A Business Partner`s Entitlement to Apply for a new Lease under the landlord and tenant act 1954

The Court of Appeal (CA) has very recently decided that an application for a new business tenancy made by one of two business partners was not a valid application where the existing lease was held by both partners.  The CA’s decision held that both joint tenants must join in any application for a new tenancy under the Landlord and Tenant Act 1954 (“the Act”) unless there is an applicable statutory exception.  The case in question is Lie v Mohile [2014] EWCA Civ 728.

 Under the Act the tenant of a business lease has a statutory right to a new lease at the end of the contractual term if it satisfies section 23 of the Act.  The qualifying criteria can be broken down as follows:

• Is there a tenancy?
• Does the tenancy relate to premises?
• Are the premises occupied for the purpose of a business?
• Is the business carried on by the tenant?
• Does the tenancy fall within any of the specific exclusions?

If the first four conditions are satisfied (and the tenancy does not fall within any of the specific exclusions), the tenant will have a statutory right to a lease renewal at the end of the contractual term.

The Lie v Mohile case concerned a medical partnership comprising two GPs whose practice operated from a property, the freehold title of which was owned by Dr Mohile, one of the two partners.  He granted a periodic tenancy to himself and his partner, Dr Lie, the rent for which was paid by the relevant PCT.

The relationship between the partners soured and Dr Mohile (M) gave notice to Dr Lie (L) to dissolve the partnership and terminate the periodic tenancy.  L applied for a new tenancy under the Act, which M opposed on the basis that he wished to practice as a sole practitioner from the property.  The judge in the court of first instance imposed an injunction, restraining M from excluding L from the property, but L’s application for a new tenancy was refused.  The judge ordered that the injunction remain in place until the dissolution proceedings were concluded.  L appealed the decision not to grant a new tenancy to him.

The CA held that the “tenant” for the purposes of any new tenancy must be all the joint tenants under the previous lease and any application would need to be made by all of those joint tenants.  Section 41A of the Act creates an exception where not all the joint tenants continue to use the demised premises for the purpose of the partnership.  The CA decided that the section 41A exception would not apply in this case as both tenants continued to operate from the same premises.

This case sends a message to all those working in partnerships to consider how property is held and managed by their partnership.  It is important to understand the legal structure surrounding practice property and its relationship with events that may occur during in the lifetime of the partnership.  It is also important for business tenants to be aware of the Courts strict interpretation of the statutory provisions surrounding the renewal of business tenancies. The CA has made it clear that all joint tenants must apply for a new tenancy under the Landlord and Tenant Act 1954 for it to be valid unless a statutory exception applies and that the Courts are not prepared to consider extensions or additions to the exceptions already in place.