What can you do if your landlord tries to ‘poach’ your business?

The relationship between commercial landlords and tenants is commonly just transactional – with the tenant running a business within the landlord’s property in return for rent. But what happens when the landlord thinks they can do the same job?

A recent case in the High Court over the future of a Sheffield music venue has highlighted the risks renting businesses can face. Thrings’ Property Litigation and IP experts Josh Gladwin and Megan Jefferies take a look at the case and what can be done.

MVL Properties vs The Leadmill

The Leadmill (a nightclub) faced the end of its lease on 25 March 2023, with the landlord, MVL Properties (MVL) serving a notice under section 25 of the Landlord and Tenant Act 1954 (LTA) to terminate the tenancy the following day – with the intention of running a similar music venue on the premises itself.

Broadly, a commercial lease will either be contracted in or out of the “security of tenure” provisions of the LTA. If the lease has not been “contracted out”, the tenant will have security of tenure and cannot be evicted at the end of the term unless the landlord is able to prove successfully a ground for opposing lease renewal.

The ground for opposing the renewal of Leadmill’s lease as set out in the notice came under ground (g) of section 30(1) of the LTA where “on the termination of the current tenancy the landlord intends to occupy the holding for the purposes or partly for the purposes of a business to be carried on by him therein or as his residence”.

The tenant opposed this, claiming that a successful opposition to renewal of their lease would infringe their right to property under the European Convention of Human Rights, Article 1 of Protocol 1, (A1P1 ECHR) and argued that they had acquired goodwill, a possession they would be deprived of – in breach of their human rights – if the landlord were to take back the site.

The High Court found in favour of the landlord, MVL and held that the opposition to renewal under ground (g) did not breach A1P1 ECHR because:

• Whilst goodwill can be a "possession" under A1P1 ECHR, a stated value would not suffice and that actual evidence must be provided by the tenant.
• Even if a tenant can prove goodwill, the LTA states its objective is "to enable tenants occupying property for business, professional or certain other purposes to obtain new tenancies in certain cases…". The Act only provides a tenant with a contingent right to renew; therefore, a tenant cannot be lawfully deprived of their "possession".
• Preventing a landlord from recovering their property would not be in the public interest.

What this means

As discussed above, where a commercial tenant has rights of security of tenure under the LTA, the landlord cannot evict without engaging in the section 25 renewal procedure. Broadly speaking, if the landlord wants possession, it will need to oppose the lease renewal by proving one of a number of grounds.

If a landlord is successful in demonstrating its firm and settled intention to occupy the holding to carry out a business under ground (g), they may not be required to pay compensation to the tenant for acquiring the tenant’s goodwill – even if they are carrying out the same business as the tenant.

This case suggests that if the landlord is able to prove a settled intention, there is nothing the tenant can do, though they may be able to put up a better fight as regards the value of the goodwill to be claimed in compensation.

How can you protect your business?

Whilst a business might have little power to repel a section 25 notice under ground (g), there are ways by which they can protect their goodwill and reputation and prevent their customers from simply continuing to frequent the same premises in the belief the landlord’s business is the tenant’s, business, because they are unaware of any change.

The two key considerations are:

• Trade marks: Protect the business name and/or logo from the outset. That way, if a similar business does operate from the same premises, they can’t legitimately use a name and/or logo that bears a resemblance to yours without infringing your intellectual property rights. This will help your customers distinguish between your business and the new business operating in the same location and mean there is less likely to be confusion that the two businesses are linked or are one and the same.
• Branding: Choose a distinctive and original name (and logo) that isn’t commonplace and doesn’t link to the industry or the goods and/or services offered. This will mean you will be more likely to be able to protect it as a trade mark (purely descriptive marks will not be accepted by the UK Intellectual Property Office (UKIPO)). For example, don’t call your café ‘The little café’. This also applies to references to the location within your business name. Any business name based on a geographical feature or address might not make sense if the business moves and so will make it harder for you to retain the same name for your business if you are forced to move premises. For example, if you run a bakery on Bridge Street, don’t call it ‘Bridge Street Bakes’. Being forced to rebrand because of a change in location can result in a loss of hard-won reputation and goodwill built up during the years of trading at the previous address.

In summary, If your business name (and logo) is distinctive, transferable and non-descriptive, it is:

• far more likely to stand out to customers and potential customers;
• far more likely to be more memorable;
• easier to retain if you have to change your address;
• less likely to already be being used by a similar business (meaning you avoid infringing another business’ rights); and
• be more likely to be accepted by the UKIPO as a registerable trade mark.

Whilst this won’t help you remain in your rented premises in the circumstances set out above, it may well make the move less painful and less costly.

Thrings’ Property Litigation and Intellectual Property lawyers are experienced in safeguarding your assets and reaching resolutions in disputes, often without recourse to court proceedings, and with an excellent track record when cases do go to Court. To find out how they can help protect, get in touch.