Receiver for the Metropolitan Police District v Palacegate Properties Ltd

Authorisation under section 38(4)(a) of the Landlord and Tenant Act 1954 is directed to informed consent to the loss of statutory security of tenure, not to approval of the fairness or detailed terms of the bargain. The executed tenancy must, however, bear substantial similarity to the tenancy placed before the court. A material change affecting the tenant’s need for protection may invalidate the authorisation.

A change from annual payment in arrear to quarterly payment in advance was immaterial in the circumstances. A lease remains a term of years certain for section 38(4)(a) purposes despite break clauses. The appeal was therefore allowed and possession ordered.

The landlord granted the tenant a five-year commercial lease for use of adjoining land as a car park and storage area. Before the lease was completed, the parties obtained an order under section 38(4)(a) of the Landlord and Tenant Act 1954 authorising exclusion of sections 24 to 28.

The draft lease stated that rent was payable annually in arrear, although the parties had agreed that it would be payable quarterly in advance. The tenant later claimed security of tenure and sought a new tenancy. The landlord sought possession. The County Court held that the lease was not excluded from the statutory protection. The Court of Appeal considered whether the rent alteration invalidated the authorisation, whether break clauses prevented a term of years certain, and how the lease should be construed.

1. Appeal allowed. The lease was excluded from the protection of sections 24 to 28 of the Landlord and Tenant Act 1954, expired by effluxion of time on 22 April 1998, and the landlord was entitled to possession.
2. Per Lord Justice Pill, with Lord Justice Mummery and Sir Ronald Waterhouse agreeing, the court’s function under section 38(4)(a) was to satisfy itself that the prospective tenant understood that statutory protection was being surrendered. It was neither empowered nor required to investigate the fairness of the bargain or dictate the lease terms.
3. The words “in relation to that tenancy” nevertheless required the executed lease to bear substantial similarity to the draft before the court. A change material to the need for protection, such as a substantial shortening of a term, could nullify the authorisation. The extent of the court’s enquiry depended on the proposed terms.
4. The rent provision did not invalidate the authorisation. Payment quarterly in advance rather than annually in arrear had no bearing on whether the tenant understood the loss of protection. The court would have reached the same conclusion even if the agreement had been made after authorisation.
5. A break clause did not prevent a tenancy from being a “term of years certain”. The statutory context, including section 69(1) and the references to break rights elsewhere in Part II, supported a consistent meaning.
6. The lease created a fixed five-year term determinable under the express break provisions. “Thereafter” referred to a date after commencement, not to a period following expiry of the five-year term.
7. The County Court’s declarations were set aside. An order for possession was made, with damages for trespass and interest to be assessed. The appeal was allowed with costs in both courts.

• Court of Appeal: Appeal from the Central London County Court allowed. The County Court’s declarations were set aside and possession ordered.
• Central London County Court: On 30 July 1999, His Honour Judge William Barnett QC held that the lease was not excluded from the security of tenure provisions of the Landlord and Tenant Act 1954.