Business tenants have security of tenure under the Landlord and Tenant Act 1954. Since the Act applies to any tenancy where the premises are occupied by the tenant for the purposes of a business, or for business and other purposes, it also applies to mixed-use premises. Where premises are let for business and residential use, and the tenant subsequently ceases the business use, so that the tenancy ceases to be subject to the 1954 Act, can the tenant instead claim protection under the Rent Act 1977?
The Court of Appeal decision in Tan v Sitkowski [2007] EWCA Civ 30 confirms that a tenant cannot arrogate to itself the protection of the 1977 Act merely by unilaterally ceasing business use. It would be anomalous and unfair to the landlord if a tenant, which had initially enjoyed 1954 Act protection, could unilaterally switch to the much greater protection afforded by the 1977 Act.
In Tan, the user covenant in the lease prohibited the tenant from using the premises for anything other than a business, but this did not prevent the court from considering whether Rent Act protection could apply. The Court of Appeal held that the provisions of the lease should be read in context, and that the user covenant was directed at the ground- floor premises only.
Rent Act protection applies to premises that are “let as a separate dwelling”. Under the legislation that was in force before 1965, premises could be treated as “let as a dwelling” even though they were also used for business purposes. However, a change in legislative policy in 1965, persuaded the Court of Appeal to decide that the premises had not been “let as a separate dwelling” because they had not been let wholly for residential purposes.
It is interesting to contrast the result of this case with the decision in Pirabakaran v Patel [2006] EWCA Civ 685; [2006] 36 EG 260. The Protection from Eviction Act 1977 was enacted on the same day as the Rent Act 1977. It applies to premises that are “let as a dwelling” and, while anyone is lawfully residing there, prohibits the landlord from forfeiting the tenant’s lease, except by court proceedings. In Pirabakaran, the Court of Appeal had to decide whether mixed-use premises were protected by that Act. The court ruled that they were.
These cases add to the complexity of the law on mixed-use tenancies, but there are good policy reasons for the different decisions. Pirabakaran rests on the construction of the particular legislation, complies with the Human Rights Act 1998 and protects tenants from the “dubious and dangerous method of enforcing a right of forfeiture by re-entry without due process of law” in cases involving their homes. Tan on the other hand, prevents tenants of mixed-use premises from ceasing to trade but continuing to occupy premises indefinitely, at an artificially reduced rent, with privileged rights of succession.
Allyson Colby is a property law consultant
