Contracting Out Of Security Of Tenure – Can Tenants Have Their Cake And Eat It Too?

The recent High Court decision in TFS Stores Limited v BMG (Ashford) Limited et al [2019] EWHC 1363 (Ch) is an important decision dealing with the contracting out procedures under Section 38A of the Landlord and Tenant Act 1954 (1954 Act) and Schedule2 of the Regulatory Reform (Business Tenancies) Order 2003 (2003 Order).

Background and facts

The Fragrance Shop (TFS), a large perfume retail operator with over 200 stores nationally, entered into leases at six designer retail outlet centres and in each case the contracting out procedure was followed. Following the expiry of the leases, and the landlord's decision not to renew but to let the stores to a rival perfume retailer, TFS sought to establish that the six leases were protected by the 1954 Act.

The contracting out procedure

Unless a commercial lease is contracted out, the 1954 Act serves to protect the tenant's right to remain in occupation of the premises and its right to the grant of a new lease following the expiry of its existing lease.

The parties can agree that...