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Published online by Cambridge University Press: 02 January 2018
Part II of the Landlord and Tenant Act 1954 is a measure of protective legislation that concerns purely commercial relationships and it is apparent that the degree of protection, and the need to redress inequality, is less than, say, with the housing market. The Act represents an unusual and complex measure of political and economic engineering. By an interference with the parties' freedom of contract, the policy of the Act is to provide security of tenure and to promote equality ofbargaining strength between commercial landlord and tenant. The aim was to prevent a tenant at the end of the contractual term facing business closure or being compelled to accept a new lease at an exorbitant rent. Although a derogation from the common law rights of the landlord, the Act was intended to make only limited inroads on the free market. In contrast to such areas as employment law and residential lettings, the transition from contract to status was to occur with a minimal disruption of market forces.
1. See generally, Haley Business Leases: Termination and Renewal (1991); Aldridge Letting Business Premises (1989) Part II; and Tromans Commercial Leases (1987) ch 15. Unless the contrary is expressed, all statutory references are to the Landlord and Tenant Act 1954.
2. It has been assumed that this legislative objective is achieved: see Law Commission Working Paper (1988), Part II of the Landlord and Tenant Act (1954) No 111 at 1.3; Law Commission Report (1969), Landlord and Tenant Act 1954, Part II, Law Commission No 17 at 1.
3. The terms of the new lease may in whole or in part be agreed without recourse to law, s 28. Any agreement must be in writing, s 69(2); s 2 of the Law of Property (Miscellaneous Provisions) Act 1989. See generally Derby & Co Ltd v ITC Pension Trust Ltd [1977] 2 All ER 890.
4. These sections are intended to determine the contents of the new lease: extent, duration, rent and other terms and conditions.
5. Section 32(1); 1 & H Caplan v Caplan [1962] 1 WLR 55. If a substantial time (eg owing to appeals or other causes of delay) has elapsed between the hearing and the making of the order, new evidence should be introduced to show any change in circumstances: Caplan. This timing element under s 32 is unusual within the framework of the Act because much of what needs to be proved (eg grounds of opposition and the identity of the competent landlord) is geared to the date of the hearing.
6. Section 32(1). Landlord's fixtures are included within the holding: Poster v Slough [1969] 1 Ch 495.
7. Cf s 24 under which, at the expiry of the original contractual term, it is the whole of the tenancy which is continued.
8. See Caplan v Caplan supra but see also s 32(3).
9. First Leisure Trading Ltd v Dorifa Properties Ltd [1991] 23 EG 116.
10. See Romulus Trading Co Ltd v Trustees of Henry Smith's Charity [1991] 1 EGLR 95.
11. Nurit Bar v Pathwood Investments Ltd [1987] 2 EGLR 90; Fernandez Walding [1968] 1 All ER 994.
12. Fernandez v Walding, ibid at 997.
13. Section 23(2).
14. See Haley op cit ch 3.
15. Hence, the tenant will be able to resist partially the landlord's opposition to the new lease on the ground of demolition and reconstruction contained in s 30(1)(f). This escape route is offered by s 31A(1)(b). The meaning of ‘an economically separate part’ is given in s 31A(2).
16. Section 32(1A).
17. Section 32(3). If this occurs all subsequent references to the holding are to be understood as referring to the whole of the property: s 32(2).
18. (1974) 29 P & CR 126.
19. There was no irrevocable licence or estoppel between the parties nor was there any ground for the rectification of the original lease. Such a right could, however, be elevated to the status of a legal easement by virtue of s 62 of the Law of Property Act 1925: Borman v Griffith [1930] 1 CH 493. It is to be appreciated that s 32 passes rights only if they are alive at the date the original tenancy ends: Cuimpluce Ltd v CBL (Property Investment) Co Ltd [1984] 1 All ER 316; Kirkwood v Johnson (1979) 38 P & CR 392.
20. [1959] 1 All ER 250.
