The matter concerned a commercial unit, which the company had intended to lease for a year, with the provision for renewal on identical terms. However in law, due to the wording of the lease, it became a perpetually renewable lease and, by operation of the Law of Property Act 1922, it was automatically converted into a 2,000-year lease. The lease, executed without legal advice, ran to just two pages due to the landlord’s preference for simple short term leases.
On application to the First-tier Tribunal (FTT) for the renewal of the lease, the Tribunal found that the tenants had been aware of the error and had deliberately intended to create a situation to their advantage. It also noted there was a longstanding judicial reluctance to find that leases are perpetually renewable, not least because they are commonly entered into by mistake. It also found these leases made little business sense and represent a windfall for the tenant, but that the wording made it clear it was perpetually renewable. The lease was subsequently rectified by the FTT to make it non-renewable after 3 years.
While in this instance, the Tribunal avoided an awkward situation for the landlord, on other occasions, the result may have been different. Had the landlord sought legal advice, a qualified legal advisor would have identified the troublesome wording and advised the landlord to make the necessary amendments to comply with their original intentions.