Commercial lease status

Posted: 10th February 2012

The Landlord and Tenant Act 1954 gives commercial tenants the right to a new tenancy in normal circumstances except where the landlord requires the property for its own purposes.
However, to be protected, the premises must be occupied by the tenant for the purposes of a business carried on by it. All of these criteria are necessary.
Recently, the warden of a caravan park (who was the employee of the local council) applied for a tenancy under the Act. The council had offered him an ‘operator agreement’ to run the park for two years and a part-time contract of service as an employee to provide the security for the site. It also gave him a ‘bungalow agreement’ (which was a residential lease) on the bungalow on the site in order to better perform his services as an employee.
Bungalow
The employee applied for a tenancy under the LTA, arguing that he carried on the business of running the caravan park. He contended that the annual payment he was required to make to the council under the operator agreement was rent and that he carried all the commercial risk (the payment not being linked to the profitability of the caravan park). This pointed to him operating the caravan park on his own account.
But the operator agreement had other clauses which pointed to the warden being the agent for the council. For example, the agreement specified the service standards he must apply in certain areas (such as emptying bins). It also gave the council the right to veto certain decisions he might make and specified the accounts he must prepare and submit to the council.
The court reached the conclusion that, taken as a whole, the agreements meant the warden managed the caravan park as agent for the council and was not entitled to a lease of it.