What rights will be included in a renewal lease which is granted to a tenant pursuant to the Landlord and Tenant Act 1954?

In Picture Warehouse Ltd v Cornhill Investments Ltd, an undertenant agreed with its immediate landlord to give up its existing lease of the second floor of a building in return for a new lease of the ground floor. It would keep one of the three car parking spaces it had on the first floor, but would give up the other two in return for having two designated spaces on land at the front of the building. The rent under the new lease was to be reduced as a result.

Some work was required to the land at the front of the building in order to make it suitable for car parking. The freeholder of the premises objected as their permission had not been sought for the work.

Although the original intention was that a right to park at the front of the building would be included in the lease, the difficulties with the freeholder made this impossible. Instead, the undertenant requested an 'assurance letter' from its landlord regarding the parking. The landlord wrote to the undertenant:

"You, your customers and deliveries are allowed to park on the front block paved area for a maximum of 30 minutes (pick-up, drop-off point). …This must be adhered to to avoid further conflict with [the freeholder]".

The move took place, but it was some time before the new lease was entered into. It contained no provision as to parking save for the retained space on the first floor. Difficulties subsequently ensued over parking at the front of the premises. The area was often occupied by the vehicles of other tenants.

The undertenant sought a new lease under the security of tenure provisions in the Landlord and Tenant Act 1954. In particular, it sought a right to park two vehicles on the area at the front of the property for no more than 30 minutes at a time. The undertenant's argument was based on section 32(3) of the 1954 Act, which provides:

"Where the current tenancy includes rights enjoyed by the tenant in connection with the holding, those rights shall be included in a tenancy ordered to be granted [under the Act]".

The court held that, as the lease did not include any rights as to parking at the front of the property, section 32(3) was of no assistance. Under section 35 of the Act, the court has a general discretion to determine the terms of the new lease. The judge held, following previous case law, that this did not enable the court to enlarge the undertenant's holding by ordering the grant of an easement over the landlord's land which the undertenant had not previously enjoyed.

The court found that the letter from the landlord amounted to no more than a bare licence. As such, it was liable to determination. The undertenant had not established a case to have a term included in the lease giving it an irrevocable right to park two cars outside the building. The undertenant had to continue to rely on the terms of the existing letter from its landlord.

Things to consider

There are many reasons why side letters may be used rather than incorporate terms into the main lease. Often, where the relationship between landlord and tenant is good, the parties are content to rely on such letters. However, they can give rise to difficulties if not carefully drafted. Questions can arise as to whether they are enforceable against successors in title to the landlord, or (where not expressed to be personal) whether assignees of the tenant's interest in the property can take the benefit.

This case reinforces the potentially precarious nature of such rights. A tenant cannot use a lease renewal under the 1954 Act to 'boost' existing informal benefits into the status of full easements, which would be irrevocable and capable of being passed on to successors in title.