Securing tenant rights on lease renewal

TO TENANTS OF most business premises, the right to lease renewal under the Landlord and Tenant Act 1954 (the Act) would be of little value unless they were also guaranteed easements and rights equivalent to those enjoyed under the current tenancy. This fact is implicitly recognised both by the Act and by the courts. But exactly what can a tenant insist upon?

The Landlord and Tenant Act 1954

In short, the effect of s 32(1) of the Act is that if the court makes an order for the grant of a new tenancy, that tenancy will be a tenancy of the holding. By virtue of s 23(3) 'the holding' means the property comprised in the current tenancy, other than any part or parts not occupied by the tenant or his business employee. Section 32(3) then provides that where the current tenancy includes rights enjoyed by the tenant in connection with the holding, those rights shall be included in the new tenancy.

Easements

It is clear from the decision of the Court of Appeal in Nevill Long and Co (Boards) Ltd v Firmenich and Co [1983] 2 EGLR 76 that the word 'rights' in this context includes rights in the nature of easements, where they are additional to other property included in the current tenancy. In that case, the tenant enjoyed under its lease rights of way over adjoining land also owned by the landlord, which gave access to the rear of the demised premises. During the contractual term of the lease, that adjoining land was sold to a third party. The tenant was successful in obtaining a declaration from the court that the rights of way would continue after the expiry of the contractual term of the lease, pursuant to the Act.

It follows, of course, that the rights must not have expired or lapsed at the point at which the matter comes before the court. In Kirkwood v Johnson [1979] EGLR 82, the Court of Appeal held '“ without deciding whether an option could qualify as a right for that purpose '“ that an option contained in the lease to acquire the reversion, because it had lapsed three months before the expiry of the contractual term of the lease, could not be regarded as a 'right enjoyed by the tenant' within the meaning of s 32(3).

Other rights

The High Court has held that purely personal rights '“ as opposed to rights in the nature of easements '“ fall outside the scope of s 32(3). The tenants in Re No. 1 Albemarle Street [1959] 2 WLR 171 enjoyed under their lease a right in the nature of a licence to maintain advertising signs on land outside their demise. It was held that that this was not a right covered by s 32(3). However, the judge went on to hold that he had jurisdiction under s 35(1) of the Act, when determining the other terms of the new tenancy, to include a similar term and he so ordered.

Picture Warehouse Ltd

In The Picture Warehouse Ltd v Cornhill Investments Ltd [2008] EWHC 45 (QB); [2008] 12 EG 98 the lease granted no rights to park vehicles externally. However, the tenant had the benefit of a licence or permission granted by means of a separate letter of assurance for its customers and delivery men to park no more than two vehicles for up to thirty minutes on the forecourt outside the demised premises. It sought on renewal to include in the new tenancy an express right to park two vehicles on the forecourt.

On appeal from the Mayor's & City of London Court, Jack J held that whatever rights the tenant had were outside the current tenancy and so were also outside s 32(3). This followed from the plain wording of the statute, and there was no reason to strain its wording and give it a wider meaning.

The judge then considered whether a right to park on the forecourt should be included as a term of the new tenancy under s 35(1). He noted that there was clear authority in both G Orlik (Meat Products) Ltd v Hastings and Thanet Building Society [1974] 29 P&CR 126 and J Murphy & Sons Ltd v Railtrack Plc [2002] EWCA Civ 679; [2002] 19 EG 148 (CS) for the proposition that the court had no jurisdiction under s 35(1) to enlarge the holding by ordering the grant of an easement over the landlord's land that the tenant had not previously enjoyed.

What was open to the court under s 35(1) was to include in the new tenancy a provision conferring on the tenant a right no greater than that given by the letter of assurance.

He concluded, however, that in the circumstances it was inappropriate to do so, and that the tenant should be left to rely upon the terms of the letter of assurance for such rights as it conferred.

Conclusion

This decision provides a useful reminder to tenants, when first taking premises, of the need to ensure that all rights necessary for their enjoyment are granted within the lease as easements so as to qualify later for protection under the Act.