Business Partnership Premises - How secure is your tenancy?

Thanks to the Landlord and Tenant Act 1954, a commercial tenant has a right to apply for a new tenancy assuming the relevant criteria are met. However, if you are operating your business as a partnership in shared premises, things could become extremely difficult if you fall out with your business partner or partners, particularly if you do not hold any equity in the business premises.

This situation arose recently in the case of Lie v Mohile [2014] EWHC 3709 (Ch). Dr Mohile was the sole owner of surgery premises which were occupied by both he and Dr Lie under a partnership agreement. There was no formal documentation between the parties with regard to the tenancy of the premises which was deemed to have been leased by Dr Mohile to himself and to Dr Lie as joint tenants under a periodic tenancy essentially on a rolling basis

Unfortunately, the two doctors had a disagreement and fell out. Dr Mohile attempted to dissolve the partnership and served notice on Dr Lie to terminate the tenancy. As a result, Dr Lie made an application to Court under Section 24 of the Landlord and Tenant Act 1954 for a new tenancy at the premises in his sole name.

In order for such an application to be successful, the following conditions must be met:

      1. the tenancy is held jointly by two or more persons;
      2. the property is or includes premises occupied for the purposes of a business;
      3. the business (or some other business) was at some time during the existence of the tenancy carried on in partnership by all the joint tenants;
      4. the business is carried on (whether alone or in partnership with other persons) by one or only some of the joint tenants and no part of the property comprised in the tenancy is occupied for the purposes of a business carried on by the other joint tenant or others.

Dr Mohile objected to the grant of a new tenancy to his former partner, saying that he wished to run his own practice at the premises without Dr Lie. The Court of Appeal ultimately agreed with Dr Mohile, finding that Dr Lie did not satisfy the fourth condition set out above because Dr Mohile had remained in the premises and intended to carry on his practice in his sole name.

However, had Dr Mohile retired and ceased to use the premises at all, Dr Lie would have been able to satisfy the fourth condition and make an application for a new tenancy. This is because no part of the premises would have been occupied for the purposes of a business carried on by the other joint tenant.

This case demonstrates the strictness with which the Courts apply Landlord and Tenant Act rules and serves as a warning to all business owners operating as partnerships to ensure that their position is protected should relationships sour.

If you operate your business as a partnership or if you wish to discuss commercial property more generally, please contact the Commercial Property team on 0113 201 4900 or via commercial.property@emsleys.co.uk.

Back to Blog