Tenants frequently take possession of premises before they have concluded the necessary legal documentation. Unfortunately, this often leads to disputes concerning the precise nature of their occupation and the occupier’s legal position.
In Manton Securities Ltd v Nazam (t/a New Dadyal Cash & Carry) [2008] EWCA Civ 805; [2008] PLSCS 211, the court had to decide the legal status of an occupier who moved into premises in 1997 while negotiating for the assignment of a lease. The landlord discovered that there had been a change of occupier some months later and, after an initial protest, sought to regularise the occupier’s position. Negotiations for the grant of a lease to the occupier stalled, but the landlord continued to accept rent until the parties fell out.
The occupier sought to protect his position by serving a request for the grant of a new business lease under Part II of the Landlord and Tenant Act 1954. He argued that he had made quarterly payments of rent to the landlord and claimed the benefit of a periodic tenancy protected by the Act. Alternatively, he claimed that he was entitled to a 21-year lease on the ground of proprietary estoppel because he had invested heavily in the premises with the landlord’s encouragement.
The Court of Appeal ruled that the occupier had no right to request a new tenancy under the Act. Practitioners will be interested in the reasons why.
Their lordships explained that if the occupier was a tenant at will, as the trial judge had held, he would have no right to a new business lease because tenancies at will are not protected by the Act.
If the occupier had been a periodic tenant, he would have been entitled to security of tenure under the Act. However, for reasons best known to those responsible for the original legislation, periodic tenants have no right to serve a request for a new business lease; this privilege is reserved for tenants granted fixed terms of more than a year. Practitioners have urged the government to place periodic tenants on the same footing as tenants under fixed-term leases and live in hope that the legislation will be amended in due course. In the meantime, periodic tenants must wait for the landlord to serve a section 25 notice terminating a lease before issuing proceedings for the grant of further lease.
None the less, the court made an order compelling the landlord to grant a lease to the occupier. The landlord had encouraged him to improve the premises in the expectation of the grant of a lease and it would be unconscionable for the landlord to withdraw from the transaction. The lease would run for 21 years from 1997, on terms agreed between the parties or settled by the court independently of the rules that apply under the Act since the tenant had no right to terminate its current arrangements with the landlord before they ended in 2018.
Allyson Colby is a property law consultant