21. See, however, the effect of s 35, post. It was held in Re Albermarle St, ibid, that the licence could pass under s 35 where new rights can be created. Under that provision there is no need for them to ‘touch and concern’ the demised premises. This case also serves as a useful illustration of the interrelationship between s 32 and s 35.
22. Fernandez u Walding, supra.
23. Section 33. Because of the possibility of appeal from the court order, the commencement date of the tenancy will be uncertain. The proper form of order is to specify the end-date of the new lease: Turone v Howard De Waldm Estates (1983) 267 EG 440, Michael Chipperfild v Shell UK Ltd (1980) 42 P & CR 136. At the end of the renewal the provisions of Part II may still apply and the tenant can be entitled to a further lease.
24. Junes (GOWN) Ltd v Harlow Development Corporation (1979) 253 EG 799.
25. CBS (UK) Ltd u London Scottish Properties Ltd [1985] 2 EGLR 125; London & Provincial Millinery Stores v Barclays Bank [1962] 2 All ER 163.
26. Betty's Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20.
27. London & Provincial Millinery Stores v Barclays Bank, supra; Frederick Lawrence v Freeman Hardy & Willis (1960) 176 EG 11.
28. See CBS (UK) Ltd v London Scottish Properties Ltd, supra.
29. London & Provincial Millinery Stores, supra.
30. Upsons Ltd v E Robins Ltd [1956] 1 QB 131.
31. CBS (UK) Ltd v London Scottish Properties Ltd, supra.
32. Upsons Ltd v E Robins Ltd, supra.
33. Charles Follett Ltd v Cabtell Investments Co Ltd (1988) 55 P & CR 36.
34. Supra. See also Re Sunlight House (1950) 173 EG 311.
35. Provided that those plans are bona fide: Becker v Hill Street Properties Ltd [1990] 38 EG 107.
36. See Betty's Cafes Ltd v Phillips Furnishing Stores Ltd, supra.
37. London & Provincial Millinery Stores v Barclays Bank, supra. See also Reohorn v Barry Corporation [1956] 2 All ER 742.
38. Under the auspices of s 35 post. The rent to be payable under the renewal would be reduced accordingly: Amika Motors Ltd v Colebrook Holdings Ltd (1981) 259 EG 243.
39. See Reohorn v Barry Corporation, supra.
40. Adam v Green (1978) 247 EG 49.
41. Becker v Hill Street Properties, supra. The judge ought not to speculate as to alternative strategies that the landlord could adopt: Michael Chipperfield, supra.
42. [1990] 15 EG 53. See also Becker, ibid.
43. Edwards & Sons. Ltd v Central London Commercial Estates Ltd (1984) 271 EG 697.
44. Ibid. See also Becker v Hill Street Properties, supra; Michael Chipperfield, supra.
45. Amika Motors, supra (three years); Edwards supra, (five years).
46. Orenstein v Donn (1983) (unreported) CAT 5 May.
47. Ibid.
48. CBS (UK) Ltd u London Scottish Propcrtus Ltd, supra.
49. London and Provincial Millinery Stores v Barclays Bank, supra.
50. Cf the disregards in relation to rent contained in s 34(l)(a), (b) post.
51. Section 34(1).
52. Barton v Long Acre [1982] I WLR 398.
53. Ibid.
54. Orianc v Dorita (1987) 282 EG 1001.
55. O'May v City of London Real Property [1982] I All ER 660.
56. Cardshops Ltd v Davies [1971] 2 All ER 721.
57. Lovely and Orchard Services v Daejan investments Ltd (1977) 246 EG 651. The calculation of rent under s 34 must, therefore, have a prospective element.
58. FR Evans (Leeds) Ltd v English Electric Co (1977) 245 EG 657. This effectively cuts out the possibility of the landlord securing an extortionate or freak rent.
59. In addition, the allusion to an ‘open market rent’ within s 34 must, seemingly, be in contemplation of a ‘willing tenant’ as otherwise it might be said that no ‘market’ would exist.
