Landlord and Tenant Act 1954: Partnerships

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Lie v Mohile [2014] EWCA Civ 728

Most occupiers are well aware of the security of tenure afforded to commercial tenants under the Landlord and Tenant Act 1954.  They are, however, less alive to how to protect those rights. Since the majority of new commercial leases are contracted out of the 1954 Act, protected tenants must be careful to ensure that they adequately preserve their position. Conversely landlords will be hoping to see tenants slip up so that the property becomes freely marketable again.

This case serves as a warning to tenants (and an opportunity for landlords) to ensure that they are careful to preserve their position.  Two doctors operated a medical practice from the premises in question as partners under a partnership agreement. Dr Mohile owned the property and granted himself and Dr Lie a periodic tenancy as joint tenants. The pair fell out and Dr Mohile sought to terminate the partnership, but without doing so properly. Both doctors continued to practice from the premises.

Dr Mohile (in his capacity as the freeholder) served a section 25 notice on himself and Dr Lie terminating the tenancy.  Dr Lie made an application to court for a new tenancy under the 1954 Act, which Dr Mohile opposed.  The usual rule, in the case of joint tenants, is that both tenants must be a party to the application. The exception to this, in the case of partnerships, is where not all of the joint tenants continue to use the premises for the purpose of the partnership business.  The Court of Appeal found that the exception did not apply in this case since it is a condition of that exception that no part of the property being occupied under the tenancy for business purposes is carried on by the other tenant (the principle aim of the exception being to assist where one or more partner has retired).  In order to protect Dr Lie’s position, Dr Mohile should have been a party to the application – unlikely, given the circumstances.

This is an important reminder for tenants who are occupying a premises under what is, or which once was, a joint tenancy to ask their solicitor to consider exactly who an application for a new tenancy should be made on behalf of in order to protect their security of tenure. It is often the case that the legal position does not reflect the position as the tenants themselves understand it.