The recent case of TFS Stores Ltd v The Designer Retail Outlet Centres (Mansfield) General Partner Ltd & Ors (the Mansfield Case) offers some much needed clarity.
The Landlord and Tenant Act 1954 (the 1954 Act) provides for a tenant to have the statutory right to renew their lease at the end of the term. Where the landlord and tenant agree as part of a letting that the tenant will not have security of tenure it is necessary to follow the contracting out procedure to ensure that the tenant does not acquire any rights under the 1954 Act. This involves the lease being for a term of years certain, serving a notice on the tenant and the tenant completing either a statutory declaration or a simple declaration.
Both the notice and the declaration have to be in a set format for the contracting out procedure to be effective. If the correct procedure is not followed, the tenant might inadvertently acquire security of tenure. The procedure is set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (the Order).
Under the Order, one of the prescribed details that must be included in the declaration is the term commencement date of the lease being granted.
In the case of TFS Stores Ltd v The Designer Retail Outlet Centres (Mansfield) General Partner Ltd & Ors (the Mansfield Case), the tenant sought to challenge whether the leases were correctly contracted out in accordance with the Order on the basis that the term commencement date specified in the declarations was imprecise and could therefore not be held to be for a term of years certain as it referred to either “the dates on which the tenancy is granted” or “to be agreed between the parties”. The Court of Appeal held that the purpose of including the term commencement date was to link the declaration to the lease in question. The Court of Appeal acknowledged that the term commencement date might not be known in advance and that the types of expressions used by the landlord in the declaration was necessary. The Court of Appeal therefore decided in favour of the landlord that the leases were correctly contracted out.
This is good news for landlords as there is little guidance from Parliament as to how exactly this element of the declaration is to be completed. The Government has indicated its intentions to review the commercial landlord and tenant legislation and the Law Commission is currently consulting on reforms to the 1954 Act, this may mean clarification or reform to deal with problematic areas such as this.