60. Giannoukakis Ltd v Saltfleet Ltd [1988] I EGLR 73.
61. Barton v Long Acre, supra.
62. Family Management v Gray (1974) 253 EG 369; Re 5 Panton St, Haymarket (1959) 175 EG 49.
63. Fawke v Viscount Chelsea [1980] 2 QB 441.
64. Ibid. It should be appreciated that no differential rent can be read into a private rent review clause: Clarke v Findon Developments Ltd (1983) 270 EG 426.
65. British Airways plc v Heathrow Airport (unreported) (1991) Chancery Division Transcript, 14 November.
66. Ibid. See also First Leisure Trading Ltd v Dorita Properties Ltd, supra; F. R. Evans (Lee) Ltd v English Electric Co Ltd, supra.
67. See Miah v Bromley Park Estates [1992] 10 EG 91.
68. Harman J, in Simonite (& Others) v Sheffield City Council (1992) Transcript 29 January, for example, felt able to disregard and modify the evidence of valuers that were ‘… honest, experienced and skilled … Since both are human neither is infallible.’ He then went on, with an air of infallibility, to calculate a rent that was so detailed as to include pence as well as pounds.
69. Oriaru v Donta, supra.
70. See Newey B & Eyre v J Curtis & Son Ltd (1984) 271 EG 891.
71. (1982) 266 EG 810. Such evidence must, however, be introduced without recourse to hearsay: English Exporters (London) Ltd v Eldonwall Ltd [19731 I All ER 726.
72. [1956] CLY 1947. This is a potentially detrimental precedent for the tenant because it may encourage the landlord to canvass offers without obligation on the part of those who make them. Such offers may be far from representative of the true value.
73. Harewood Hotels Ltd v Harris [1958]I All ER 104 (a hotel business]. The court indicated that a similar approach could be applied to other businesses with special features such as theatres and race-courses, for example. It served to indicate the earning capacity of the business to a potential lessee.
74. Barton v Long Acre, supra.
75. Cornwall Coast County Club v Bardgrange [1987] 282 EG 166. Support for this conclusion was taken from the House of Lords in Lynall v IRC (1972) AC 680 (not cited in Barton). The premise for the exclusion of trading accounts is that as ‘haggling’ parties in the real world cannot see trading accounts neither should the hypothetical landlord under s 34.
76. —(1962) 185 EG 219.
77. The court will not, however, relax a user covenant merely to justify a higher valuation: Gorleston Golf Club v Links Estate [1959] CLY 1830.
78. Davies u Brighton Corporation (1956) CLY 4963.
79. Section 34(l)(a).
80. O'May v City of London Real Property Co, supra. The policy of the Act is not to compel landlords to renew at less than a market value. Nor does it allow the landlord to argue that a sitting tenant should be prepared to outbid the rest of the market.
81. Section 34(l)(g).
82. ‘Goodwill’ was defined by Lord Macnaughten in Commissioners of Inland Revenue v Muller & Co (1901) AC 217 as‘… the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start’ (at 223,224). Cf'site goodwill' arising from the premises situation: Whiteman Smith Motor Co v Chaplin (1934) 2 KB 35.
83. Section 34(1) (C). A valuation difficulty arises with this disregard in that it is uncertain whether the valuer is to assume that the works have never been carried out; or is to value the premises as improved, but with complex adjustments reflecting the cost of the work and amortisation, for example. See (1985) 275 EG 228 (Fogel & Freedman).
84. Godbold u Martin the Newsagents Ltd (1983) 268 EG 1202.
85. Appleton u Abrahamson (1956) 167 EG 633.
86. Euston Centre Properties Ltd v H & J Wilson (1982) 262 EG 1079.
87. The Law Commission ‘Report on the Landlord and Tenant Act 1954 Part II’ op cit thought that 21 years was a preferable period to 10 or 14 years because the latter were too short.
