Lawbite: Business partners’ right to a lease renewal

• United Kingdom

• Real estate
• Real estate dispute resolution
• Real estate litigation

11-11-2014

Lie v Mohile [2014] EWCA Civ 728

The Court of Appeal has held that an application for a new business tenancy under the Landlord and Tenant Act 1954 (the “Act”) which was made by only one of two business partners who occupied the property as leaseholders, was not valid.

The business partners (L and M) operated the premises together as a doctors’ practice.  The premises were owned by M who granted a periodic tenancy to himself and L as joint tenants.  After a dispute, M ineffectively attempted to terminate the partnership.

Under the Act, both joint tenants must join in any application for a new tenancy unless they fall within one a number of statutory exceptions.  For partnerships, Section 41A of the Act states that in a case where not all joint tenants continue to use the demised premises for the purpose of their business, an exception will be allowed.  This facilitates lease renewal for professional partnerships, in which one or more of the partners in whom the lease is vested may have retired.  In this case, though, neither partner had retired, and both partners were still occupying the property for the continued purpose of the partnership business.

In order to constitute a valid application relying on Section 41A of the Act, four conditions must be fulfilled:

• The lease must be vested in at least two joint tenants;
• The property demised must include property which is occupied for the purposes of the business;
• During the tenancy the business must have been carried on in partnership by all the joint tenants at some time;
• The business must now be undertaken by at least one of the joint tenants and no part of the property must be occupied by the other joint tenant(s) for the purpose of the business.

This provides a useful reminder for tenants occupying business premises as a partnership of the strict interpretation of Section 41A of the Act.  Many tenants occupy shared premises and it is important to give full consideration to the legal structure at the outset and the potential difficulties that can arise when applying for a new tenancy in order to ensure that applications can be validly made under the Act, and security of tenure is not lost.