Here’s the latest in our series of recent case law updates affecting commercial leases. Among other points, these cases highlight landlords’ responsibilities for following specified processes for serving notice, and their potential legal liability for unlawful activities carried out by their tenants.
Right to Renew and Redevelopment
The purpose of the Landlord and Tenant Act 1954 is to give tenants a reasonable degree of security of tenure, which could only normally be overridden in certain subject to the landlord satisfying certain conditions including the service of appropriate notices or counternotice requesting possession. Where a new lease is to be granted the duration is to be determined as being reasonable in all the circumstances and having regard to the current tenancy.
In B&M Retail Ltd v HSBC Bank Pension Trust (UK) Ltd (2023) the landlord HSBC had failed to protect its ability to seeking possession for redevelopment but sought to mitigate its oversight by seeking an immediately operable break clause in the new lease. Whereas B&M sought a new 10-year term, HSBC proposed an 18 month term with a six month redevelopment break clause.
The question for the court was therefore whether there should be a redevelopment break clause. There was no dispute that the bank intended to redevelop the site and the judge sided with the landlord that planning permission was likely to be given.
Whilst consideration was given to the impact on the Tenant, the court’s decision reinforced the view that security of tenure should not restrict a landlord’s ability to redevelop. A new five-year lease was granted containing a rolling redevelopment break upon six months’ notice.
Landlords’ Liabilities Under the Proceeds of Crime Act 2002
Knowledge of an unlawful use of commercial premises can leave landlords liable to prosecution under the Proceeds of Crime Act, as the case of Regina vs T&M Investments Limited 2023 showed.
The Dubai café in Manchester’s ‘Curry Mile’ was unlawfully operating a shisha bar from retail premises in Manchester. Enforcement action was taken by the council and yet the landlord T & M Investments allowed the lease to continue.
The Proceeds of Crime Act allows the confiscation of assets gained through criminal activity. T&M Investments were therefore prosecuted under the Act. The court deemed that the benefit the landlord had received from effectively turning a ‘blind eye’ to its tenants activities between the date of the Enforcement Notice and the date the landlord eventually brought the tenants lease to an end was over £170,000 and ordered this be repaid.
The case is a reminder to landlords for the need for well drawn leases that allow for forfeiture for planning breeches and unlawful activities carried out on a property by a tenant. Moreover it is a warning for landlords to be vigilant that their properties are not being used for illegal purposes.
Contact Giles Blagden: 0118 959 6144 email: g.blagden@hicksbaker.co.uk
