FREE BOOK SAMPLE: from ‘A Practical Guide to the Landlord and Tenant Act 1954: Commercial Tenancies’ by Richard Hayes & David Sawtell

CHAPTER TWO
TENANCIES WHICH ARE
PROTECTED BY THE LTA 1954

Section 23(1) LTA 1954 states that ‘Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes’. The starting point is simple: all business tenancies are protected by the LTA 1954 unless something takes them outside its protection.

Section 23(1) can be broken down as follows:

  • There must be a tenancy. Licences as well as tenancies at will fall outside the protection of the LTA 1954. This can lead to difficulties where an occupier has possession of a property and pays a periodic sum as consideration for that occupation: is it a lease or a licence?

  • The tenant must occupy premises within the property that is comprised in the tenancy. It is possible for a tenant to cease occupation, or to cease its business in, the property and then for it to lose the benefit of protection under the LTA 1954.

  • The tenant’s occupation is for the purposes of a business. The LTA 1954 has been interpreted so that ‘business’ is given a very broad definition. For example, it can include charitable or religious use.

  • The business must be carried on by him. This is broadened by a number of statutory provisions to include companies related to the tenant.

Each of these different elements, plus exclusions to the LTA 1954, are discussed below.

What is a ‘tenancy’?

The word ‘tenancy’ means a normal leasehold relationship, including a sublease.

Section 69(1) LTA 1954 gives a full interpretation of the meaning of the word within Part II:

tenancy” means a tenancy created either immediately or derivatively out of the freehold, whether by a lease or underlease, by an agreement for a lease or underlease or by a tenancy agreement or in pursuance of any enactment (including this Act), but does not include a mortgage term or any interest arising in favour of a mortgagor by his attorning tenant to his mortgagee, and references to the granting of a tenancy and to demised property shall be construed accordingly

Ordinary landlord and tenant principles are applied to distinguish between a licensee (who is not protected by the LTA 1954) and a tenant (who is capable of being protected). In Street v Mountford [1985] AC 809 it was held that an agreement granting exclusive occupation of residential accommodation for a term at a rent (where no services are provided), where the grantor was providing neither attendance nor services, creates a tenancy, notwithstanding the use of the word ‘licence’. The position is the same whether one is looking at occupation of a residential property or at occupation of a commercial property: London & Associated Investment Trust Plc v Calow [1986] 2 EGLR 80. A draughtsman of a licence needs to be careful to ensure that a tenancy is not inadvertently granted which is then not contracted out of the LTA 1954.

A genuine tenancy on sufferance or a tenancy at will is also excluded from statutory protection: Wheeler v Mercer [1957] AC 416. Although an express agreement for a tenancy at will falls outside the protection of the LTA 1954 the court will consider the reality of the situation applying normal Street v Mountford principles.

What are ‘premises which are occupied’?

The term ‘premises’ acquires an important meaning in the LTA 1954. The subject matter of the tenancy must be property which is capable of being occupied. For example, a lease of an easement does not, by itself, attract the protection of the Act, unless it is property that it is actually possible to occupy.

In Land Reclamation Co. Ltd v Basildon District Council [1979] 1 WLR 767 the tenant had a tenancy of a right of way along a private road which it used exclusively for business purposes. It was held that the right of way was not protected by the LTA 1954 as an easement (by itself) could not be ‘occupied’. The Court of Appeal referred to Stumbles v Whitley [1930] AC 544, which was a case under the Landlord and Tenant Act 1927, where it was held that fishing rights were not ‘premises’, although the tenant was able to obtain a grant of such rights as part of the grant of a new lease of a hotel.

An easement of a car parking space can, however, be occupied, if the right conferred on the tenant was to the effect of excluding the landlord, and hence falls within the LTA 1954: Pointon York Group v Poulton [2006] 3 EGLR 37.

Land Reclamation was considered by the Court of Appeal in Nevill Long & Co (Boards) Ltd and another v Firmenich & Co [1983] 2 EGLR 76. In that case, there had been a severance of the reversions so that the rights of way that were part of the business lease now passed over land that was owned by a different freehold owner. It was held that the severance of the reversions did not create a separate tenancy in respect of each severed part of the reversion as a consequence of the provisions of section 140(1) Law of Property Act 1925. Notwithstanding the severance of the reversions, there continued in existence under each of the leases a single tenancy of the property thereby demised including the right of way. As in each lease the actual land was occupied for the purpose of the lessee’s business, each such tenancy was within section 23. The problem of split reversions for the landlord when serving a section 25 notice is discussed in Chapter 10.

