16/09/2008

Manton Securties Ltd -v- Nazam – unlawful assignments of a lease

Landlords should be pro-active and take steps to formally regularise the position where a lease of their premises has been unlawfully assigned.

The recent case of Manton Securities Ltd -v- Nazam has again highlighted and reiterated the point that landlords should not sit back when an unlawful assignment of a lease of their premises takes place.

In this case, the tenant was granted a lease of premises which it subsequently sought to assign.  Without a lawful assignment having taken place the tenant allowed a third party into occupation.  The landlord discovered the change of occupier a few months later but took no steps to forfeit the lease or raise any objection to the third party being in occupation.  As the outgoing tenant was unable to negotiate a formal assignment of the lease the landlord then stepped in and offered the new occupier a new 21 year lease.  However, no formal agreement was reached and the occupier remained in the premises paying rent. 

As the landlord had plans to redevelop the premises the occupier, as part of the plans, agreed to carry out and pay for certain improvements and repairs to the premises as part of the terms for the proposed new lease.

The parties then fell out when the landlord invoiced the occupier for works to the whole of the premises, which the occupier refused to pay.  The landlord sought to terminate the occupier’s tenancy of the premises and legal proceedings were commenced. 

The occupier argued that he was entitled to protection under the Landlord & Tenant Act 1954 and furthermore, was entitled to the grant of a new 21 year tenancy on the basis of proprietary estoppel.  The landlord on the other hand argued that the tenant was a tenant at will, had no basis to bring a proprietary estoppel claim, and if the occupier was entitled to a new tenancy, one should not be granted as the occupier had persistently delayed in paying rent.

The Court of Appeal reached the conclusion that the occupier was entitled to an order for the grant of a new tenancy on the basis of proprietary estoppel.  The occupier had carried out repairs and improvements to the premises on the reliance that he would be granted a new 21 year lease.  The evidence confirmed that the occupier had paid in full for the works he had agreed to carry out.  The landlord could not rely on the point that the occupier had delayed in paying rent as he had previously done nothing about this and had instead offered the occupier a 21 year lease. 

Practical Point:

The case highlights the problems that can be encountered by a landlord if he sits back and allows an unlawful assignment of a lease to take place without the change in occupier being formalised.  Not all landlords will be as unlucky as the one in this case but to avoid the potential of incurring legal costs and having to grant a tenancy to someone the landlord may no longer get along with, landlords should consider the following options when an unlawful assignment takes place:

  • Forfeiture of the lease
  • Negotiating a formal assignment, or
  • Possession proceedings

Remember, some form of action should be taken as soon as the landlord becomes aware of an unlawful assignment if protracted negotiations and problems in the future are to be avoided.

If you would like further information on this topic please contact Helen Gore on 0113 227 0297 or email helen.gore@gordonsllp.com