In the UK, the Landlord and Tenant Act 1954 provides security of tenure for commercial tenants, protecting them from being evicted without due process. However, the interpretation and application of this security of tenure can become complex, particularly when the terms of occupancy are under dispute, as illustrated in the recent case between Arapina Bakery Ltd and Green Alpha UK Ltd.
Security of tenure
Security of tenure provides a significant advantage for commercial tenants, giving them the statutory right to renew their business leases at the end of the lease term. This is a vital component of long term business security. After all, a business that has to relocate to a different premises could be damaged by having to move. This is particularly true for retail companies like the subject of this case, Arapina Bakery, who spent time and money building up customers in a particular location.
Arguments
In this case, Arapina Bakery Ltd (the Claimant) argued that it had security of tenure under the 1954 Act, claiming that their eviction was unlawful. The Defendant, Green Alpha UK Ltd, countered this claim, arguing that no formal lease was ever established, as the Heads of Terms were marked “Subject to Contract,” indicating that the parties did not intend to be legally bound until a formal lease was executed.
The Defendant’s argument relied heavily on established legal principles, including the notion that negotiations under the “subject to contract” umbrella do not create binding legal relations. The case of Javad v Aqil [1991] 1 WLR 1007 was cited, where the Court of Appeal found that no periodic tenancy could be inferred when terms of tenancy were not agreed upon, reinforcing the position that no tenancy under the 1954 Act was created.
Our thoughts
This case highlights the importance of clearly defined agreements in commercial leases and the potential pitfalls of informal or “subject to contract” arrangements. For landlords and tenants alike, ensuring that all terms are explicitly agreed upon and documented is crucial to avoid disputes over tenancy rights.
As commercial property transactions continue to evolve, especially with the increasing complexity of property laws, both parties must seek legal clarity from the outset to protect their interests and avoid costly litigation.
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