THE LANDLORD & TENANT ACT 1954 – IT STILL HAS TEETH.

The security of tenure provision provided to business tenants by the Landlord and Tenant Act 1954 are mother’s milk to all law students. Sadly, in my lifetime, we’ve seen a steady erosion of the protection. Now, commercial premises are routinely offered for tenancies which exclude the tenant’s rights under the Landlord and Tenant Act 1954.

So much so that young lawyers today take an exclusion of the Act for granted. They don’t even raise an eyebrow when heads of terms land on their desk referring to an “L&TA excluded tenancy”.  

Goodwill in a site

But what if the proposed tenancy is for premises to be used in a business start-up? And the business is a shop or restaurant? Routinely excluding the Landlord and Tenant Act 1954 deprives the tenant of their goodwill in the site. It ends up with a gift of the goodwill to their Landlord on expiry of the business tenancy. The landlord then picks up a rent from the next tenant enhanced by the hard-earned goodwill of the original tenant.

County Court disables security

Fortunately, there are still lawyers out there who understand that. McDonalds’ solicitors were alive to the risk when they negotiated a tenancy for premises at the County Hall in London. It’s a prime site almost opposite the Houses of Parliament and Big Ben. But, in law, nothing is simple. The landlord made use of the provisions in the Landlord and Tenant Act 1954 which disable security to the tenant. This can apply where the landlord wants the premises back for its own use.

High Court finds misrepresentation

However, it didn’t work out that way in the end. In McDonald’s Restaurants Limited v Shirayama Shokusan Company Limited [2024] EWHC 1133 (Ch), the court held that the landlord had obtained its tenancy termination order through misrepresentation. Its case was that it needed the premises back so it could open its own high end Japanese restaurant on the site to enhance presentation of Japanese culture at its County Hall premises.

McDonalds could be forgiven for chagrin at the loss of its tenancy. Perhaps it was incensed by its landlord’s reference to its restaurant as “a junk food outlet”. They refused to take the county court’s termination order lying down. Possibly anticipating misrepresentation, McDonalds lawyers persuaded the county court judge to require the landlord to give the court an undertaking to carry out the works it presented to the court in support of its application for a termination order.

In due course, one of McDonalds’ lawyers noticed that there was no work proceeding at the premises in pursuit of the undertaking given to the county court judge. McDonalds then applied to the High Court alleging misrepresentation and deceit and claiming damages against its former landlord.

Preliminary decision on liability

In a preliminary decision on liability, the court decided that there was misrepresentation but stopped short of finding deceit. The case will now proceed to resolve McDonalds’ claim for damages.

The L&TA tenant’s right is for the grant of a new tenancy on the same essential terms as the old one. In this case the original tenancy was for 20 years. It follows that the starting point for McDonalds claim will be for 20 years loss of profit from this site. No doubt mediation will prevail and there will be a settlement. Whether or not it was a “junk food outlet”, it was almost certainly a profitable one…..

Philip

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