The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (the 2003 Order) removed the requirement to obtain a court order before excluding business leases from the protection of the Landlord and Tenant Act 1954 (the 1954 Act). Instead, landlords must serve warning notices on prospective tenants explaining the implications of agreeing to give up statutory renewal rights and, before committing themselves, tenants must sign formal declarations confirming that they accept the consequences of excluding security of tenure.
But the 2003 Order has created unwelcome uncertainty for both landlords and tenants in some respects. TFS Stores Ltd v BMG (Ashford) Ltd [2019] EWHC 1363 (Ch) provides welcome guidance on three points. First, did the tenant’s solicitors have authority to accept service of the landlords’ warning notices? Secondly, did the person who executed statutory declarations on behalf of the tenant have authority to do so? And finally, were the declarations valid?
Had the answer to any one of these questions been “no”, the tenant would have been protected by the 1954 Act. But the judge answered all the questions in the affirmative, although he did not consider a point that has troubled conveyancers since the introduction of the new rules: are warning notices valid if they are served on agents, rather than on prospective tenants themselves? The tenant accepted that the judge was bound by authority to the effect that service on an agent will suffice (Galinski v McHugh (1989) 57 P&CR 539 and Yenula Properties Ltd v Naidu [2002] 3 EGLR 28) and reserved its position for a higher court.
However, the judge did decide that the tenant’s solicitors had had authority to accept service of the warning notices. Their authority flowed from their instructions to deal with the transactions, which were described in heads of terms agreed by the tenant and stated that the leases were to be “contracted out” of the 1954 Act. Furthermore, the company employee who signed the statutory declarations on behalf of the tenant (a retail director, but not a statutory director of the company) had had authority to do so too.
Was the wording in the statutory declarations defective? The declarations described terms commencing “on a date to be agreed between the parties”, “on the Access Date under the Agreement for Lease pursuant to which the tenancy of the premises will be entered into”, and “on the date on which the tenancy is granted”. The tenant argued that fixed dates should be ascertainable and that the formulae identified term commencement dates, as opposed to lease commencement dates. But the judge decided that the purpose of providing a date was to help identify a proposed tenancy and that the formulae did suffice or, alternatively, that the declarations were “substantially” in the form prescribed.
Interestingly, the judge would not have allowed the landlord to rely on statements in the leases that relevant warning notices were served, statutory declarations made and the procedure in the 2003 Order properly followed. The provisions did not suffice to ratify the process because the tenant did not fully understand what was being asked of it, and did not create an estoppel since that would negate the protection provided by the legislation.
Finally, the tenant was not liable for double rent under section 1 of the Landlord and Tenant Act 1730. It applies where a tenant “wilfully” holds over after a landlord has demanded possession of premises in writing and the tenant had not acted wilfully because it had argued its case in good faith.
Allyson Colby, property law consultant