As for occupation itself, this is a matter of fact, giving the words their ordinary meaning. In Graysim Holdings Ltd Respondent v P. & O. Property Holdings Ltd [1996] AC 329 Lord Nicholls held at 334 that the concept of occupation is not a legal term of art, with one single and precise legal meaning applicable in all circumstances. However, the LTA 1954 does not allow for two persons (such as the tenant and a subtenant), other than persons acting jointly, being in occupation of the same property for the purpose of the legislation. In Bagettes Ltd v G.P. Estates Ltd [1956] Ch 290, the tenant sublet unfurnished residential flats for business purposes: the Court of Appeal held that the common parts then fell outside the LTA 1954 as once the flats were gone, the business for the purpose of which the tenant occupied the retained parts was also gone. See also the section below on the definition of ‘holding’.

On the other hand, some businesses, such as hotels and storage units, are in the business of providing accommodation or space: the business owner is still in occupation. If the landlord’s use of the retained parts is merely ancillary to the subtenants’ use of their units, providing access and facilities, it is difficult to see how the tenant has ‘retained’ occupation for the purpose of the LTA 1954. The extent of presence by the tenant required to fall within the protection of the LTA 1954 is a matter of fact and degree.

It is possible for a tenant to occupy premises through an agent or manager: Parkes v Westminster Roman Catholic Diocese Trustee (1978) 36 P & CR 22.


What is a ‘business’?

Section 23(2) states that, in Part II of the LTA 1954, the expression ‘business’ includes ‘a trade, profession or employment and includes any activity carried on by a body of persons, whether corporate or unincorporate.’

On the other hand, the subletting of parts of premises as flats with a view to making a profit from the rentals is not a business in respect of which the person carrying it on is entitled to security of tenure under the LTA 1954: Bagettes Ltd v. G.P. Estates Ltd [1956] Ch 290. In Trans-Britannia Properties v Darby Properties [1986] 1 EGLR 151 it was noted that even if the majority of the premises are sub-let, so at first blush it might appear difficult for the lessee to assert that they are in occupation of the site, the court needs to consider the degree of control and extent of the services provided by the tenant company.

This definition includes ‘businesses’ whose affairs are not strictly profit-making: for example, see Hawkesbrook Leisure Ltd v Reece-Jones Partnership [2004] 2 EGLR 61, a case where sports grounds were managed with a view to making a profit or surplus, albeit not distributable to members or shareholders, and the business was carried on as a trading activity. In Parkes v Westminster Roman Catholic Diocese Trustee (1978) 36 P & CR 22, the Court of Appeal confirmed that the provision and running of a community centre run by the local parish priest was a ‘business.’ Lord Denning MR analysed the legal structure of the Roman Catholic Church, noting that it had a structure which is very common to charitable organisations. A body of trustees (which, in this case, was a company limited by guarantee) held the legal title in the property and all of the assets. The trustees were given power by a trust deed to hold property and to use and apply it as capital and income. To the Court of Appeal, the activities of the Church were quite clearly a ‘business’ for the purpose of section 23(2) LTA 1954. Bridge LJ went so far as to confirm that ‘“Business” of course is extremely widely defined in the Act as including any activity-carried on by a body of persons corporate or unincorporate.’

A property can be occupied for the purpose of a business even if it is not used for business activity itself or if is ancillary to the business, such as a store room, a car park or a parking space. This line does have limits however: in Hillil Property & Investment Co Ltd v Naraine Pharmacy Ltd (1979) 39 P & CR 67, the tenant owned two adjoining shops, and used one of the shops as a dumping ground for waste materials from other shops. It was held that an activity within section 23(2) must be at least something correlative to the conceptions of ‘trade, profession or employment,’ rather than a casual operation, and therefore this use fell outside the LTA 1954. This is, however, a question of fact and degree.

Companies and businesses

The business must be carried on by the tenant. This is subject to a number of statutory provisions that broaden and explain this phrase.

