Real Estate Tip of the Week - Beware the 1954 Act Trap

Published 4 November 2019

Even where parties have followed the statutory process to exclude sections 24 to 28 of the Landlord and Tenant Act 1954 (“the 1954 Act”) to the letter, the lease must be granted for a “term of years certain”, otherwise it is not capable of being contracted out and any purported exclusion of the provisions of the 1954 Act will be invalidated.

Our recent articles in May and June explore the implications of security of tenure and the recent approach of the court to the contracting out procedure.

It may not be new law, but the 2008 decision in Newham London Borough Council v Thomas-Van Staden remains relevant. In that case, the term of the lease was expressed to include “any period of holding over or extension of it whether by statute or at common law or by agreement”. While the parties clearly intended the lease to be contracted out, the Court of Appeal held that this wording granted a fixed term, plus a period of holding over, and therefore was not a “term of years certain” and so could not be excluded. The landlord’s notice to terminate the lease was therefore ineffective to bring the statutory tenancy to an end.

While most modern contracted out leases will not contain the problematic wording, we still see it from time to time in older leases, and a well advised tenant may seek to use this to its advantage.
Practical tips for landlords:

• If a contracted out lease is intended, then the term should not be expressed to be periodic or contain extension wording similar to that used in Thomas-Van Staden. In particular, on renewal of a lease ensure that any such extension wording is not inadvertently repeated in the new lease, if that new lease is to be contracted out.
• Where such extension wording appears and a landlord wishes to recover possession at contractual expiry or by effecting a break right, then care will need to be taken to ensure effective termination (which may be by service of a statutory notice, without prejudice to the landlord’s position that the tenancy is contracted out).

We recommend that legal advice be sought well in advance of the intended termination date.