Graham Pierce, partner at Worthingtons Solicitors in Belfast, writes on a recent court case clarifying the law on occupations versuses leases.

Most occupiers of business premises will be aware that they have certain protections afforded to them under the provisions of the Business Tenancies (NI) Order 1996. Amongst other provisions, the Order allows a tenant the right to a new tenancy on the expiry of the term of the tenancy unless the landlord can object to a new lease being granted and therefore regain possession using one of a number of limited and specific grounds as contained in the Order. However for the legislation to apply in the first instance the tenancy must be one that is capable of being protected by the legislation.

A recent case in Northern Ireland’s Court of Appeal, Car Park Services Limited –v- Bywater Capital (Winetavern) Limited, considered this very issue in relation to the occupation of a car park in Belfast. Car Park Services Limited had occupied and operated the car park at Winetavern Street since 1997. A written agreement had been entered into between the operator of the car park and the cark park owner detailing the terms of occupation which document was described as a “licence” rather than a “lease”. This is an important distinction in that whilst a lease is protected by the legislation, a mere licence to occupy is not. However it is generally known and accepted that simply labelling a document a licence does not of itself take the occupancy outside the protections afforded by the legislation. The detail of the document and the nature of the occupancy need to be considered using the main principles set out in a House of Lords case determined in 1985. That case determined that to be a lease rather than a licence the occupier needed to have been granted exclusive possession of the premises for a stated term and at a rent.

Car Park Services Limited applied to the Lands Tribunal in the High Court in Belfast for a new tenancy of the car park in accordance with provisions of the Business Tenancies Order. The President of the Tribunal rejected the application on the basis that the car park operator did not have a lease capable of having the protection of the legislation. This was after careful consideration of all clauses in the document, especially one clause which stated that the parties expressly agreed that the occupation was by way of licence and not by way of a lease. The car park operator appealed the Tribunal’s decision to the Court of Appeal and the Appeal Judges determined in its favour by a majority 2:1. The court held that the occupation was indeed a lease affording the occupier the protections granted by business tenancies legislation. Reliance could not be placed on a clause which purported to exclude the protection of the legislation.

This case has once again brought about discussions on the differences between business tenancies in this jurisdiction and those in England and Wales and the Republic of Ireland where parties to a tenancy arrangement can agree to exclude the protections afforded by their respective business tenancy legislation. In Northern Ireland the legislature has consistently rejected any change which would permit the parties to do this. The rationale for this appears to be predicated on the perception that business tenants in Northern Ireland tend to be smaller and possess unequal bargaining power when compared to landlords and could therefore be pressurised into giving away their rights. Whatever one’s views are on the rights or wrongs of the current legislation, the case highlights once again the uncertainties that exist around tenants’ rights of renewal and landlords’ ability to regain possession of their premises at the expiry of the current arrangement. It also underlines the importance of landlords taking proper legal advice on any proposed occupancy arrangement before handing over possession of their premises.