Section 23(1A) broadens the definition of ‘the carrying on of a business’. Where:

a) a company in which a tenant has a controlling interest in a company which is in occupation or carries on a business, or;

b) where the tenant itself is a company and the person with a controlling interest in the company is the occupier or carries on the business;

their occupation of the premises or carrying on of the business is equated with the tenant. This equivalency is extended throughout Part II of the LTA 1954 by subsection 23(1B).

A tenant can conduct business in a partnership. Goulding J held In re Crowhurst Park [1974] 1 WLR 583 that the carrying on of a business by the defendant in partnership with his wife was a carrying on of a business by the defendant himself.


Premises that cease to be occupied

A tenancy for a fixed term cannot be continued under section 24(1) unless, immediately before the term would at common law expire by effluxion of time, the tenancy is one to which the Act applies: Esselte v Pearl Assurance [1997] 1 WLR 891, CA. If the tenant vacates the property before the contractual term date the tenancy will not be one to which Part II of the LTA 1954 applies and it will come to an end, even if the tenant has already applied to the court for the grant of a new tenancy. This means that he or she does not need to serve notice under section 27. This is confirmed in section 27(1A):

(1A) Section 24 of this Act shall not have effect in relation to a tenancy for a term of years certain where the tenant is not in occupation of the property comprised in the tenancy at the time when, apart from this Act, the tenancy would come to an end by effluxion of time.

The question of whether a property ‘ceases’ to be occupied was explored in Aspinall Finance Ltd v Viscount Chelsea [1989] 1 EGLR 103. The mere fact that the tenant is not occupying at the relevant date is not conclusive. Tenants do not have to occupy and carry on business for every hour of every day. Some breaks are inevitable. For example, some businesses that are only open in the summer months and are closed throughout all the winter months; alternatively, there may be a need for urgent structural repairs and the tenants had to go out of physical occupation in order to enable them to be effected. The test is whether the thread of continuity of business user continues or whether it has been broken: I&H Caplan Ltd v Caplan (No 2) [1963] 1 WLR 1247. The court will look at whether the tenant has an intention to resume occupancy, although this by itself is probably insufficient. Other, non-conclusive, factors include the time that the business has not been carried on, the intention to resume and the reason why the business is not being carried on, whether the reasons were forced on the tenant, and whether the tenant voluntarily went out.


The holding

Part II of the LTA 1954 uses a term that is infrequently used outside the context of the Act. The term ‘the holding’ is defined in section 23(3) to mean:

  • the property comprised in the tenancy;

  • excluding any part of the property which is occupied neither:

    • (a) by the tenant nor

    • (b) employed by the tenant,

      and employed for the purpose of a business by reason of which the LTA 1954 applies.

If a tenant were to occupy only a part of the demised area (for example, if they have sublet), the holding would only include the part that is occupied by their business. This can have important consequences in a lease renewal case. The holding does not include a part of the property which is not occupied at all.

The distinction is important when it comes to the difference between the automatic security of tenure and the right to a grant of a new lease. As will be explored below, section 24 LTA 1954 gives security of tenure to the ‘tenancy’ (section 24(1): see above). On the other hand, section 32(1) states that an order for the grant of a new tenancy by the court ‘shall be an order for the grant of a new tenancy of the holding; and in the absence of agreement between the landlord and the tenant as to the property which constitutes the holding the court shall in the order designate that property by reference to the circumstances existing at the date of the order.’

Where the tenant has sublet only part of the demised property, for example, the entire tenancy (and hence the property in the part which has been sublet) will continue past the term date of the tenancy by virtue of section 24; but, on an application by either the tenant or the landlord for a new tenancy and upon the court’s order for a new tenancy coming into effect this continuation will cease and the new tenancy will consist only of the tenant’s holding: section 32(1) LTA 1954 (‘an order under section twenty-nine of this Act for the grant of a new tenancy shall be an order for the grant of a new tenancy of the holding; and in the absence of agreement between the landlord and the tenant as to the property which constitutes the holding the court shall in the order designate that property by reference to the circumstances existing at the date of the order’.) The landlord can, however, require the whole of the property in the current tenancy to be included: LTA 1954, section 32(2).

