Lie v Mohile

 

The Message

Ensure the right parties make the statutory application for a new business tenancy.

The Case

Lie v Mohile [9 May 2014] concerned whether one of two existing partners and tenants of business premises under a lease was entitled to apply for a new tenancy under Part 2 of the Landlord and Tenant Act 1954 (“Act”).

Dr Lie and Dr Mohile were general practitioners who provided medical services at a medical centre. They did so as partners under a partnership agreement. While Mohile had tried to dissolve the partnership, his attempts had failed.

The premises that were the medical centre were owned by Mohile, who granted a periodic tenancy of them to himself and Lie. The tenancy was protected by Part 2 of the Act and Mohile served on himself and Lie a section 25 notice to terminate the tenancy. Subsequently, Lie issued an application under section 24 for the grant of a new tenancy to himself alone. Mohile opposed the application.

The key issue was whether Lie was entitled to apply alone for the grant of a new tenancy, or whether section 41A of the Act required both tenants to apply.
On the basis of 1960s case law, a claim for a new lease under the Act would have to be made by both partners. However, section 41A reversed that effect, allowing for an exception in the case of partnerships where not all of the joint tenants continue to use the premises for the purpose of the partnership business.

There are four statutory conditions which have to be fulfilled for the exception to apply. The lease must be vested in at least two joint tenants. The premises must include premises occupied for the purposes of the business, which must at some time during the tenancy have been carried on in partnership by all the joint tenants. Finally, the business must now be carried on by at least one of the joint tenants, either alone or in partnership with other persons, but with no part of the property being occupied under the tenancy for the purpose of a business carried on by the other joint tenant.

The County Court decided that while Lie satisfied three conditions, he did not satisfy the fourth one. The premises continued to be occupied by both partners for the purposes of the partnership business.

Lie appealed, but the Court of Appeal dismissed his application. It rejected Lie’s argument that as a matter of law he was the only tenant of the premises under the existing tenancy. Lie contended that Mohile was not capable of granting a tenancy to himself, even as a joint tenant with Lie, and the tenancy, therefore, took effect as a tenancy granted to Lie alone. Lie argued that he could satisfy the statutory exception, because his continuing partnership with Mohile was a business carried on in partnership with other persons. The problem for Lie was that the statutory exception did not apply at all if Lie was the sole tenant. The legal basis for Lie’s argument was rejected as being inapplicable to the grant of the tenancy in this case.

Since the statutory exception did not apply, the case law governed the position and both Lie and Mohile had to join in the application. There was no room for any judicial expansion of the exception on grounds of fairness beyond the bounds set by Parliament.