Fast Drinks Ltd v Cetyl International Group Inc (2016) QBD Unreported

A sub-tenant’s section 26 request seeking a new tenancy commencing on 1 July 2015 was, on appeal, held to be valid despite the sublease’s contractual expiry date falling in January 2016.

Cetyl, the superior landlord, had successfully exercised its right to break the head lease on 17 July 2014. Accordingly, all interests granted from the head lease were terminated, including Fast Drinks’ sublease. Fast Drinks’ statutory tenancy continued however pursuant to the protection given by s24 of the Landlord and Tenant Act 1954 (“LTA 1954”).

Fast Drinks then requested a new tenancy commencing on 1 July 2015 from Cetyl pursuant to s.26 LTA 1954.

Cetyl argued that the s.26 request was invalid as the proviso in section s26(2) of the LTA 1954 provided that the commencement date could not be earlier than the date Fast Drinks’ subtenancy would come to an end by effluxion of time or notice to quit given by Fast Drinks, being by their reckoning, 16 January 2016.

Overturning an earlier decision of the Court, it was held that the proviso in s26(2) did not apply as this was a post term request (the sub-tenancy having come to an end in July 2014 by the Cetyls’ break) and the request was valid. The matter was remitted to the County Court to progress (with directions) Fast Drinks’ application for a new tenancy.

Key points:

• A reminder that landlords should consider the potential security of tenure of sub-tenants when exercising a break clause and ideally at the point of drafting the head lease as the issues could have been avoided if it contained provisions which insisted that any sub-leases excluded the protection of the LTA 1954 (and if they were then excluded!)

• The case highlights that it is also crucial for sub-tenants to fully understand the terms of any head lease from which their interest is derived as they could have an effect on the sub-tenant’s use and enjoyment of the property