Business Tenancies notes PDF

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Collette Harkin

Land Law Notes

Business Tenancies notes

The legislation for -

NI is the Business Tenancies (NI) Order 1996 (BTO)

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E&W is the Part II Landlord and Tenants Act 1954 (LTA)

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These provisions are almost identical

A business tenancy legislation provides security of tenure to business tenants.

Tenancies that are protected England and Wales 

Section 23 (1) of the 1954 Act states “subject to the provisions of this Act, this part of the Act applies to any tenancy where the property comprised in the tenancy is to include 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”.

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A subtenant will also be protected.

Northern Ireland 

Section 3 (1) of the BTO states “Subject to the provisions of this Order, this Order applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by the tenant, or for those and other purposes.”

Tenancies that are not protected England and Wales 

Section 43 of LTA - agricultural leases, mining leases, some fixed term leases of nine months or less (depending on duration of actual occupation – less than 18 months)

Northern Ireland

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Tenancies that are not protected are stated in Article 4 which is summarised as agricultural leases, mining leases, some fixed term leases of nine months or less (depending on duration of actual occupation – less than 18 months)

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Provisions are the exact same. (1)This Part of this Act does not apply— (a)to a tenancy of an agricultural holding; (b)to a tenancy created by a mining lease ; (c)to a tenancy where the property comprised therein is let under a letting to which the restrictions on the obtaining of possession by the landlord imposed by section three of the Rent and Mortgage Restrictions (Amendment) Act, 1933, apply in relation to the tenant, or would apply but for subsection (7) of section twelve of the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920; or

(d)to a tenancy of premises licensed for the sale of intoxicating liquor for consumption on the premises, other than premises where— (i)the excise licence for the time being in force is a licence the duty in respect of which is the reduced duty payable under paragraph 3, 5, 6, 10, 11 or 12 of the Fourth Schedule to the Customs and Excise Act, 1952, or a licence granted on the provisional payment of reduced duty with a view to subsequent adjustment to the duty payable under the said paragraph 3 or the said paragraph 6 ; or (ii)the Commissioners of Customs and Excise certify that no application under any of the said paragraphs has been made in respect of the period for which the excise licence for the time being in force was granted, but that if such an application had been made such a licence as

is mentioned in sub-paragraph (i) of this paragraph could properly have been granted.

Note – periodic tenancies – weekly, monthly or yearly duration are not excluded but are unlikely to give rise to the same problems

Element 2:Must be a Tenancy England and Wales and NI  

a licence to occupy will not be protected. Shell Mex and BP Ltd v Manchester Garages [1971] 1 WLR 612 - The defendant, by agreement, was allowed to use a petrol company’s filling station to sell petrol. The agreement did not grant exclusive possession. Held:The defendant was a Licensee.

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Lord Denning MR: "Broadly speaking, we have to see whether it is a personal privilege given to a person (in which case it is a licence), or whether it grants an interest in land (in which case it is a tenancy). At one time it used to be thought that exclusive possession was a decisive factor. But that is not so. It depends on broader

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Land Law Notes

considerations altogether. Primarily on whether it is personal in its nature or not….In my opinion the agreement was only "personal in its nature" and created "a personal privilege" “I realise that this means that the parties can by agreeing on a licence, get out of the Act; but so be it; it may be no bad thing.” 

This was replaced by the approach in Street v Mountford. The principle of street v Mountford will apply with business tenancy.

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Street v Mountford (1985)

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Mr Street, by an agreement which stated that it was a licence, granted Mrs Mountford the right to occupy rooms 5 & 6 of the property 5 St Clements Gardens in Boscombe for a rent of 37.00 per week. The question for the court was whether the agreement was, as expressed in the agreement, a licence, or whether it was in fact a lease. The terms of the agreement included that Mr Street could enter the rooms at any time to inspect , to read the meter, to carryout maintenance and install or replace furniture or for any other reasonable purpose. No one other than Mrs Mountford could occupy or sleep in the room without permission. No children or pets were allowed. The licence could be terminated by 14 days written notice. The agreement also stated the that the licence did not and was not intended to give a tenancy and conferred no protection from the Rent Acts.

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Held: The agreement was a lease. Lord Templeman stated “If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence.”

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Reasoning

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A lease can be defined as the grant of exclusive possession for a term at a rent (although rent is not strictly required)

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A court is entitled to look behind the label given to an agreement to decide whether in fact a lease was granted, but disguised as a licence

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The agreement here was clearly a lease, therefore Mountford was entitled to legislative protection under landlord and tenant legislation

Exclusive possession to tenant England and Wales and NI 3

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By merely wording what is in reality a tenancy a license, the landlord cannot escape the provisions of the legislation.

