Mixed Premises - Legal Status

Living ‘above the shop’ is quite common in the small business sector and where the premises are rented, the lease will cover both the business and residential parts of the property. However, the statutory basis for repossession is quite different for commercial and residential premises, especially where the latter qualify as ‘assured shorthold tenancies’.

Recently a landlord was seeking to repossess, on the grounds of arrears of rent, premises it had let to a fishmonger. The premises consisted of the shop on the ground floor, which together with a basement made up the commercial premises, and a first-floor flat in which the fishmonger lived.

The District Judge considered the tenancy to be a business tenancy, and therefore not protected by the provisions which apply to shorthold tenants under the Housing Act. A possession order in favour of the landlord was therefore granted. On appeal, the judge ruled that the initial decision had been wrong in regarding the lease as commercial when a residential tenancy had been created and set aside the possession order. The landlord appealed to the Court of Appeal.

The Landlord and Tenant Act 1954 (LTA) will apply when the premises are occupied for business purposes, and a tenancy which is governed by the LTA cannot be an assured tenancy. The question therefore was whether the occupation of any part of the premises was for the purpose of a business carried on by the tenant. If so, the use of the residential part of the premises was incidental to the lease of the business premises and the tenancy could not be an assured shorthold tenancy.

The landlord won the appeal. The initial purpose of the fishmonger’s lease was to secure business premises, so the LTA applied.

Landlords who let mixed accommodation should be prepared for prospective tenants to demand separate leases for the commercial and residential parts of the premises.