Siddiqui and Ullah v Rahman (acting by LPA receivers) (Unreported, 19 February 2018)
Editor’s Note: James Walters of Irwin Mitchell LLP was the solicitor to the successful defendants in this case, Daniel Hardy and Mark Swiers of Sanderson Weatherall LLP, acting as Law of Property Act 1925 receivers (Receivers). The Receivers were very ably represented at trial by Paul de la Piquerie of Selbourne Chambers.
This case concerned whether commercial tenants were entitled to a new lease of the premises under section 24(1) of the Landlord and Tenant Act 1954 (1954 Act). The judgment of Her Honour Judge Walden-Smith shows the importance to a tenant of knowing when you must apply to court to protect lease renewal rights, and demonstrates the limited circumstances in which a tenant may claim that a landlord cannot argue that the tenant has missed the deadline and therefore lost its renewal rights.
The 1954 Act
Where a lease of business premises benefits from security of tenure under the 1954 Act, the tenant may continue occupying the business premises after the contractual expiry of the lease until the tenancy is brought to an end by one of the methods in the 1954 Act. The most common methods of termination under the 1954 Act are:
- The tenant serving a request for a new tenancy under section 26 of the 1954 Act
- The landlord serving notice under section 25 of the 1954 Act , either proposing the terms of a new tenancy or opposing the grant of a new tenancy.
Where a tenant serves a valid section 26 request, the deadline to apply to court for the grant of a new lease is the day before the date proposed in the notice for the new tenancy to commence. Where a landlord serves a valid section 25 notice, the deadline is the termination date specified in the notice.
If the deadline expires without (1) either party applying to court for a new lease, (2) a new lease being agreed, or (3) the deadline being extended by the parties agreeing an extension in writing, the original tenancy will determine, and the tenant will immediately lose both their right to a new tenancy and their right to occupy the premises.
Tenants must be mindful of the deadline to make sure they do not lose their right to a new tenancy. Landlords should also keep track of any lease expiries and deadlines, in order to offer a new tenancy or re-let the property and, more importantly, to avoid the tenant acquiring a new, protected tenancy as a result of the landlord continuing to demand and accept rent.
What is estoppel?
An estoppel can arise where, for example:
- Party A makes a clear and unequivocal statement to Party B that Party B will have some right or benefit in relation to Party A’s property
- Party B relies on that statement to its detriment
- it would be unfair for Party A to go back on its word.
Estoppel can, among other things, be used to prevent a party from relying on the validity or invalidity of a notice – in this case, under the 1954 Act.
In November 2009, the tenants took a single lease of five properties for a term of six years, expiring in November 2015.
In May 2015 the tenants served a request under section 26 of the 1954 Act (S26 Notice) requesting a new tenancy of the properties. The new lease was to commence the day after the contractual term expired in November 2015.
In July 2015, we responded to the tenants’ solicitors disputing the validity of the S26 Notice on a number of grounds. We also served a counter-notice under section 26(6) of the 1954 Act (Counter-notice) and a hostile notice under section 25(1) of the 1954 Act (S25 Notice) opposing the grant of a new tenancy. The Counter-notice and the S25 Notice were served without prejudice to the Receivers’ contention that the S26 Notice was invalid, and to each other. The S25 Notice stated 15 January 2016 as the termination date.
In November 2015 the deadline for the tenants to apply to court for a new tenancy pursuant to the S26 Notice passed. The tenants did not apply to court for a new tenancy, or try and negotiate an extension of the deadline.
In January 2016 the tenants applied to court for a new tenancy. The claim was issued at court just before the deadline in the S25 Notice expired, but two months after the expiry of the deadline in the S26 Notice.
On the first day of the trial, the Receivers asked the court to strike out the tenants’ claim and grant them summary judgment. The main grounds of the Receivers’ application were that the S26 Notice was valid, that the tenants had not applied to court by the expiry of the deadline in the S26 Notice and therefore the 1954 Act ceased to apply to the original tenancy (and the tenancy determined) in November 2015.
The tenants argued that their claim was not issued after the deadline because the S26 was invalid because (among other things):
- it referred to a property not expressly mentioned in the 2009 lease
- the Receivers were estopped from arguing that the S26 Notice was valid because they initially disputed its validity in July 2015.
The Judge found that the S26 Notice was validly served by the tenants on the Receivers. On the facts, she found that it would have been clear to the Receivers that the tenants were asking for a new tenancy of the property not expressly mentioned in the lease.
Since the S26 Notice was valid, the Judge concluded that the deadline for the tenants to apply to court was in November 2015. She held that the tenants failed to issue their claim before the deadline, “effectively falling off the edge of a cliff from which there is no way back”.
The Judge was not persuaded that the response to the tenants’ solicitor in July 2015 meant that the Receivers were estopped from saying that the S26 Notice was valid. The Judge considered that:
- The Receivers were simply flagging the issues they identified in the S26 Notice to protect their position and were not making a clear and unequivocal statement. If that had been the case, there would have been no need for the Receivers to serve the Counter-notice
- The tenants had not relied on the alleged statement to their detriment, finding that the tenants “simply missed the fact that there was a requirement to issue the claim by the expiry of the [S26 Notice]”
- Therefore, the Judge struck out the tenants’ claim and declared that the 2009 lease ended on the last day of the original tenancy in November 2015.
This case highlights the importance of knowing the deadline to apply to court to protect and maintain your or your tenant’s right to apply for a new tenancy.
If a tenant requires a new lease and the landlord does not agree to an extension of the deadline, a tenant must ensure that it issues a claim in good time before the earliest date that the deadline under the 1954 Act could expire.
It will be difficult to raise an estoppel argument unless the other party has clearly and unequivocally said that they will or will not do something, and you can evidence that you have relied on that statement to your detriment.
The judgment validates the practice of litigants to identify potential issues with notices under the 1954 Act at an early stage to protect their position and serve notices on a without prejudice basis to cover other possible outcomes to the renewal process. Practitioners should consider carefully the effect of disputing validity of a notice and whether doing so may give rise to an estoppel argument.