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It was highlighted in the case of Dresden Estate Ltd v Collinson (1987), that ‘the attributes of a residential premises and a business premises are often quite different’ and that ‘the indicia, which may make it more apparent in the case of a residential occupier that he is in fact a tenant may be less applicable or be less likely to have that effect in the case of some business tenancies’.

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In this case, the landlord retained the right to move the tenant to a different premise. This was held to be in consistent with the right of exclusive possession and therefore inconsistent with the existence of a tenancy.

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In Addis combe Garden Estates Ltd v Crabbe [1958] 1 QB 513

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Lawn tennis club had stated object “to carry on the business of a lawn tennis club” and held premises under a (purported) licence – club remained in occupation after expiry of period specified in licence – landlord took action for re-possession of premises and tenant claimed that this was business tenancy. The court held description given to relationship by parties irrelevant – relationship to be determined by law and as there was an intention to grant exclusive possession to tenant demonstrated that the relationship was one of landlord and tenant (rather than licensor and licensee).

Business Premises England and Wales and NI Element 3 “ . . . where the property comprised in the tenancy is or includes premises . . . “

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The word premises, to describe business premises, is used in a wider sense. Such as open land.

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For example, a piece of land leased for training horses has been construed as a business premises.

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Bracey v Reed (1963) established that land could held as a tenancy.

Part of the premise for business use England & Wales 

A tenant must occupy a property or part of a property to gain protection under the 1954 Act.

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Business use must be residential. Statutory codes apply to business and redetian tenancies are regarded as mutually exclusive.

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For the 1954 Act to apply the business use of a premises must be significant purpose of the tenants occupation of the premises.

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Both Cheryl investments ltd v Saldsanha (1978) and Royal Life Saving Society v Page (1978) throw light on the status of mixed residential and business use.

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In the Royal Life Saving Society case, the doctor in the royal life savings had his consulting rooms in Harley Street. By entering into a tenancy of the maisonette where he lived he had asked for, and had been granted, by the landlord, permission to carry on his profession there. Both addresses appeared in the medical directory and both phone numbers put on stationary. However, in practice, the doctor very rarely saw patients at his maisonette. The court held that the professional use of the maisonette was incidental to the business and that the doctor has a Rent Act protected tenancy of the maisonette.

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In Cheryl Investments, on the other hand the businessman had installed a telephone and installed other business equipment in his flat. The business was solely operating from these premises. The courts held that in the case the occupation of the flat was for significant business purpose and was therefore a business tenancy.

Occupation Element 4 “ . . . which are occupied by the tenant . . . (for the purpose of a business carried on by the tenant” 

It is not necessary for tenant to be physically present on premises at all times.

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It depends on upon the degree of control and use of premises.

England & Wales

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In Teasdale v Walker (1985) -The tenant sought protection under the 1954 Act for his lease of premises which he only occupied during the seasonal periods: they were closed and empty in the winter and only used in the summer. Held: That was sufficient to create a protected tenancy, though a mere intention to resume occupation

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if a tenant get a new tenancy will not preserve the continuity of the business user if the thread has once been definitely broken. 

In Graysim Ltd v P & O Property Holdings Ltd [1996], Lord Nicholls stated ‘Occupation’ by a tenant does not require physical occupation by him for him to have the right to renew the lease under the Act. A market operator letting all the stalls in a market area was a protected tenant.

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Premises must be occupied by the tenant personally or by agent – Pegler v Carven

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In Pegler v Craven [1952], Jenkins LJ said at 687 : The conception of 'occupation ' is not necessarily and in all the circumstances confined to the actual personal occupation of the person termed the occupier himself. In certain contexts and for certain purposes it obviously extends to vicarious occupation by.

Northern Ireland 

Article 3 (2) BTO provides that an occupation by accompany where the tenant has controlling interest or occupation by person with a controlling interest where tenant is a company – will be sufficient. 2) Occupation or the carrying on of a business— (a)by a company in which the tenant has a controlling interest; or (b)where the tenant is a company, by a person with a controlling interest in the company, shall be treated for the purposes of this Article as equivalent to occupation or, as the case may be, the carrying on of a business by the tenant; and in relation to a tenancy to which this Order applies by virtue of this paragraph references (however expressed) in this Order to the business of or to use, occupation or enjoyment by the tenant shall be construed as including references to the business of or to use, occupation or enjoyment by a company falling within sub-paragraph (a) or a person falling within sub-paragraph (b).

Break in Occupation Still element 4.. 

Break in occupation can be (a) voluntary or (b) forced by circumstances

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If voluntary court likely to decide that tenant has ceased to occupy for business purposes

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If forced by circumstances, its up to the court to determine if “thread of continuity” has been broken.

England & Wales 

I&H Caplan v Caplan (No2) (1963)- For some months whilst the tenants’ right to a new tenancy was being litigated they had ceased trading and had vacated the premises. They then succeeded before the Court of Appeal and started trading from the premises afresh. Their protection under the 1954 Act was again challenged because of the interruption.

