Business Partnerships – Applying for a New Lease
A recent Court of Appeal case illustrates the difficulties that can arise when a business partnership operates from shared premises but does not give full consideration to the legal structure at the outset. The court held that an application for a new business tenancy made by one of two business partners was not a valid application. It stated that both joint tenants must join in any application for a new tenancy unless the tenants can take advantage of one of the statutory exceptions. Some businesses (such as doctors and dentists) often practise from shared premises, either in partnership or on their own account, and there will be circumstances in which vesting property interests in a special purpose vehicle, such as a limited company or a limited liability partnership, may help to avoid disputes over both ownership and entitlement to occupy.
Lease renewals: A tenant of a business lease has a statutory right to a lease renewal at the end of the contractual term if it satisfies the following criteria:
- Is there a tenancy?
- Does the tenancy relate to premises?
- Are the premises occupied for the purpose of a business?
- Is the business carried on by the tenant?
- Does the tenancy fall within any of the specific exclusions?
If the first four conditions are satisfied and the tenancy does not fall within any of the specific exclusions, the tenant will have a statutory right to a lease renewal at the end of the contractual term.
Joint tenants: All joint tenants must join in any application for a new tenancy unless a statutory exception applies. In the case of partnerships, there is an exception where not all of the joint tenants continue to use the demised premises for the purpose of the partnership business. Four conditions must be fulfilled for this exception to be valid:
- The lease must be vested in at least two joint tenants
- The demise must include property occupied for the purposes of the business
- The business must at some time during the tenancy have been carried on in partnership by all the joint tenants
- The business must now be carried on by at least one of the joint tenants, either alone or in partnership with others, with no part of the property being occupied under the tenancy for the purposes of a business carried on by the other joint tenant or tenants
The content of this Business Briefing is for information only and does not constitute legal advice. It states the law as at December 2014. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this briefing.