Avondale Park v Miss Delaney’s Nursery 

The Court of Appeal decision in Avondale Park v Miss Delaney’s Nursery raises an interesting point about the effect of a clause in a lease that states that it “will be terminated” on the occurrence of a specified event. Does the lease end immediately or is the clause just an option to terminate?  In the case, this answer had significant consequences. 

Avondale Park Ltd (Avondale) held a lease of a property under which the permitted use was for residential accommodation. The lease had security of tenure under the Landlord and Tenant Act 1954 (1954 Act) with a contractual expiry date of 13 September 2022. 

Avondale’s predecessor had granted a sublease of the whole of the property to Miss Delaney’s Nursery Schools Ltd (Miss Delaney’s) until 29 August 2022, for use as a children’s nursery. The sublease did not have security of tenure and stated that if, by 14 December 2014, Avondale had failed to secure a deed of variation from the freeholder consenting to the change of use of the premises, the sublease “will be terminated immediately”. The deed of variation was never obtained. Miss Delaney’s went into occupation in late 2014 and traded from the premises with Avondale accepting rent until disputes arose in August 2022. At that point, Avondale purported to forfeit the lease by peaceable re-entry.  

Miss Delaney’s successfully sought an injunction to be allowed back into occupation arguing that, because no deed of variation had been produced, the sublease had terminated but, as they had been in occupation for eight years, paying rent, they had acquired a periodic tenancy with security of tenure under the 1954 Act.   Avondale appealed but the Court of Appeal agreed with Miss Delaney’s, finding:

• On the correct construction of the sublease, it automatically terminated on 14 December 2014, given that the required deed of variation had not been produced. When interpreting the clause, the court considered what the wording showed about what the parties intended. The intention in this instance was for immediate termination; the sublease did not say “may” terminate. 
• Even though the parties acted as if Miss Delaney’s still occupied the property under the sublease, this did not prevent them from now asserting that they had a periodic tenancy with security of tenure. 

This finding meant that, instead of Miss Delaney’s right to occupy ending conclusively on 22 September 2024 as Avondale had expected when granting the sublease, Avondale would only be able to recover possession by serving the relevant 1954 Act notice and proving one of the statutory grounds under the 1954 Act, which in some cases requires the payment of statutory compensation. 

Landlords should be careful when agreeing “automatic” termination clauses, not only to be sure of their effect but also because if they do not work as expected, occupiers who remain in occupation paying rent may acquire unwelcome statutory rights.