88. If the tenant did quit, compensation for improvements might be available under Part I of the Landlord and Tenant Act 1927. See (1991) Legal Studies Vol II No 2 at 119.
89. Section 34(l)(d).
90. The Landlord and Tenant (Licensed Premises) Act 1990, subject to certain transitional arrangements, places all on-licensed premises within the protection of the 1954 Act from 11th July 1992.
91. [1967] 2 All ER 548. This case decided that the effect of a protected residential subletting was to be disregarded.
92. Section 34(3). The court may have had this power anyway: Re 88, High Road, Kilburn [1954] 1 All ER 527. The subsection does, however, remove doubt. It would seem from National Westminster Bank v Arthur Young McClelland Moores & Co. (1984) 273 EG 402 that s 34(3) requires the rent review clause to be considered after the market rent has been calculated. This could entail a benefit for the landlord in that the market rent might be higher than if the review clause had been included in the calculation.
93. James (Gowns) Ltd v Harlow Development Corporation, supra. This is so even though the open market tendency is towards upwards-only reviews.
94. O'May v City of London Real Properly, supra.
95. Section 35.
96. O'May v Cig of London Real Property, supra. In Re Albermarle St, supra, Upjohn J made it clear that s 35 gave the court the widest discretion to impose new terms.
97. O'May ibid. See also Gold v Brighton Corporation [1956] 3 All ER 4423.
98. Leslie Godwin Investments Ltd v Prudential Assurance (1987) 283 EG 1565; Becker v Hill Street Properties, supra.
99. Supra at 670. The court refused to increase the service charge obligations of the tenant in the new lease.
100. Cardshops Ltd v Davits supra. Here the landlord failed in the attempt to change a qualified covenant against assignment into an absolute covenant. It imperilled the tenant's goodwill.
101. (1978) 246 EG 739.
104. Supra.
103. Kirkwood v Johnson, supra where the tenant was unable to have an option to purchase inserted into the new lease.
104. G. Orlik (Meat Products) v Hastings and Thanet Building Society, supra.
105. Kirkwood v Johnson, supra. In relation to the option to purchase. Ormrod LJ suggested that if the option in the original lease had not lapsed (ie a time limit had been imposed and passed) it could have been transmitted under s 32. It did not, in any event, fall within the jurisdiction conferred by s 35.
106. O'May v City of London Real Property, supra. See also Re Albermarle St, supra.
107. Cairnplace Ltd v CBL, supra.
108. Ibid. The court can impose a term that the tenant provide a guarantor or insure the premises, even though the term would depend on third parties for efficacy and co-operation.
109. Ibid. The court could not include a term as to the payment of the landlord's costs and, thereby, deprive the tenant of the protection afforded by s 1 of the Costs of Leases Act 1958. Such a term can be included only by agreement.
110. O'May v City of London Real Property, supra; Hyams v Titan Properties Ltd (1972) 224 EG 201 7. This should be more than merely revising the language of the lease and should reflect changes in the law, building techniques and management practices, for example.
111. Re 5 Panton Street, supra.
112. Cairnplau Ltd v CBL, supra.
113. Propounded at first instance, accepted by the Court of Appeal and tolerated by the House of Lords in O'May, supra.
114. The current and unsatisfactory position was recognised by the Law Commission ‘Landlord and Tenant: Reform of the Law’ (1987) Law Com. No 162 at 4.55, 4.56. The report concluded that ‘… it may be that legislation should seek to clarify the position or change the balance between the parties … because the value of substantial properties is greatly influenced by the acceptability of the lease terms to investment institutions … The interests not only of landlords and tenants, but also of general policy toward commercial property, need to be balanced, and this is a topic that would repay detailed consideration.’ (at 4.56). This is a consideration which is still awaited.
115. Working Paper No 111 op cit. at 3.6.1.
116. Ibid at 3.6.2.
117. Ibid at 3.6.6.