The principal Act conferring security of tenure on business tenants is part II of the Landlord and Tenant Act 1954. This act allows business tenants to stay on at the end of their lease and to apply for a new tenancy. They are entitled to a new tenancy at the end of the old one unless the landlord has a statutory ground of opposition under s.30. Significant amendments to the act have been made by The Regulatory Reform (Business Tenancies) (England and Wales) order 2003 SI 2003/3096.

The Act regulates the manner in which business tenancies can be terminated.
A business tenancy will not come to an end at the expiration of a fixed term, nor can a periodic tenancy be terminated by the Landlord serving an ordinary notice to quit
A business tenancy will continue after the expiry date in the lease until terminated in accordance with one of the ways specified in the Act
Business tenants also have a right to apply for a new tenancy on termination of the current tenancy
The Landlord may only oppose that application on certain statutory grounds under s30 LTA 1954.

Section 23 (1) provides that:

“this Act applies to any tenancy where the property compromised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purpose of a business carried on by him or for those and other purposes”

The act protects tenants who occupy premises for the purpose of a business

There must be a tenancy
The premises must be occupied by the tenant
The premises must be occupied for the purposes of a business carried on by the tenant

Licences are not protected
In view of the danger for landlords inadvertently creating a protected tenancy, the use of a licence as a means of avoiding the Act needs careful consideration

Esso Petroleum v Fumegrange 1994 2 EGLR 90

F was given a licence to operate a petrol station but E retained a strong degree of control over both the layout of the premises and how the business as run and because of this strong degree of control as retained by E, it was held that F did not have a tenancy, they only had a licence. They may have had exclusive right to run the business but they did not have exclusive possession of the property.

Clear Channel UK Limited v Manchester City Council 2006 04 EG 168

C who erect advertising boardings claims that they were given a licence by M to erect advertising boardings, however, the exact spaces on which C could erect the boardings were not clearly defined, therefore, they did not have exclusive possession of any particular possession of any particular space, so they only had a licence. In the business sector, in contrast with the residential sector, the Courts are often prepared to find a licence on the facts rather than a lease.

C argued they had tenancies of 14 advertising sites belonging to the D landlord. Written agreements drawn up but never executed and vague as to area demised. D claimed held 14 site as licensee.. At the end of the period covered by the agreement, D purported to determine C's rights of occupation, but C claimed it had a tenancy protected by the Landlord and Tenant Act 1954 Part II. C submitted that

(1) it had enjoyed exclusive possession of the area occupied by the concrete bases and that it had factual possession of the sites;

(2) it was an annual tenant of the 14th site.

HELD: On the facts, the sites were not the concrete bases but larger undefined areas of land owned by Landlord. Only general addresses were referred to in the draft documentation, not specific locations. Further, the draft documentation did not contain an express grant of a right of way to and from the sites, which was a surprising omission if the demise was limited to the concrete bases. The terms of the agreement made far better sense as licences than tenancies. As the sites were undefined areas of land owned by M it was clear that there had been no intention to grant exclusive possession to C. (2) The draft documents in relation to the 14th site showed an intention to grant a lease over the area occupied by the advertising station. It was much larger than the other structures and would be much more difficult to remove. The inclusion of a prohibition against assignment, sub-letting or parting with possession clearly showed an intention to grant a tenancy. C occupied the 14th site as a periodic annual tenant. C's acts of use, maintenance and control of the site for the purposes of its business amounted to occupation for the purposes of s.23 of the Act, having regard to the purpose of the provisions of Part II of the Act, the nature of the site and the use to which it might reasonably be put. Graysim Holdings Ltd v P & O Property Holdings 94 LGR 553 applied.

Business is widely defined in s23 to include a ‘trade, profession or employment’
Business’ includes a trade profession or employment and includes any activity carried on by a body of persons, whether corporate or unincorporate: s.23(2).
Where the business is carried on by an individual it must amount to a trade, profession or employment
Where the business is carried on by a body of persons, an ‘activity’ may suffice but the activity must be correlative to the conceptions involved with the words ‘trade, profession or employment
The act does not protect a tenant who is carrying on business in breach of a prohibition in the lease: s. 23(4).

In most cases it will be fairly easy to determine whether the tenant is in occupation however in some cases it may not be as clear cut. However, problems arise where a business tenant sub-lets part of the property to a business sub-tenant. They cannot both qualify for protection in respect of the sub-let part. In normal circumstances the sub-tenant will enjoy the protection.

Lee-Verhulst (Investments) Ltd v Harwood Trust 1973 QB 204

The tenant company was the head tenant of a property divided into bedsits and the head landlord had sublet into the ten bedsits. The landlord serviced each flat daily and imposes restrictions on the activities of the occupants. The sole director of the tenant company lived in the basement and devoted his time into running the business, and supervised incoming phone calls and controlled the extent to which cooking took place, and provided light meals as well. The question was whether the ten landlords were still in occupation of the property.

Having regard to the level of control and the extent of services provided by the head tenant company, the Court held that the head tenant occupied the flats notwithstanding that the subtenants of the individual flats had exclusive possession of their flats.

Graysim Holdings Ltd v P & O Property Holdings Ltd 1996 AC 329.

HL held that the services offered by the Landlord must be extensive in order to have the protection of the Act.

The head tenant was the head tenant of Wallacy Market near Liverpool. And they have sublet all the units in the market to store holders and did not retain much presence except for the occasional care taker and the head tenant also provided heating and lighting. And it was held that because of the sub-letting to store holders, and the lack of presence of the head tenant to the property, the head tenant no longer actually occupied the market for the purpose of its business itself, so the head tenant was not actually protected under the LTA 1984.

Smith v Titanate 2005 20 EG 262; 2005 2 EGLR 63

Occupation need not be by the tenant personally. It is sufficient where it is conducted through the medium of a manager or agent. However, in this case, a company held a 52 year lease and sublet to individual tenants – entry into the flats by the company was on reasonable notice and the flats are self-contained, the landlord had no unrestricted right to enter, thus, not substantial enough to have occupation and therefore protection of the Act.

In the residential context, the question is the degree of control as to whether the head tenant retains enough control of the premises itself where they have sublet.

Pointon York Group PLC v Poulton [2007] 1 P & CR 6

The lease for premises and 6 parking spaces until 21 June and the tenant had sublet until 20 June. On 21 - 23 June, the tenant re-entered and started painting in order to continue to occupy to run his business – held was occupying for purposes of the act as painting and decorating appurtenant to carrying on a business as preparing for that trade and car parking spaces could be included within definition of premises so again occupied for purposes of the Act.

#14788 - Business Tenancies - BPC Property and Chancery

About Oxbridge

More Bpc Property And Chancery Samples