The rocky relationship between Mike Ashley and Debenhams raises interesting questions around protection for commercial tenants. Where landlords’ actions exceed the usual battles over rent and renewal, what can be done if ulterior motives drive the landlord to force the tenant out – or potentially even drive them out of business?
A modern commercial lease contains protections for landlords and tenants: in exchange for extensive covenants, tenants enjoy the right to quiet enjoyment of their property. If a landlord’s actions go beyond what is lawful, a tenant can rely on this right and possibly derogation from grant and other tortious claims against its landlord. In those circumstances, tenants can seek the court’s assistance through injunctive relief and damages.
What happens if a landlord takes issue with minor lease breaches that do not affect its commercial interests? This could be disrepairs that are minor or temporary breaches – yet the landlord still serves section 146 notices or sends lawyer’s letters. What can the tenant do if the landlord acts unreasonably, but notionally within the lease terms? Is its motive ever relevant?
Without any de minimus level of breach or reasonableness requirement for service of notices or relying on costs clauses, a tenant could face threats of forfeiture, having to remedy trivial breaches and meet the landlord’s costs. If the landlord issued proceedings, the tenant would have to seek relief from forfeiture from the court. The court might view the landlord’s behaviour as unreasonable, or even as abuse of process, and may make appropriate costs orders.
There are protections against forfeiture actions for minor or trivial repairing breaches if the Leasehold Property (Repairs) Act 1938 applies. Minor breaches are unlikely to substantially diminish the value of the landlord’s reversion. But this only benefits tenants with three years left of a lease of a least seven years.
The extensive protections residential tenants enjoy do not extend to commercial tenants and there is generally no obligation or implied term of good faith for tenants to rely on in commercial relationships. A tenant’s best option is to fully comply with its lease covenants where possible and seek good legal advice to protect against unreasonable landlord behaviour. The obvious route would be to seek injunctive relief against the landlord to restrain any unlawful behaviour.
Small commercial tenants lacking deep pockets may be unable to defend a barrage of claims from their landlord. Whether the court would provide relief to tenants in these circumstances and question the landlord’s motives for taking such action remains to be seen.
Helen Wheddon is a partner at Stevens & Bolton