Has your commercial lease been validly contracted out under the landlord and Tenant Act 1954?

In a recent case FS Stores Limited v The Designer Retail Outlet Centres (Mansfield) General Partners Limited and others [2019] the High Court considered whether six separate commercial leases had been validly contracted out of the Landlord and Tenant Act 1954.

TFS Stores Limited (“TFS”) which trades as The Fragrance Shop is a large retail operator with over 200 stores nationwide. TFS claimed that six of its leases at a number of McArthur Glen outlet shopping centres had not been validy contracted out of the 1954 Act so that they were entitled to renew the leases at the end of the contractual term.

The court was asked to consider 3 issues:

1. Whether solicitors for the tenant, in the case of two of the tenancies, had authority in each case to accept service of the “warning notices” served under the contracting out procedure;
2. Whether a particular employee of the tenant who executed statutory declarations had authority to do so;
3. Whether the wording in the statutory declaration was validly completed and in particular whether the commencement date specified by a tenant was correct.

The court decided that the tenant's solicitors had actual authority to accept service of the warning notices and even if they did not, they had “ostensible authority”. The Court also decided that the retail director, who had signed the statutory declarations, had express authority to execute the declarations and in any event the landlord was entitled to believe that he had authority.

So far as the validity of the commencement date specified is concerned, TFS said that the statutory declarations were all defective because they failed to specify the commencement date of the term of the proposed tenancy correctly. However it is common for parties to a lease not to know the actual date of the commencement of the lease and for solicitors to use a form of wording in the declaration such as "for a term commencing on a date to be agreed by the parties". The court decided that using wording that refers to the commencement date in this way, or some other formula, was a satisfactory approach and it was not necessary to have an express date in order for the declarations to be valid.

Comment

The court was invited by the landlord to find that the tenant’s CEO knew full well that TFS had entered into tenancies that were contracted out and what that meant and further that he knew that the claim that the procedures had not been followed, was false and simply a device to buy time. The court said there was some force in this argument but was unable on the evidence to come to the conclusion that “his solicitors came up with technicalities in the contracting out process and could not have had any faith in the arguments”.

In the circumstances TFS was lucky to avoid having to pay double rent for holding over ‘wilfully.’

The case reinforces the position that Courts will be reluctant to allow tenants to raise minor technical invalidities in the contracting out procedure in order to try to gain statutory protection under the 1954 Act.

If you would like advice regarding your commercial lease please contact Johanne Spittle on 01904 716018 or email johanne.spittle@warekay.co.uk.