The Landlord and Tenant Act 1954 provides a tenant of commercial premises with a statutory right to apply for a new tenancy, as long as the nature of the tenancy satisfies certain preliminary criteria.
Once the criteria have been satisfied, there is usually no controversy over whether the tenant can exercise its statutory rights.
However, the position is more complicated where the tenant is a business partnership and there is or has been a dispute between the partners. The question may arise as to whether one (or some) but not all of the partners have the right to apply for a new tenancy to the exclusion of the other partner(s).
This was the scenario contemplated by the Court of Appeal in the recently decided case of Lie v Mohile [2014] EWCA Civ 728. The matter concerned section 41A of the 1954 Act, which states that an application can be made by one or some partners (but not all) if all the following conditions are met:
- the lease must be vested in at least two joint tenants;
- the demised premises must include premises occupied for the purposes of the business;
- the business must at some time during the tenancy have been carried on in partnership by all the joint tenants; and
- the business must now be carried on by at least one of the joint tenants, either alone or in partnership with other persons, with no part of the property being occupied under the tenancy for the purposes of a business carried on by the other joint tenant or tenants.
In the above case, Lie and Mohile were two doctors in general practice. Mohile owned the property and had granted a tenancy to himself and Lie as a partnership.
Mohile tried to dissolve the partnership but his attempt was later held to be ineffective due to a defective notice of dissolution. He then served on himself and Lie a section 25 notice, terminating the tenancy. Lie made a Court application under section 24 of the 1954 Act, asking that a tenancy be granted in his sole name. Mohile objected to the grant of a new tenancy on the basis that he wanted to continue to run his practice from the premises, but without Lie (utilising section 30(1)(g) of the 1954 Act as a ground of objection).
The main question the Court had to consider was whether Lie could make a section 24 application at all, given the conditions set out in section 41A, particularly the first and fourth conditions. The Court of Appeal applied these conditions to the facts as follows. The first condition is satisfied because Mohile’s attempt to dissolve the partnership was not effective, ie the partnership still existed and the tenancy was still vested in the names of both partners.
The fourth condition is not satisfied, however, because the premises were still occupied by both partners. In order for the fourth condition to apply, one or more partners must have ceased to have used any part of the premises for business purposes. As this was not the case, Lie could not rely on it.
What the case means
In short, the case affirms the position that where a lease or tenancy is granted to a partnership, then when it comes to renewal the tenant’s application must usually come from all of the partners. It is only in very limited circumstances that the Court will hear an application from fewer than all the partners. Such circumstances are where one or more of the partners are no longer in the partnership and do not trade from any part of the premises – only then may the remaining partners apply for a tenancy in their names only.
This article was written by Sean Gallagher, Commercial Property Solicitor at Ison Harrison. If you would like to speak to Sean about this or any other Commercial Property matter you can contact him on 0113 284 5057 or e-mail at sean.gallagher@isonharrison.co.uk
