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Validity of Contracting Out Notices Where Term Commencement Date Not Yet Known

January 2020

In the recent case of TFS Stores Limited v BMG (Ashford) Limited 2019 the court reviewed the contracting out of security of tenure procedures under Section 38A of the Landlord and Tenant Act 1954  in connection with a number of retail leases held by The Fragrance Shop.  The tenant did not wish to vacate at the end of the contractual terms so sought to challenge the validity of the statutory notice served on the tenant’s solicitor instead of the tenant, the ostensible authority of the person making the declaration on behalf of the tenant, and the absence of an exact term commencement date in the notice.

On the facts of this case, the judge held that the tenant’s solicitors had actual authority to accept service of the warning notices, on the basis that this formed part of their instructions to complete the transaction in accordance with the terms agreed between the parties, which included the leases being ‘contracted out’.

As it was the tenant’s retail director who had made the declarations, the tenant argued that the declarations were invalid because he was not a statutory director of the company. The court held that the tenant was bound by the acts of professional and employee agents as having actual authority to act as they did, which meant that the tenant could not challenge the validity of the declaration on the basis that the person making the declarations was not explicitly authorised to make them.

The third argument advanced by the tenant was that the statutory declarations were invalid due to a failure to include the exact term commencement date of the leases in the landlord’s notice. As is commonly the case, the term commencement dates were not known at the time of drafting the notices, so wording was used  to avoid specifying an exact date, along the lines of “a term commencing on the date on which the tenancy is granted”.

The judge held that an exact term commencement date was not essential because the purpose of the wording is to identify the tenancy to be granted and the wording used was sufficient for those purposes.

The court also confirmed that statutory declarations must be made “in the form, or substantially in the form” set out in the 2003 Order. The declarations could therefore be rescued by virtue of them being in “substantially” the form contained within the 2003 Order.

To the relief of the Landlord the court found that the leases were validly contracted out.

For further information on any ‘contracting out’ disputes or how to avoid them, please contact cbarritt@prettys.co.uk.

Claire Barritt

Senior Associate

e cbarritt@prettys.co.uk

t 01473 298335

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