Business Tenants to be on best behaviour or statutory protection can be removed

Ref. Youssefi v Mussellwhite [2014] EWCA Civ 885

The Court of Appeal in this case upheld the previous Judge’s view that bad behaviour on the part of the business Tenant precluded her from being granted a renewed Lease, which she expected under statutory protection provided by Landlord and Tenant Act 1954.

Specifically, Ms Youseffi was the Tenant of a dwelling house shop and premises in Winchester under a Lease that expired on 31 March 2009. The Lease was protected under the Landlord and Tenant Act 1954, but the Landlord opposed renewal because of the Tenant’s breaches of covenant and poor conduct.

The Tenant had been held by the previous Judge to have been in breach of both pay and repair covenants under the lease, as well as failing to trade in accordance with Use Classes A1 and A3 – instead choosing to merely prepare food on the premises and sell it elsewhere. The Landlord wanted to recover possession of the premises so it could be sold and was granted termination of the lease by the original Judge to do so.

On Appeal, the Court considered whether it was necessary for a Landlord to show that the grant of a new tenancy would cause it real prejudice in the future. Further, would it be sufficient to simply establish it or would it not be fair to continue the Landlord and Tenant relationship because of the Tenant’s past performance and behaviour?

The Court held that it had a general discretion to consider whether the proper interests of the Landlord would be prejudiced if a new tenancy was granted to the particular Tenant. Those interests could be prejudiced by the Landlord having to continue dealing with the Tenant under a new tenancy in light of the Tenant’s past breaches and behaviour. It was not necessary for a Landlord to prove actual loss would be suffered, although this was likely to be the case in most instances.

Whilst the Court of Appeal actually disagreed with the original Judge that there had been a substantial breach of the repair covenant, it did agree that the use class term had been breached – which was prejudicial to the Landlord – and that refusals to allow the Landlord access had undermined the Landlord and Tenant relationship.

To expect the Landlord to continue to let the property to the same Tenant under these conditions would be unfair. As such, despite the fact that five years have passed since the original lease actually expired – the Tenant must now vacate the premises and the Landlord is at last able to sell the premises with vacant possession.

Business Tenants should be careful therefore. Bad behaviour has been shown to overwrite statutory protection in some instances and, with specific premises often being integral to a business’ fabric and success, one must be careful to avoid breaching covenants to ensure long-term stability.

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SRJ                                                                                                                                        06.08.14