Tenant withdrawing application for new business lease – Premises vacated before end of lease under mistaken belief as to exact date term ended – Tenant claiming compensation – Occupation for business purposes – Whether premises occupied immediately preceding date of termination – Landlord and Tenant Act 1954 Part II section 38
From 1974 until 1994 B ran a restaurant, La Pentola, at 14 North Parade, Bath. He was the tenant of those premises under a 20-year lease dated January 14 1974. Clause 4(7) of the lease provided that if the tenancy was one to which Part II of the Landlord and Tenant Act 1954 applied, then ” subject to the provisions of sub-section (2) of section 38 of that Act neither the Tenant nor any assignee or under-lessee of the term hereby granted or of the demised premises shall be entitled on quitting the demised premises to any compensation under section 37 of this same Act”. The tenancy was one to which Part II of the 1954 Act applied.
On October 4 1993 the landlord, Academic Agency Ltd, served a section 25 notice seeking to determine the tenancy and stating that any application by B for a new tenancy would be opposed on the statutory grounds contained in paras (f) and (g) of section 30(1). Although B served a counternotice stating that he was not willing to give up possession of the premises and applied to the county court for an order for the grant of a new tenancy, he subsequently changed his mind and withdrew, with the result, by operation of section 64, that the tenancy terminated on August 11 1994. B’s solicitors mistakenly believed that the tenancy terminated on 29 July.
B closed the restaurant on July 23 1994 and spent six days cleaning up the premises, which he vacated on July 29 1994 when he handed over the keys to his solicitors. B contended that compensation amounting to £15,030 was due. However, the landlord contended, and the county court judge held, that no such compensation was payable, the right to it being excluded by the lease. Section 38(2) provided that, in certain circumstances, such an exclusion was void. That depended upon the premises having been occupied for the purposes of the business “during the whole of the five years immediately preceding the date on which the tenant ..is to quit the holding”. The judge held that between July 29 and August 11, the days “immediately preceding” August 11 1994, B was not in occupation of the premises. B appealed.
Held The appeal was allowed.
1. The test was whether the premises had been “occupied for the purposes of a business”. Since premises could be “occupied” even when closed for the season or for holidays or for repairs, it followed that section 38(2)(a) could be satisfied notwithstanding that the tenancy came to an end during such a period of closure. Where business premises were left empty for only a short period, business occupancy had not necessarily ceased provided always that during it there had existed no rival for the role of business occupant and that the premises were not being used for some other, non-business, purpose. Although the appellant had vacated the premises voluntarily and left them empty and had no intention of ever returning, the thread of continuity had not been broken by those events because each was recognisable as an incident in the ordinary course or conduct of business life.
2. A strict construction of the words “immediately preceding” overlooked the correct approach to the concept of continuing occupation of business premises as and when required by Part II of the Act: Department of the Environment v Royal Insurance plc [1987] 1 ELGR 83 overruled.
Edward Denehan (instructed by Withy King & Lee, of Bath) appeared for the appellant; Richard Stead (instructed by McCloy & Co, Bradford-on-Avon) appeared for the respondent.
