Landlord and Tenant Act 1954
The Landlord and Tenant Act 1954 confers security of tenure on business tenants. The central issue in Brumwell v Powys County Council [2011] EWCA Civ 1613 was whether the warden of a caravan park was protected by the Act.
The warden claimed that he was carrying on business on his own behalf. The council claimed that it had delegated the management of its business to him and that he was acting as the council’s agent. Consequently, he did not have exclusive possession of the site.
The warden had, initially, been employed by the council to run the site. Following a strategic review, the council decided to divest itself of day-to-day responsibility for the enterprise. Consequently, it entered into three linked agreements with the warden comprising an operator agreement, a service occupancy of a bungalow and a contract of employment for the provision of security at the site. The arrangements put paid to any “right to buy” the bungalow and enabled the warden to derive his income from the takings from the caravan park.
The court of appeal rejected the warden’s claims that the agreements were a sham – and took the view that the bungalow agreement and contract for the provision of security would both have been superfluous if the warden had been granted exclusive possession of the site to carry on business for himself.
The court noted that the warden was carrying on business at his own risk, because he was liable to pay the council a fixed quarterly sum that bore no relationship to the profitability of the caravan park. It accepted that this would normally suggest that the warden was acting as a principal, but was struck by other features of the operator agreement, which led it to conclude that the warden was acting as the council’s agent.
The fact that the warden ran the business as an independent contractor was equally consistent with his acting either as a principal or an agent. However, the council had reserved a high degree of control over the way the business was staffed and run.
The warden was obliged to promote and maximise the use of the caravan park, to obtain the council’s approval for the charges made to users of the site, to keep proper financial records, and to use the accounting services of the county treasurer. The council was responsible for insurance and agreed to provide legal and accountancy services free of charge. The cumulative effect of these provisions indicated that the council had retained ownership of the business and had delegated the management of it to an agent.
The decision shows that it is possible to enter into a management agreement without creating a lease. However, each case will turn on its own particular facts; see, for example, Dellneed Ltd v Chin [1987] 1 EGLR 75, where the court ruled that the parties had created a tenancy instead. Consequently, it is usually safer to grant a lease for a fixed term and exclude it from the protection of the Landlord and Tenant Act 1954.
Allyson Colby is a property law consultant
