Where it is agreed between the parties that a business tenant will not have a right to renew its lease at the end of its term it is imperative that the statutory process excluding this right is precisely followed. If it is not, a tenant might be able to argue that it is entitled to a new lease.

The High Court has recently provided some helpful guidance on the practicalities of contracting out. In the case a tenant tried to argue that, because of technical defects in the contracting out process, it was entitled to a new tenancy in circumstances where its landlord wanted to secure vacant possession at the end of the fixed term of its lease.

The court held:

The tenant's solicitor had actual or apparent authority to do everything necessary to bring to completion a transaction reflecting the heads of terms. This meant that the solicitor could accept the statutory warning notice as agent.

The statutory declaration used as part of the contracting out process was not defective. It was sufficient that it had been given by a non-statutory director of the tenant as he had actual or apparent authority to negotiate and complete leases, and had been held out to have authority by the tenant's solicitor.

A fixed calendar date specifying the point in time from which the lease term was to run was not required in the statutory declaration. It was enough to refer to an access date as defined in the agreement for lease or to refer to the commencement date in the lease. It was necessary only to identify the tenancy in respect of which rights were being waived.

This is good news for landlords and hopefully the court's robust, pragmatic approach to the contracting out procedure may deter tenants from taking unjustified points.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.