Ben McFarlane, Nicholas Hopkins & Sarah Nield: Land Law, Text, Cases and Materials

Chapter 23: The Lease

3 3.1 The Acquisition Question Legal Leases

The effect of section 54(2) of the Law of Property Act 1925 on the acquisition of legal leases of three years or less is considered on pp 765-768. In Fitzkriston Limited Liability Partnership v Panayi [2008] EWCA Civ 283, the Court of Appeal considered the requirement that, to fall within section 54(2), a lease must be at the best rent which can reasonably be obtained without taking a fine. In that case, the occupier paid an agreed rent of 4,000 per year for business premises. It was held that, as this was below the market rent for such premises (such market rent being estimated at 12,000 to 20,000 per year), the occupier did not have a lease at the best rent and so section 54(2) did not apply. So, as no deed had been used to give the occupier his right, the parties agreement, by itself, could not give the occupier a lease: as a result, the occupier did not qualify for the statutory protection provided to commercial leases under Part II of the Landlord and Tenant Act 1954. The decision is discussed by Brown, Best Rents, Parol Leases and the Law of Property Act 1925, section 54(2) [2009] Conv 54. The author argues for a different interpretation of the section, under which best rent is to be understood, in effect, as the rent agreed by the parties. He argues that this wider interpretation would further the aim of section 54(2), which is to permit the acquisition of short legal leases by means of oral agreements. It should be noted, however, that the more restrictive interpretation favoured by the Court of Appeal is in line with the trend manifested by the decision in Long v Tower Hamlets London Borough Council (see pp 765-767), in as much as it narrows the application of section 54(2) and so affirms the general rule contained in section 52 of the Law of Property Act 1925 that, if B wishes to show that A has granted him or her a legal property right, B must show that a deed has been used. A more radical proposal is made by Brown & Pawlowski, Rethinking the Law of Property Act 1925, section 54(2) [2010] Conv 146. It is argued that the best rent requirement of s 54(2) should be abolished and that the taking effect in possession requirement should be modified so that it can be met by any lease taking effect in possession within three months from the date of the grant of the lease. The result of such reforms would be to allow oral legal leases to arise in a greater range of circumstances, a position which the authors state would bring English law closer to that of other common law jurisdictions.

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