The tenant’s motive for occupying the property, turning it into the holding, is not relevant. In Narcissi v Wolfe [1960] Ch 10 the subtenant left the premises. The tenant then went into occupation of the parts that had been vacated for the purpose of obtaining a new lease of the whole demise. Roxburgh J held that it was not the Court’s business to investigate the tenant’s purpose: all that the Court had to investigate was whether there was a real occupation or whether it was simply colourable.

Use of the tenancy for business purposes in breach of covenant

Where a tenant occupies a property and conducts a business there in breach of a prohibition in general terms, applying to the whole of the demised premises, against use for business or for trade or for any profession or employment, the tenancy is not protected by the LTA 1954: see The Trustees of the Methodist Secondary Schools Trust Deed v O’Leary (1993) 25 HLR 364. It is important for the landlord to ensure that if there is such a breach that it is not acquiescing in it. On the other hand, a business carried on in breach of covenant prohibiting particular trades or businesses does qualify under the LTA 1954.


Working from home and home businesses

Where employees of the tenant are in occupation of living accommodation, the tenant may nevertheless be in occupation for the purposes of the business if it is necessary for the individual to live in the house in order to perform his duties properly, though not if his occupation is for mere convenience: Chapman v Freeman [1978] 1 WLR 1298. In that case, the occupation of a cottage by hotel staff was not necessary for the furtherance of the business, but was merely for the convenience of the business, and therefore was not covered by the LTA 1954. Denning LJ contrasted this with ‘the toll-keeper who had to live in a cottage next to the toll-bridge, or the stockman who has to live in the centre of the stockyard so as to carry out his duties. Those servants occupied for the purposes of the business: see Ramsbottom v Snelson [1948] 1 KB 473’.

Residential property may in certain circumstances be occupied for the purposes of a business, where the business activity is a significant purpose for the tenant in occupation (where a professional man takes a tenancy of one house for the very purpose of carrying on his profession in one room and of residing in the rest of the house with his family, like the doctor who has a consulting room in his house), as opposed to being purely incidental to his residential occupation (for example, if he incidentally does some work at home): Cheryl Investments Ltd. v. Saldanha [1978] 1 WLR 1329.

The ‘home worker’ who decides to give up his office and to do all his or her work from his home is now governed by a separate regime. In Cheryl Investments Ltd, it was held that this would take him or her into the LTA 1954 regime. This is now significantly altered by a new regime that dates from 2015.

Section 35 of the Small Business, Enterprise and Employment Act 2015 inserted provisions into the LTA 1954 to remove ‘home businesses’ from the protection of the LTA 1954. These provisions came into force on 1 October 2015 and are subject to a transitional provision at subsection 35(5) of the 2015 Act. The new home business provisions do not apply to:

  1. a tenancy which is entered into before 1 October 2015;

  2. a tenancy which is entered into on or after 1 October 2015, pursuant to a contract made before that day;

  3. a tenancy which arises by operation of any enactment or other law when a tenancy mentioned in paragraph (a) or (b) comes to an end.

Subsection 5 now contains a convoluted provision in respect of home businesses. These are defined in section 43ZA. Subsection 43ZA(1) confirms that Part II of the LTA 1954 does not apply to a ‘home business tenancy’. Subsection 43ZA(4) states that a ‘home business’ is a business of a kind which might reasonably be carried on at home’. Subsection 5 (presumably to protect public houses) states that ‘A business is not to be treated as a home business if it involves the supply of alcohol for consumption on licensed premises which form all or part of the dwelling-house’.

Subsection 43ZA(2) defines a home business tenancy as a tenancy under which:

  1. a dwelling-house is let as a separate dwelling,

  2. the tenant or, where there are joint tenants, each of them, is an individual, and

  3. the terms of the tenancy—

a. require the tenant or, where there are joint tenants, at least one of them, to occupy the dwelling-house as a home (whether or not as that individual’s only or principal home),

b. permit a home business to be carried on in the dwelling-house, or permit the immediate landlord to give consent for a home business to be carried on in the dwelling-house, and

c. do not permit a business other than a home business to be carried on in the dwelling-house.

Section 41(3) states that where a tenancy is held on trust, section 43ZA(2) is modified: paragraph (b) (the requirement that the tenant or joint tenants is an individual) is omitted, and the condition that the terms of the tenancy require the tenant(s) to occupy the dwelling-house as a home is altered, so that it is a condition that the terms of the tenancy require at least one individual who is a trustee or a beneficiary under the trust to occupy the dwelling-house as a home.