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Held: Though it was ‘distinctly a border-line case’, the ‘thread of continuity’ was not broken. Cross J said: ‘I think it is quite clear that a tenant does not lose the protection of this Act simply by ceasing physically to occupy the premises. They may well continue to be occupied for the purposes of the business although they are de facto empty for some period of time. One rather obvious example would be if there was a need for urgent structural repairs and the tenant had to go out of physical occupation in order to enable them to be effected. Another example would be that which the Court of Appeal had to deal with in Teasdale v Walker [1958] 1 WLR 1076.’

Purpose of a business Element 5 “ . . . for the purposes of a business . . . “

England & Wales 

Section 23 (2) defines a business as including a trade, profession or employment and includes any activity carried on by a body of persons, whether corporate or unincorporated.

Northern Ireland 

Article 2 (2) of Order defines “business” as - A trade, profession or employment and any activity carried on by a body of persons whether corporate or incorporate, whether or not carried out for gain or reward.

Case law

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Abernethie v Klieman [1970] – the claimant was somebody who occupied the premises for conducting the Sunday school. The question was could it be regarded as business. The court held it did not it was more entertainment than an business

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Hillil Property Ltd v Nariane Pharmacy Ltd (1979)– the use of a warehouse, whether storing goods was regarded as a business. The court held even though there was no trading or buy it was still regarded as a business. - Although the premises must be occupied for the purpose of a business the actual business does not need to be carried on at the premises, or every part of the premises. The use of the premises must further the tenant's business .

Does the lease satisfy all 5 elements? 

If so it will be a business tenancy and the tenant shall have security of tenure provided by the legislations.

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If it does not satisfy one or more of the 5 elements, it is not a business tenancy within elements, not business tenancy within meaning of legislation and thus tenant will not have security of tenure provided by the 1954 Act or Business Tenancy Order.

Operation of Order Northern Ireland 

Article 5 (1) – (1) A tenancy to which this Order applies shall not come to an end unless terminated in accordance with the provisions of this Order; and subject to the following provisions of this Order such a tenancy may be terminated by— (a)a notice to determine served by the landlord in accordance with the provisions of Article 6; or (b)a request for a new tenancy made by the tenant in accordance with the provisions of Article 7.

England and Wales 

Section 24 (1) of the Landlord and Tenants Act 1954 - A tenancy to which this Part of this Act applies shall not come to an end unless terminated in accordance with the provisions of this Part of this Act; and, subject to the provisions of section twentynine of this Act, the tenant under such a tenancy may apply to the court for a new tenancy—(a)if the landlord has given notice under the next following section to terminate the tenancy, or (b)if the tenant has made a request for a new tenancy in accordance with section twenty-six of this Act.

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Land Law Notes

Both provisions are the exact same

Notice to Determine Northern Ireland 

Article 6 – Landlord to serve on tenant notice specifying date of termination which must not be more than 12 months or less than 6 months from date of service of notice; Notice to state if landlord willing to grant tenant new tenancy. If landlord willing, must specify general terms of new lease. If not, must state whether application for new tenancy will be opposed and on what grounds (specified in Article 12).

England and Wales 

In order to terminate a tenancy to which the 1954 Act applies, the landlord must serve a notice in accordance with section 25.

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By serving such a notice the landlord puts in mortion the mechanisms of the renewal procedure.

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The notice must be given in the prescribed form and must:

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Section 25 (3) (a) - specify the date at which the tenancy must come to an end.

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Section 25 (5) require the tenant, within two months of giving the notice to notify the landlord in writing, whether or not, at the date of termination, the tenant will be willing to give up the tenancy of the property.

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Section 25 (6)

state whether the landlord would oppose the granting of a new

tenancy. 

According to section 25 (2) the notice must be given ‘more than twelve or less than six months before the date of termination specified in the notice.’

Request for new tenancy Northern Ireland 

Article 7 (1) BTO - (1) A tenant may, , make a request for a new tenancy where the current tenancy is — (a)a tenancy granted for a term certain exceeding 9 months, whether or not continued by Article 5; or (b)a tenancy granted for a term certain not exceeding 9 months, where the circumstances are as mentioned in the exception in Article 4(1)(c); or (c)a tenancy granted for a term certain exceeding one year and thereafter from year to year; or (d)a tenancy granted for a period dependent on the fall of a life or other uncertain event continued by Article 5.

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Article 7 (2) - A tenant's request for a new tenancy shall be for a tenancy beginning with such date, not more than 12 nor less than 6 months after the making of the request, as may be specified

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Article 7 (6) Within 2 months of the making of a tenant's request for a new tenancy in accordance with this Article, the landlord shall serve notice on the tenant— (a)that he is willing to grant a new tenancy on the tenant's terms (or on those terms as modified by an agreement reached between the landlord and the tenant); or (b)that he will oppose ...