commercial property
autumn 2008
when is a lease created?
Tenants have significant rights compared
with those who occupy premises by virtue of
a licence, so it is important to be sure of the
basis of occupation and to be aware of the
fact that tenants’ rights can be created in
some circumstances when a formal lease has
not been signed.
This is because the Law of Property Act 1954
(Section 54) provides that a lease can come
into being without the need for the preparation
of a written lease. There are certain conditions
which apply in such circumstances, which are, in
simplified terms, that:
n
the lease cannot exceed three years;
n
the term starts when the lease is put into
effect (i.e. not later); and
n
the rent is the market rent for the premises.
Recently, an appeal was heard from tenants who
were occupying premises paying a rent of
approximately one third of the market rate under
a one-page agreement which was not properly
executed as a lease, but which they claimed
was sufficient to constitute a lease under Section
54.
They claimed that as a result, they had security of
tenure when a new purchaser of the freehold of
the unit they let sought to evict them from the
premises.
The case went to the Court of Appeal, which
concluded that the tenants did not have a lease
under Section 54 as the requirement that the
rent payable was equivalent to a market rent
was not met. Accordingly, the arrangement
could be terminated on demand. Had the rent
paid by the tenant been closer to the market
rent, the decision may well have gone the other
way.
Making informal arrangements for property use is
fraught with risk for both landlord and tenant.
If you are letting out or seeking to rent a
property, we can assist you to ensure that your
interests are protected.
WHISKERS SOLICITORS
6 Mitre Buildings, Kitson Way
Harlow, Essex. CM20 1DR
Tel 01279 439439 Fax 01279 439100
e-mail: enquiries@whiskers.co.uk
www.whiskers.co.uk
rates change may alter landscape
landlord wins unfair terms case
The decision in a
widely reported
case, in w