50 shades of occupation

01 Feb 2013

Business tenancies, to which the Landlord and Tenant Act 1954 (the 1954 Act) applies, will – unless the tenancy has been brought to an end – give rise to an automatic continuation tenancy at the end of the contractual term.

Landlords in the current market facing the prospect of re-letting premises are, however, becoming increasingly litigious and for this reason a number of cases turning on the concepts of “occupation”, “possession” and “vacant possession” are coming before the courts.

Although “occupation” is used in a variety of contexts in the law of landlord and tenant there is no specific definition in the 1954 Act.

In Graysim Holdings Ltd -v- P&O Holdings Limited it was said of the definition of “occupation” that:

“Like most English words “occupied”, and corresponding expressions such as occupier and occupation, have different shades of meaning according to the context in which they are being used.”

The Judge in this case went onto say that under the 1954 Act the context of “occupied” was a means of identifying whether a business tenancy existed and as such:

“In this context “occupied” points to some business activity by the tenant on the property in question. .. .. .. Thus the word carries a connotation of some physical use of the property by the tenant for the purposes of his business”.

Where this approach breaks down, however, is at the end of a business tenancy when the emphasis for the tenant is not on proving occupation but showing that the landlord can go back into possession.

Case law has made it clear that “occupation” need not extend to the tenant’s personal presence but can be by virtue of belongings being left at the property (e.g. bags of cement left in a basement were found to prevent vacant possession).

In the case of NYK Logistics (UK) Ltd -v- Ibrend Estates BV, the Court of Appeal formulated a new definition of “vacant possession” which means that:

“.. .. the property is empty of people and that the purchaser is able to assume and enjoy immediate and exclusive possession, occupation and control over it. It must be empty of chattels [to the extent that] any chattels left on the property [do not] substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property.”

Here, the tenant proposed that it would hand over the keys, so that full access was available to the landlord but that, in order for repairs to be carried out after the tenancy had ended, its security guards would come back on site.  Essentially, the tenant was to give up possession but return later as the landlord’s licensee.  In the event, the keys were not handed over before the tenant’s workmen went into the property.  Since vacant possession had not been given the tenant remained in occupation and was not entitled at that time to terminate the business tenancy.

The debate on these concepts will continue to raise complex questions of law because the cases turn on matters of degree as to whether particular acts constitute a continuation of occupation.