Following changes to the Landlord and Tenant Act 1954, which took effect on 1 June 2004, both landlords and tenants can initiate proceedings for the renewal of business leases. The provisions enabling landlords to apply for the renewal of a tenant’s lease are designed to help landlords discover whether tenants intend to take another lease (as opposed to enabling landlords to foist unwanted leases on their tenants). Consequently, the landlord’s application will be dismissed if the tenant informs the court that it does not want another lease: section 29(5).
However, if one of the parties has applied to the court for the renewal of the tenant’s lease, section 64 of the 1954 Act operates to extend the existing tenancy until three months after the disposal of the application. Where section 64 applies, a tenant will be liable for rent, even if it vacates the premises immediately. Consequently, it is important to understand whether the three-month period operates from the date when the tenant informs the court that it does not want another lease or, alternatively, from the date of a court order dismissing the landlord’s application.
Windsor Life Assurance Co Ltd v Lloyds TSB Bank plc [2009] PLSCS 297 concerned renewal proceedings initiated by a landlord in respect of premises that commanded an annual rent of £1m. The tenant decided not to renew its lease on 17 April 2009. It confirmed its decision by fax to both the landlord and the court and calculated that its tenancy would terminate on 17 July 2009. The landlord claimed rent for the period up to 8 September 2009 (three months after the date on which the tenant obtained a court order disposing of the landlord’s proceedings).
The judge ruled that the legislation did not require the tenant to do anything more than inform the court of its decision. The judge did not believe that the legislature expected tenants to pay rent for each day that the court did not deal with their letters and decided that Parliament must have envisaged that the court would dismiss the proceedings immediately on receipt of confirmation that the tenant did not wish to take another lease.
Consequently, the judge fashioned an order for use in future cases confirming the date on which the tenant had notified the court that it did not wish to take a new lease and declaring that the landlord’s application to renew the lease was dismissed on that date. Further guidance from the judge indicates that any unresolved arguments regarding costs and interim rent can be reserved to a further hearing.
Finally, the judge noted that the legislature appeared to have forgotten to require tenants (or, indeed, the court) to inform landlords of their decision to decline a new business lease. None the less, he took the view that most well advised tenants would keep their landlords informed, failing which tenants would be liable for any wasted costs incurred by landlords during any period in which they continued to prepare for trial in ignorance of the true position.
Allyson Colby is a property law consultant