Subsection 43ZA(9) provides that if, under a tenancy, a dwelling-house is let together with other land, then, for the purposes of the home business provisions:

  1. if the main purpose of the letting is the provision of a home for the tenant, the other land is to be treated as part of the dwelling-house, and

  2. if this is not the main purpose of the letting, the tenancy is to be treated as not being one under which a dwelling-house is let as a separate dwelling.

Where the tenant’s breach of a prohibition of use for business purposes is one of the terms of the tenancy, this prohibition extends to the whole of the property, and the breach itself consists ‘solely of carrying on a home business’, Part II of the LTA 1954 will not apply: section 23(5) LTA 1954. This is the case even if the immediate landlord or the immediate landlord’s predecessor in title has consented to the breach, or if the immediate landlord has acquiesced in the breach. This is a sharp distinction from the normal situation discussed above, where consent to or waiver of the breach could bring the tenancy under the Act’s protection.


Other excluded leases

Section 43 contains provisions excluding a list of other types of tenancies from the protection of the LTA 1954. These are:

  1. a tenancy of an agricultural holding which is a tenancy in relation to which the Agricultural Holdings Act 1986 applies, or a tenancy which would be a tenancy of an agricultural holding in relation to which that Act applied if subsection (3) of section 2 of that Act did not have effect or, in a case where approval was given under subsection (1) of that section, if that approval had not been given (subsection (1)(a));

  2. a farm business tenancy (subsection (1)(aa));

  3. a tenancy created by a mining lease (subsection 1(b));

  4. a tenancy granted by reason that the tenant was the holder of an office, appointment or employment from the grantor thereof, and continuing only so long as the tenant holds the office, appointment or employment, or terminable by the grantor on the tenant’s ceasing to hold it, or coming to an end at a time fixed by reference to the time at which the tenant ceases to hold it (although this subsection does not effect to a tenancy granted after the commencement of the LTA 1954 unless the tenancy was granted by an instrument in writing which expressed the purpose for which the tenancy was granted) (subsection (2)).

Under section 43(3), Part II of the LTA 1954 also does not apply to shorter leases except in certain circumstances. It does not apply to a tenancy granted for a term certain not exceeding six months unless:

  1. the tenancy contains provision for renewing the term or for extending it beyond six months from its beginning; or

  2. the tenant has been in occupation for a period which, together with any period during which any predecessor in the carrying on of the business carried on by the tenant was in occupation, exceeds twelve months.


Contracting out of the LTA 1954

It is possible to contract out of the provisions of Part II of the LTA 1954. This is the most important way a business tenancy falls outside the protection of the Act. Contracting out is discussed in Chapter 3.


The inadvertent creation and inheritance of LTA 1954 protected tenancies

Tenancy granted instead of a lease

As discussed above, the LTA 1954 does not apply to a licence but does apply to a tenancy, whatever the description of the form of occupation given by the parties. An example of this is Mann Aviation Group (Engineering) Ltd v Longmint Aviation Ltd and another [2011] EWHC 2238 (Ch). The tenant, MAGE, designed and constructed small aircraft and helicopters in aircraft hangars and storage buildings. When it went into administration, the administrators claimed that they had the benefit of an implied periodic tenancy. Longmint, the owner of a 10-year lease in respect of these buildings, denied this, and averred that they were a mere licensee. Sale J, applying Street v Mountford, noted that MAGE had the power to exclude persons from their premises. The sum paid for occupation was described as rent. Even though there was not a written tenancy agreement, the circumstances showed that the parties intended to enter into a relationship of landlord and tenant. As it was a periodic tenancy it was an overriding interest that was thus binding on Longmint. As it had not been contracted out of the LTA 1954, it was protected by the Act.


Subletting

A sub-tenancy is a tenancy under section 69 LTA 1954. Whether or not your direct tenant is in breach of covenant by subletting, if they themselves have not taken adequate precautions it is possible that a sublease may fall within the LTA 1954. If the client then evicts the direct tenant the sublease will remain, leaving him or her as their direct landlord: D’Silva v Lister House Development [1971] Ch 17. The superior landlord might still be able to rely on forfeiture. Furthermore, the unlawful grant of a sublease might allow the landlord to oppose the grant of a new lease to both the tenant and the subtenant under section 30(1)(c).

