This presentation from TLT's Annual Commercial Leases Seminar looks at ten common misconceptions about the landlord tenant relationship.

1. TLT LLPTLT LLPTLT LLPTLT LLPTLT LLPTLT LLP
Myth busting
Clearing up some common landlord
and tenant misconceptions
18116719.1
2015 TLT Annual
Commercial Leases Seminar

2. TLT LLP
Myth 1
• A tenant can claim back rent paid in advance for the
period after the break date when it's not in occupation

3. TLT LLPTLT LLPTLT LLP
TLT LLP
No – rent cannot be claimed back
• Marks & Spencer plc v BNP Paribas Security Trust
Company (Jersey) Ltd (2014)
• High Court held term should be implied that rent paid
when tenant not in occupation should be repaid on
successful exercise of break
• Court of Appeal said no term should be implied – parties
should write it in if they want it
• Supreme Court heard appeal from Marks & Spencer last
week – outcome is awaited

4. TLT LLP
Myth 2
• Licences to assign – asking for an undertaking for costs
doesn't stop the clock running

5. TLT LLPTLT LLPTLT LLP
TLT LLP
Yes – time does not stop running
• Landlord's solicitors seek an undertakings for costs
when a tenant seeks consent to assign the lease
• Landlord's solicitors can only ask for reasonable costs
• Can take a few days for tenant's solicitors to get funds to
give the undertaking
• During that time landlord must be considering the
application – cannot wait for its costs to be covered
• Can pick up costs under lease covenant – usually come
through in any event
• Landlord has about 4 weeks

6. TLT LLP
Myth 3
• "Subject to licence" – is the same as "subject to
contract"

7. TLT LLPTLT LLPTLT LLP
TLT LLP
No – the phrases mean different things
• "Subject to contract"
• Phrase used to ensure no contract is formed until the
parties have finished negotiating
• Once lease completed – contract completed
• "Subject to licence"
• Often used when tenant seeks a consent under the
lease – meaningless
• Landlord must comply with Landlord and Tenant Act
1988

8. TLT LLP
Myth 4
• The landlord does not have the right to know the details
of the agreement between the tenant and the assignee

9. TLT LLPTLT LLPTLT LLP
TLT LLP
No – the landlord can ask for details
• Homebase Ltd v Granchester Developments (Falkirk)
Ltd (2015)
• Landlord could not unreasonably withhold consent in the
case of an assignee of sound financial standing
• Assignee met test – Landlord withheld consent
• L argued that a payment was passing between the
parties something like a rent subsidy or reverse premium
• T argued if assignee meets financial test that is enough
• Court agreed with Landlord

10. TLT LLP
Myth 5
• You can agree with a tenant to vary a lease by increasing
the size of the premises

11. TLT LLPTLT LLPTLT LLP
TLT LLP
No – a new lease will come into effect
• If the parties agree to add premises to a lease or want to
extend the length of the term the law steps in
• Automatic surrender of existing lease and grant of a new
lease
• Unintended consequences
• What can you do:
• Grant reversionary lease for additional term
• Grant second lease of extra premises
• Grant a new lease of extended premises or term

12. TLT LLP
Myth 6
• You can get back a non-refundable deposit

13. TLT LLPTLT LLPTLT LLP
TLT LLP
Maybe – you might get a deposit back
• Deposit is the buyer or tenant's demonstration of its
commitment
• If they do not proceed – seller or landlord can keep
deposit
• Cannot contract out of s49 Law of Property Act 1925
• Court may save deposit being forfeited if appropriate in
all the circumstances e.g. not the buyer or tenant's fault
• In some cases deposits may be forfeited if that is what
the contract says and s49 does not apply

14. TLT LLP
Myth 7
• To surrender the lease the tenant just needs to hand
back the keys

15. TLT LLPTLT LLPTLT LLP
TLT LLP
No – surrender is not just handing in keys
• Both landlord and tenant must acknowledge lease is at
end by their conduct
• Landlord must accept surrender:
• Handing keys back to landlord or agent not enough
• Landlord not immediately taking action when tenant
leaves is not enough
• Landlord can change the locks to protect the
premises
• Limited entry may not be sufficient to indicate
acceptance
• Grant of lease to new tenant would be

16. TLT LLP
Myth 8
• A tenant can claim a periodic tenancy if it stays in
occupation when a contracted out lease ends

17. TLT LLPTLT LLPTLT LLP
TLT LLP
Maybe – but most often tenancy at will
• Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing
Ltd (2013)
• Negotiations ebbed and flowed
• High court held periodic tenancy had arisen
• Court of Appeal said no – tenancy at will
• Possession allowed so long as negotiations continued –
however slowly
• When negotiating for new lease very unlikely to agree
some interim arrangement

18. TLT LLP
Myth 9
• A landlord cannot serve a new section 25 notice if it
changes its mind about agreeing to a new tenancy

19. TLT LLPTLT LLPTLT LLP
TLT LLP
Yes – no changes to a s25 notice
• Landlord cannot change its mind once served section 25
notice
• Notice ends tenancy on date stated in it and starts the
1954 Act process
• If not opposing renewal, proposals in section 25 notice
are not binding
• Can put something else to tenant or to court
• If can show sufficient intention to redevelop in future
court may order break clause

20. TLT LLP
Myth 10
• Breach of a crucial covenant can be dealt with by
exercising a break clause

21. TLT LLPTLT LLPTLT LLP
TLT LLP
No – cannot use break clause for breach
• A landlord's right to break if the tenant is in default of an
important covenant is very similar to forfeiture
• Required procedures regarding forfeiture
• Notice may need to be served
• Landlord must set out details of breach
• Landlord must set out how breach may be remedied
• General equitable relief from a clause that imposes
unjustifiable detriment for non-performance