Security of tenure? No lease...

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Bex6486

  • #1
    We run a PT business with 2 PT studios. Both are in former retail units that we were granted change of use for.
    We have occupied one of the studios since July 2003 - we have never had a lease there but had a 3 year 'Management Services Agreement' or licence which states that we would pay a licence fee for the 'non exclusive use of the premises' and the owner would pay us a management fee. In reality this meant us paying him rent minus the 'management fee'. The owner has never had any connection with our business and it's worth noting that we have always had exclusive use. It is also worth noting that he is a Lawyer....
    The licence arrangement states that : neither the payment of or any demand for Fees nor the fact that the amount of the Fees is calculated by reference to a period shall create or cause this Agreement to become a tenancy'.
    However throughout the document referral is made to 'Landlord' and 'Tenant'.
    In Declarations at the end of the document it states:
    'This Agreement does not include any rights over any other property except any rights expressly granted by this Agreement. Section 62 of the Law of Property Act 1925 is excluded'.
    'The manager does not acquire any security of tenure under the Landlord and Tenant Act 1954 Part II.'
    This licence expired in July 2006. We are still operating from the premises.
    We are trying to find out what our legal position is... does no tenancy agreement mean no security of tenure despite the fact that we have been in the same premises for 15 and a half years? The owner wants to increase the rent (beyond market value) and we have objected. He is now saying we have to pay what he demands or leave (and his wife will take over the property to run her business...) - any help or suggestions would be very gratefully received...
     
    C

    ComPropSolicitor

  • #2
    Interesting one. That's for sure. You certainly need to regularise the position. Preferably via way of a New Lease or Licence. That said, appears to me that the intended grant of a Licence would probably be constructed by law to be a Lease by virtue of it actually affording to you exclusive possession - which a Licence cannot do.

    My opinion would be that this would give you argument to suggest that you attract protection via way of the LTA 1954 (security of tenure for commercial premises) and you are therefore questionably in occupation via way of hold-over.
     
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    M

    Michael Loveridge

    Free Member
    Aug 2, 2013
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  • #3
    The first thing to say is that this advice is based solely on what you've said in your question, and I (and anyone else trying to assist) would need to read the licence document before being sure about the advice.

    However, on the basis of what you've said I would take the view that you are almost certainly protected as a business tenant under Part II of the Landlord and Tenant Act 1954.

    The thinking behind this Act was that when a business has been in the same location for a while it builds up goodwill, and the landlord should not just be able to turf them out on a whim. It's ironic that business tenants now have better protection and security than residential tenants.

    You can't make a lease into a licence just by calling it a licence. As you had exclusive possession of the property I'd take the view that it was a lease right from the outset. It follows that when the `licence' expired you continued to occupy - known as `holding over' - on the same basic terms as to rent and so on.

    This means that you're in the same position as if you'd been granted a conventional lease at the rent you're currently paying back in 2006.

    I'm assuming there is no rent review provision in the `licence', in which case the landlord can't increase your rent without your agreement.

    Furthermore, if he wishes to terminate your lease he needs to serve you with a `section 25 notice', giving you a minimum of 6 months' notice. The LTA gives you a legal right to a new lease, and if you can't agree terms either of you can ask the court to decide them for you.

    Although the landlord is entitled to object to your having a new lease, he can (assuming you've generally behaved yourself as a tenant by paying the rent etc) only do so on specified grounds, and he needs to prove his case.

    One of the grounds is that he wants the premises for his own occupation. However, wanting it for his wife doesn't count unless the property's in their joint names. It would be helpful if you could get him to put it in writing that he wants it for his wife's business, as he would then be unable to oppose your request for a new lease - though as a solicitor he's probably not that stupid.

    But even if he managed to succeed on that ground he would have to pay you compensation for ending your tenancy. Normally, this is a sum equivalent to the rateable value of your property, but when you've been in occupation for at least 14 years the compensation doubles to twice the rateable value.

    So you're potentially in a much stronger position than you think, but I'd recommend that you get some professional advice (and probably representation) so that you can negotiate on equal terms with the landlord.
     
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    E

    Engage Legal

  • #4
    Some very useful advice above.

    As noted above, termination of LTA protected tenancies is a pretty technical area, so (assuming it applies) you should make sure the landlord complies with his obligations under that.

    You say the owner / landlord is a lawyer. Chances are he will know what he is doing, so all the more reason for you to get some professional advice to protect your position properly.
     
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