Summary and implications

The County Court has ordered a new lease for a term of 10 years, on lease renewal. The 10- year term is double the length requested by the tenant (Iceland Foods Ltd v Castlebrook Holdings Ltd 12 December 2013).

  • The judge gave limited consideration to market comparables when deciding the length of the renewal lease.
  • The court struck a balance between the parties' interests when determining the length of the term.
  • The judge had to balance the tenant's requirement for security of tenure and the damage to the landlord's reversion of a short lease.

The judge was asked to determine the duration of a renewal lease of supermarket premises in Cheshire under the Landlord and Tenant Act 1954 (the Act).

The tenant had been in occupation of the supermarket for 20 years

The tenant, Iceland, had been in occupation for 20 years of a lease which was originally granted for a term of 42 years.

Iceland served a section 26 request, requesting a tenancy of just five years at a rent of £37,500 per annum.

The landlord, Castlebrook, requested a term of 15 years at a rent of £182,350 per annum.

The judge had to decide what was reasonable

In deciding the length of the term, the judge's discretion was limited. Under the Act, the judge could only order either a periodic tenancy or a tenancy for a maximum of 15 years.

Subject to that limitation, the judge had to decide a length of term which was "reasonable in all the circumstances" (in accordance with section 33 of the Act). 

The tenant wanted a shorter term to give flexibility

Iceland sought a shorter term on the basis that it wanted flexibility in light of the store's under-performance and the fact that market conditions were unsettled.

The landlord argued that a shorter term would affect the value of its reversion and that supermarket leases were usually granted for a longer term.

The judge exercised his discretion and granted Iceland a term of 10 years. The judge gave consideration to Iceland's requirement for a security of tenure, as this was the primary purpose of the Act.

However, the judge struck a balance between this and the landlord's requirement that the term was not so short as to prejudice the value of the reversion.

The court considered that the length of the existing lease (42 years) was a factor in granting a longer lease than that requested by Iceland.  Market comparables offered limited value in helping the judge to decide the length of the new lease. 

Factors which may influence the judge's discretion on lease term

The judge's discretion on the length of the new lease may be influenced by factors including:

  • the length of the current tenancy (as in the Iceland case);
  • the length of time that the tenant has been in occupation; and
  • the hardship to either party of granting a long (or short) term. For example, the fact that it may be difficult for the landlord to re-let the premises after a very short term.

While this decision seems to offer hope to landlords who are seeking a longer term, it will not carry as much weight as a decision made in a higher court. However, the decision is a reminder of the factors the court will take into account when deciding the term of a renewal lease.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.