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Court of Appeal Rules on Business Partners Right to Apply for a New Business Tenancy

Nov 12, 2014

The Court of Appeal, in the recent case of Lie v Mohile (2014) EWCA Civ 728 has had to consider who can make a valid application for a new business tenancy.

If you are a tenant of a business lease you have a statutory right to renew your lease, if your lease does not explicitly exclude such a right and if you satisfy the criteria contained in s23 of the Landlord and Tenant Act 1954.

The criteria state that there must be a tenancy that relates to the premises, the premises must be occupied for the purpose of running the business and the business must be carried out by the tenant. The criteria also sets out that there are specific tenancies which are excluded from the right to renew, excluded tenancies include tenancies for six months or less and farm business tenancies.

If your tenancy satisfies the criteria and is not excluded you have a statutory right to renew the lease at the end of your contractual term.

In Lie v Mohile the parties were two doctors who were partners under a partnership agreement. The partnership business operated from a property owned by only one of the parties (Mohile). Mohile attempted to dissolve the partnership but did not do so correctly and therefore the partnership carried on. Lie then applied to Court for the grant of a new tenancy to only himself.

The case went to the Court of Appeal and it was decided whether or not an application for a new business tenancy made by only one of two business partners was valid or not.

The Court of Appeal held that the application for a new business tenancy was not valid. Their reasoning in coming to this decision was based heavily on the judgement in the case of Jacobs v Chaudhuri. In this case it was held that both joint tenants must make an application for a new business tenancy unless a statutory exception could be applied. Interestingly an exception is allowed for partnerships. However to take advantage of this exception, Lie had to satisfy the Court that 4 criteria had been satisfied. The Court of Appeal agreed that the lease was held by at least two joint tenants, that the property granted by the lease was occupied for the business run by Lie and Mohile and that Lie and Mohile operated the business as partnership. It was however not satisfied that the business was carried  on by one or some only of the joint tenants as property granted by the lease continued to be occupied by both Lie and Mohile. Lie’s appeal was therefore dismissed.

It is therefore important for business tenants to be aware of the Courts strict interpretation of the statutory provisions surrounding the renewal of business tenancies. The Court of Appeal has made it clear that both joint tenants must apply for a new tenancy under the Landlord and Tenant Act 1954 for it to be valid unless a statutory exception applies. Further the Courts are not prepared to consider extensions or additions to the exceptions already in place.  

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