Landlords who want to recover possession of premises for their own business must be aware of timing issues

In a case between two frozen food retailers the Court held that, Heron Foods, was not entitled to oppose an application for the renewal of a lease by its sub-tenant, Frozen Value, even though Heron wanted to use the premises for its own business.

Heron had failed to extend its own lease in time and, although its lease was still running, had temporarily lost its status as the 'competent' landlord. Consequently, it would have to wait another five years from the date on which it regained that status before it would be entitled to try again. Heron’s difficulty arose as a result of a restriction in the Landlord and Tenant Act 1954 known as the “five year rule” and provisions that specify who qualifies as a competent landlord.

The five year rule prevents landlords from recovering possession from tenants to carry on business themselves from the premises if their own interest was purchased or created within the previous five years. It prevents landlords from buying up the tail end of leases and depriving sitting tenants of security of tenure after a short association with the premises.

The competent landlord provisions allow sub-tenants and reversioners to bypass intermediate landlords whose own leases are due to expire shortly and enables them to deal with each other instead. A competent landlord must either hold a superior leasehold interest with at least 14 months left to run, or hold the freehold interest in the property.

This case breaks new ground and establishes that loss of competent landlord status will restart the clock for the purposes of the five year rule.

Property law expert Lauren O'Sullivan of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was an "important reminder" of the technicalities of the 1954 Act which must be followed before a lease renewal could be successfully opposed. "It also demonstrates the significance to a tenant of careful due diligence as to a landlord's title in order to identify flaws," she said.

"Furthermore, the decision provides the opportunity for superior landlords to strengthen their negotiating position in lease renewals or disposals where there is an intermediate landlord under time pressure to maintain its status as the competent landlord," she said.

Property law expert Allyson Colby of Pinsent Masons stressed that landlords must be careful to monitor the amount of time left on their own leases if they plan to oppose the grant of a new lease to a sub-tenant so that they can carry on business from the premises themselves.

"They can protect their interests by renewing their leases, or buying the reversion, while their own interest still has more than 14 months to run," she said. "Landlords who are not alive to this will have to put their plans on ice for the time being, even though they first acquired an interest in the premises more than five years previously.