Although unlawful subletting might potentially be a ground for forfeiture, the landlord must be careful to ensure that if he or she does intend to forfeit (and hence destroy the sub-tenancy) and the tenant has demised the whole of the property, that the forfeiture takes place before the tenancy expires by effluxion of time. If the landlord waits, the original tenancy will expire so that there will be nothing to forfeit, leaving only the protected sub-tenancy.


Holding over

If a tenant holds over at the end of a fixed term and the parties do not start to negotiate new terms, it is technically possible that a court would hold that they have entered into a new periodic tenancy. As the parties would not have contracted out of the LTA 1954, this new tenancy would be protected: A tenancy at will, however, does not fall under the protection of the LTA 1954: Wheeler v. Mercer [1957] AC 416.

This scenario has been considered by the Court of Appeal in two particular cases, namely Javid v Aqil [1991] 1 WLR 1007 and Erimus Housing Ltd v Barclays Wealth Trustees (Jersey) Ltd & Others [2014] 2 P & CR 85. In Javid, the proposed tenant was allowed into the property having paid ‘rent for three months in advance’ in anticipation that the parties would be able to agree the terms of a lease. No lease was executed and the tenant occasionally paid rent. The parties failed to reach agreement and the landlord sought possession of the property. The Court of Appeal rejected the argument that proof of possession and payment of rent by reference to a quarterly period raises a presumption in favour of a periodic tenancy which can only be rebutted by an express agreement. It was held that, as a matter of principle, a tenancy springs from a consensual arrangement between two parties: the extent of the right granted and accepted depends primarily upon the intention of the parties. The law will imply, from what was agreed and all the surrounding circumstances, the terms the parties are to be taken to have intended to apply. While the parties are still negotiating for more than a licence, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a very limited interest.

This decision was confirmed in Erimus, where the negotiations were ‘desultory and lacking any impetus’ [13]. There was, however, no evidence that the negotiations had ceased or been abandoned. At [23] it was again emphasised that holding over and paying rent gave rise to no presumption of a periodic tenancy: instead, ‘the parties’ contractual intentions fall to be determined by looking objectively at all relevant circumstances’, the most significant of which was the ongoing negotiations for a new formal lease. This was contrasted with Walji v Mount Cook Land Ltd [2002] 1 P&CR 13 where the parties reached agreement on the terms of a new lease but then did nothing further for years in terms of executing such a lease. At first instance it was held that a periodic tenancy had come into existence; this decision was affirmed on appeal.


Who is the landlord?

The LTA 1954 differentiates between the immediate landlord (who is the tenant’s landlord at common law) and the ‘competent’ landlord. The competent landlord is the only party who can, for example, serve a section 25 notice. The reason for this distinction is that the immediate landlord may have a term that is only a few days longer than the tenant’s interest, and hence not be able to grant a new tenancy under the LTA 1954. The situation is complicated where there is an intermediate landlord who has sublet part of their demise to tenant protected by LTA 1954, but who himself or herself also has the protection of the LTA 1954. (If they have sublet the whole of their demise, they are no longer in occupation of the property for the purpose of their business, and therefore are not protected by the LTA 1954).

Section 44(1) LTA 1954 confirms that, in Part II of the LTA 1954, the expression ‘the landlord’ means ‘the person (whether or not he is the immediate landlord) who is the owner of that interest in the property comprised in the relevant tenancy which for the time being fulfils the following conditions’, namely:

  • it is an interest in reversion expectant (whether immediately or not) on the termination of the relevant tenancy, and

  • it is either:

    • the fee simple; or

    • a tenancy which will not come to an end within fourteen months by effluxion of time and, if it is such a tenancy, that no notice has been given by virtue of which it will come to an end within fourteen months or any further time by which it may be continued under section 36(2) or section 64 of this Act; and

  • and is not itself in reversion expectant (whether immediately or not) on an interest which fulfils those conditions.

On the other hand, a reference to a ‘notice to quit’ given by the landlord in the LTA 1954 is a reference to a notice given by the immediate landlord.

Only the competent landlord may serve or receive a section 25 or section 26 notice respectively. A section 27 notice can be served on the immediate landlord.

