169: In or out, shake it all about. Is this the end of uncertainty under the 1954 Act?

What is ‘the Act’?

The Landlord and Tenant Act 1954 (the Act) affords commercial tenants a right to remain in occupation after the contractual term of a commercial lease has come to an end, with an automatic right to renew their lease on broadly the same terms. Whether a tenant benefits from this, depends on whether the lease under which they occupy the property is either ‘in’ or ‘outside’ of the Act.

What does this mean?

If the lease is ‘in’, it means that the tenant will benefit from ‘security of tenure’ and the only way for the landlord to get their property back at the end of the contractual term of the lease, is by relying on a number of, limited, statutory grounds.

This situation is often far from straightforward and can result in the landlord’s significant loss of time, money and sleep when it comes to trying to get their property back! Therefore, careful consideration needs to be given when granting a lease to ensure the lease is outside of the Act by following the statutory notice procedure.

The recent case of TFS Stores Limited v The Designer Retail Outlet Centres (Mansfield) General Partner Limited and others looked at the procedures to exclude the Act and whether what actually happens in practice to exclude security of tenure is valid.

The background

TFS Stores, better known as The Fragrance Shop, entered into separate leases with different landlords at six locations across the UK. All of the leases were contracted out of the 1954 Act by following the statutory procedure of service of notice by the landlord and a declaration by the tenant that they will not have security. At the end of the term, the landlord opted not to renew the leases and a disgruntled TFS commenced legal proceedings, citing that the leases had not been validly contracted out of the Act.

The Issues

TFS argued three main grounds to try and prove that they had security of tenure:

• TFS’s solicitors did not have authority to accept service of the warning notice;
• TFS’s  representative who signed the statutory declaration did not have authority to do so; and
• the landlord’s warning notice was invalid as it did not clearly specify the term commencement date.

The decision

Dealing with the three main grounds in turn:

• the Judge found that TFS’s solicitors did have authority to accept service. This was either express authority as it formed part of the bigger picture for the solicitors to do everything necessary to conclude the transaction or implied authority, incidental to the express authority, to bring the matter to such completion, as supported by the transaction’s heads of terms which specified the leases were to be contracted out;
• the Judge was wholly satisfied that TFS’s representative, Mr Thompson, had actual authority to sign the declarations, in his capacity as retail director. In addition, Mr Thompson had apparent authority to sign the declarations. TFS’s solicitors had authority to represent to the landlord’s solicitors that Mr Thompson had authority to sign and this was evidenced by the signed declarations; and
• failure to include a fixed term commencement date is not sufficient to invalidate the notice, particularly when it is not possible to know what the commencement date will be, at the time of service of the notice. The key is to be able to identify the tenancy in respect of which the tenant’s rights are being waived and using either (i) the date that the interest under the lease commences or (ii) the date from which the term is calculated were held to be adequate identifying badges of the prospective tenancy.

What can we learn?

Where the term commencement date of the lease is unknown at the time of service of the notice, as long as the tenancy can be identified by the warning notice and declaration, the notice to exclude the 1954 Act will be valid. Landlords can breathe easy and sleep well knowing that the current procedure adopted by their solicitors to deal with such circumstances has been deemed valid and effective.