Lawbite: Parliamentary purpose is key when contracting out of the 1954 Act

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate litigation

21-05-2021

TFS Stores Ltd v BMG (Ashford) Ltd et al [2021] EWCA Civ 688

The Court of Appeal has unanimously dismissed TFS’s challenge of the High Court decision in this case involving the procedure followed to contract out six leases from the protection of the Landlord and Tenant Act 1954 (“1954 Act”).  

The procedure for contracting out is set out in Schedule 1 of the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (the “2003 Order”) and, briefly, requires a notice to be served by the landlord warning the tenant of the consequences of contracting out of the 1954 Act and for the tenant to make a declaration acknowledging that it is losing its 1954 Act protection. The warning notice and tenant declaration have to be in, or substantially in, a form prescribed by the 2003 Order.

The parties had followed the contracting out procedure before entering into the leases in question.  When these leases expired and the various landlords decided not to grant new leases however, TFS, as tenant, claimed that the procedure was not correctly followed and as such the leases were protected by the 1954 Act.

The issue on appeal was whether the various ways in which the terms of the leases were described in paragraph 1 of the tenant’s declarations meant that the declarations were not "in the form, or substantially in the form" prescribed, with the consequence that the parties' purported contracting out from the security of tenure provisions of Part II of the 1954 Act was void.  These descriptions included ones by reference to an access date provided in an agreement for lease and ones "for a term commencing on the date on which the tenancy is granted".

The Court concluded that there was no reason why a formula couldn’t be used to complete that part of the paragraph.  This included using words such as "from a date to be agreed" if necessary, for example where the date of the lease (or agreement for lease) is not known in advance.  Parliament had, by the 2003 Order sought "to make the renewal or termination of business tenancies quicker, easier, fairer and cheaper" whilst giving the proposed tenant appropriate protection. To reach a different conclusion would introduce a technicality into the declaration that the 2003 Order sought to eradicate. 

Key points

• a key point is the necessity for the declaration as a whole to fulfil all the essential purposes of the prescribed form. Despite the use of apparently mandatory language, Parliament should not be taken to have insisted on an interpretation which is contrary to commercial sense
• there was some commentary in the judgment around paragraph 1 of the declaration. Males LJ suggested that provided that the way paragraph 1 as a whole is completed left no room for doubt as to the lease which is the subject of the declaration, its essential purpose (being to identify the lease) had been fulfilled.  Arnold LJ was doubtful, however, whether it was even necessary for the date, taken together with the other information in the declaration, unambiguously to identify the lease in question, “…since extrinsic evidence may well be available which assists in such identification…”. It was not necessary for the purposes of this appeal to reach a conclusion on that issue 
• this appeal was originally due to be heard in June 2020 but, on application from TFS, the court concluded that the temporary stay on possession proceedings under PD 51Z applied to this case and as such the hearing was adjourned