Given this complicated relationship between the tenant, the intermediate landlord (or landlords) and the competent landlord, the LTA 1954 goes into some detail as to the mechanics of how this is given effect. Schedule 6 of the LTA 1954 provides further provisions where the immediate landlord is not the freeholder. Paragraph 1 defines the following terms:

  • the competent landlord” means the person who in relation to the tenancy is for the time being the landlord as defined by section 44 of the LTA 1954;

  • mesne landlord” means a tenant whose interest is intermediate between the relevant tenancy and the interest of the competent landlord;

  • superior landlord” means a person (whether the owner of the fee simple or a tenant) whose interest is superior to the interest of the competent landlord.


What happens if the new tenancy will extend beyond the term of the immediate landlord?

Where, in accordance with the LTA 1954, the period for which it is agreed or determined by the court that a new tenancy should be granted thereunder will extend beyond the date on which the interest of the immediate landlord will come to an end, the power of the court under the Act to order such a grant shall include power to order the grant of a new tenancy until the expiration of that interest and also to order the grant of such a reversionary tenancy or reversionary tenancies as may be required to secure that the combined effects of those grants will be equivalent to the grant of a tenancy for that period (paragraph 2, Schedule 6).


The competent landlord’s notices and agreements made binding on intermediate landlords

Paragraph 3(1), Schedule 6 confirms that any notice given by the competent landlord to terminate the relevant tenancy, and any agreement made between that landlord and the tenant as to the granting, duration, or terms of a future tenancy under the LTA 1954, shall bind the interest of any mesne landlord notwithstanding that he has not consented to the giving of the notice or was not a party to the agreement. Further, under para 3(2), the competent landlord shall have power for the purposes of the LTA 1954 to give effect to any agreement with the tenant for the grant of a new tenancy beginning with the coming to an end of the relevant tenancy, notwithstanding that the competent landlord will not be the immediate landlord at the commencement of the new tenancy, and any instrument made in the exercise of the power conferred by para 3(2) shall have effect as if the mesne landlord had been a party.


Compensation where the competent landlord does not obtain consent from intermediate landlords

This power under para 3 is not, however, without liability. Paragraph 4(1), Schedule 6 provides for compensation to be payable by the competent landlord to mesne landlords whose consent has not been given for any loss arising in consequence of the giving of the notice or the making of the agreement.


Consent not to be unreasonably withheld

If the competent landlord applies to any mesne landlord for his consent to such a notice or agreement, that consent shall not be unreasonably withheld, but may be given subject to any conditions which may be reasonable (including conditions as to the modification of the proposed notice or agreement or as to the payment of compensation by the competent landlord) (para 4(2)).


The relationship between the competent landlord and any superior landlord

An agreement between the competent landlord and the tenant made for the purposes of the LTA 1954 in a case where—

  1. the competent landlord is himself a tenant, and

  2. the agreement would, apart from paragraph 5, operate as respects any period after the coming to an end of the interest of the competent landlord,

shall not have effect unless every superior landlord who will be the immediate landlord of the tenant during any part of that period is a party to the agreement (para 5).

Allied to this provision is para 7. If the competent landlord’s interest in the property comprised in the relevant tenancy is a tenancy which will come or can be brought to an end within sixteen months (or any further time by which it may be continued under section 36(2) or section 64 of the LTA 1954) and he or she gives to the tenant under the relevant tenancy a section 25 notice to terminate the tenancy or receives a section 26 notice:

  1. the competent landlord shall forthwith send a copy of the notice to his immediate landlord; and

  2. any superior landlord whose interest in the property is a tenancy shall forthwith send to his immediate landlord any copy which has been sent to him in pursuance of para 7(a) or 7(b).

The superior landlord may, however, become the competent landlord after a section 25 notice has been served. Where the competent landlord has given a section 25 notice to terminate the relevant tenancy and, within two months after the giving of the notice, a superior landlord:

  1. becomes the competent landlord; and

  2. gives to the tenant notice in the prescribed form that he withdraws the notice previously given;

the section 25 notice shall cease to have effect, but without prejudice to the giving of a further notice under that section by the competent landlord. (para 6). The prescribed form is form number 7 of the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004 (SI 2004/1005).

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