Jaime McCracken on £250,000 – a large premium and then pay your rent late – what can go wrong?

Ahmad & Another v Leek (Personal Rep of Mr George William Leek (Deceased) & Another [2016] EWCA Civ 1351

Part II of the Landlord and Tenant Act 1954 provides security for tenants in that they are able to build a business safe in the knowledge that there is a degree of security in their tenancy and there are fairly limited circumstances in which the Landlord can refuse to renew the tenancy.

That at least is the conventional view.

However, the Court of Appeal’s recent refusal of the final application for permission to appeal in a matter where Jamie McCracken represented the successful Landlord opposing the grant of a renewed lease is a salient reminder of the risks that do exist for the small businessman who pays his rent late but eventually gets there.

Mr and Mrs Ahmad purchased a convenience store, paying a premium in the region of £250,000 to take over the lease and set about improving and building the business over a number of years.

In doing so they had a good relationship with the Landlord who would frequent the store and at no time was there any concern over the rent which fell due on usual quarterly days.

However, the Landlord passed away and Mr and Mrs Ahmad were initially unsure of who they should make payment of rent to and accordingly they did not make a payment over several quarters.

This was initially swept into questions of ambiguity in solicitors’ correspondence.

However, the back rent was not satisfactorily paid up by them over 2-3 years and there followed a sequence of misfortune, firstly they allegedly uncovered a fraud that had been visited upon them by the previous owner; secondly there was the unfortunate death of their landlord with whom they had been in a good relationship; thirdly a quantity of gold had been confiscated upon Mrs Ahmad’s return to the Uk and unexpected costs incurred in respect of the recovery of the gold; fourthly another business venture had recently been the subject of excessive costs.

On their application for a renewed lease under Part II of the Act, the Landlord’s executors opposed the grant on the basis that there was a persistent delay in payment of rent – as defined in s.30(1) b of the Act, at the date of the hearing less than £5000 was outstanding.

Jamie McCracken advised and represented the Landlord’s executors through the proceedings and he successfully secured the recovery of the premises for them. Such determinations are relatively rare because as noted by Lord Justice Lewison when describing the trial judge’s observations; “In arriving at that judgment the judge was fully aware of what he described as the appalling consequences for the Ahmad’s if he refused them a new tenancy.”

However, this does act as a reminder to many small businesses of the importance of making the rent payment on time and provides some reassurance to Landlords that they do not need to put up with late payments even when a significant premium has been paid by the tenant.

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