Food Glorious Food – The importance of the “Permitted Use” in leases

Property & Land Law

11 January 2017

Sometimes when a barrister says he (or she) will “dine out on a case” it’s literally true.

I was instructed recently in a landlord and tenant case involving the commercial lease of a fast food premises; my client was the tenant who had acquired the lease of a vacant fish and chip shop; the lease was for seven years with an option to extend for a further fifteen years and cost my client £80,000 up-front plus about £100,000 spent doing the place up.

My client got on well with his landlord; the landlord allowed my client to start the renovations before the formal start of the lease (in late 2014) and my client agreed to the landlord and his family continuing to live in the large flat above the shop rent-free for a few months until he could find somewhere else to live.

However, after my client had started to make a success of the business (something the landlord had failed to do) things went downhill; the Landlord’s repeated promises to move out by a certain date were broken and in late 2015 my client instructed an internet “landlords’ advice” agency who served a “Section 21” [Housing Act 1988] notice on the landlord terminating the tenancy of the flat, and subsequently in early 2016 they issued a possession claim.

For reasons known only to themselves the landlords’ advice agency wrongly stated in the Claim Form that there had been an agreement for rent of £10 per month (there hadn’t, and no rent had been paid for the flat) and signed the Claim Form as the tenant (almost certainly a criminal offence), then told my client they couldn’t do any more and he’d better get a solicitor (they probably should have said that rather earlier).

However, my client didn’t get a solicitor and sent a “witness statement” he’d written to the Court which truthfully stated that there was no rent paid and, by the way, the landlord had just been arrested for chasing one of my client’s staff up the high street with a sword.

At that stage the landlord decided to up the ante and issued a section 146 Notice [Law of Property Act 1925] in respect of the whole property (i.e. the shop and the flat) because that the lease of the shop said it should only be used as a “fish and chip shop” and the tenant was selling kebabs. The landlord claimed the lease was forfeit and that he (the landlord) should get the shop and flat back and keep the £80,000 purchase price and the £100,000-worth of improvements, and, no doubt, the considerable goodwill the business had built up. My client finally went to a solicitor, and in due course, came to me.

Long story short; a full day was spent arguing whether kebabs were the stock in trade of fish and chip shops (we were in Hastings for the trial, but the court resisted the temptation to see what was available from the local takeaway shops). The learned judge’s conclusion, after much deliberation, was that selling kebabs was a breach of the “permitted use” – the fact that my client had invested in a big illuminated sign renaming the premises the “Kebab and Fish & Chip Shop” didn’t help.

However, the Judge agreed that the landlord had “waived” that past breach, and couldn’t have the shop and flat back, because he had accepted rent from my client since knowing about the breach: not only was he living upstairs but, initially at least, he had been a regular customer and particularly enjoyed the special chilli and garlic sauce.

My client (the tenant) also got a possession order evicting his landlord from the flat the landlord owned, and an order that he (the landlord) should pay our costs of £5,500.

And I got some very nice fish and chips on the way home (it was too early for a kebab, and anyway my client wasn’t allowed to sell them anymore).

In summary

  • Always read the whole Lease before you sign it and if you’re not sure what it means, get advice!
  • Cheap (or free) legal advice is often worth only what you’ve paid for it!

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