relates to 10-year leases agreed between 2007 ad 2009 in Bridgend, Mansfield, Swindon, Ashford, Cheshire Oaks and York. Security of tenure is the fight of a leaseholder to continue to occupy a property once the lease has expired.
When leaseholders agree to waive their rights to security of tenure they have to fill out and sign a “warning notice” with a form to be filled out by the tenant that states the name of the tenant, the address of the premises and the date of the commencement of the lease.
With the leases in question, the retailer was granted access to the properties before leases had been agreed, and the access date was used on the form.
As this was arguably incorrect, lawyers for TFS argued that the form was invalidated, and it therefore had not opted out of security of tenure.
However, the Court of Appeal disagreed today.
“It is relevant… that the declaration is to be completed by the tenant, who is therefore responsible for deciding how to fill in the blanks in the form,” Lord Justice Males said in the ruling.
“No doubt the landlord will in practice wish to satisfy itself that the declaration has been properly completed, and may sometimes produce a draft for the tenant’s signature, but it is the tenant’s responsibility to read the warning notice and (if necessary with professional advice) to ensure that it understands and accepts the consequences of entering into an agreement without the statutory protection of security of tenure.
“When the landlord has done all that it is required to do by serving a warning notice in proper form, it is an unattractive submission on the part of a tenant to say that it has filled in the blanks in the declaration in a way which invalidates the parties’ agreement.”
Sarah Morley, a real estate partner at Charles Russell Speechlys, said the result was a “relief” to commercial real estate lawyers.
“The alternative would have made it very difficult (if not impossible) to contract out leases in situations where the start date is necessarily uncertain, for example when entering into an agreement to take a lease after the landlord has completed some works.
“We had been expecting this result, as it reflects what had been agreed between the parties who had both been legally represented and had known that commercially their intention was to contract the leases out of the 54 Act. As Lord Justice Males says in the judgment, an alternative interpretation would have been contrary to commercial sense. This result allows businesses to continue to operate with certainty, which is an ingredient in short supply in these times,” she said.
