Court of Appeal clarifies commercial lease contracting out procedure

Under the Landlord and Tenant Act 1954, commercial tenants have the benefit of a statutory right to renew their lease at the end of the original contractual term. If the parties do not intend for this right to apply, they must agree to exclude the lease from the statutory provisions and follow a specific procedure set out in the 1954 Act.

As part of the procedure, a tenant has to make a declaration setting out the details of the lease and confirming that they have received notice of the intention to exclude their statutory renewal rights from the proposed lease. The declaration must be “in the form or substantially in the form” prescribed by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003.

Since the introduction of this statutory procedure, there has been a question mark over how to describe the start date of lease term in the tenant’s declaration so that it complies with this requirement. Of course, if the date of the lease term is known at the time the tenant makes the declaration, then it is simply a matter of setting out the date. However, where the date is not yet known, for example where the start of the term will be the date the lease is completed, then solicitors have had to use different wording to describe the start of the lease term.

In the cases of TFS Stores Ltd v Designer Retail Outlet Centres (Mansfield) General Partner Ltd and BMG (Ashford) Ltd v TFS Stores Ltd [2021] EWCA Civ 688, the Court of Appeal has held that using a formula to describe the date on which a lease term will commence, will comply with the requirements of the 2003 Order, provided that the declaration as a whole is sufficiently worded so that the lease can be identified.

This is a welcome decision for practitioners who have long used formulae to describe the start of the lease term in the tenant’s declaration.

Our Commercial Property expert and partner, Laura Mather comments: “If you are negotiating a new lease, either as a landlord or a tenant, having the right legal advice is key. Our commercial property team can assist you to ensure that you are fully aware of your rights and obligations and that the lease you end up completing complies with the statutory requirements needed to reflect the agreement you have reached with the other parties involved.”

If you are entering into a commercial lease either as a landlord or a tenant, we have expert solicitors who will be able to assist you. 

Contact us today to find out how our team can assist you.