Use clauses in Commercial Property Leases

Leases of commercial properties usually contain provisions which control use. This may be by a wide description of uses which are permitted - ‘office’, ‘warehouse’, ‘retail shop’, or by reference to the nature of the business to be carried on – ‘solicitor’s office’, ‘furniture warehouse’, ‘ladies’ clothes shop’. Reference may instead be made to a Use Class specified in the Town and Country Planning (Use Classes) Order in force at the time.

Where a lease contains such use provisions, a prospective tenant must obviously ensure that these are consistent with his intended use of the premises.

If he is taking a new lease, he may be in a position to negotiate terms with the landlord. Where, however, he is taking an underlease or an assignment of an existing lease, a landlord’s licence to change the use may be required, but not readily granted.

A recent Court of Appeal case highlights the care which must be taken when considering the meaning of a use clause. The tenant here was seeking to use the premises concerned as a coffee and sandwich bar. The lease, which dated from the 1950s, included a tenant’s covenant not to use the premises for the business of a ‘victualler, vintner, tavern keeper, vendor of malt liquor, restaurant or coffee house keeper’. The Court focussed particularly on the intended meaning of ‘victualler’

The Appeal Judges concluded that the prohibition against the sale of ‘victuals’ constituted a general prohibition against the sale of food and drink, whether for consumption on or off of the premises. As a consequence, the tenant’s intended use of the premises would have constituted a breach of the relevant lease provision.

Covenants in leases do not necessarily cease to be enforceable, merely because they appear to be redundant or old-fashioned. They may, as in this Appeal case, be as applicable in the current world as they were in the past, especially where words and phrases, not in current use, are readily translated into modern idiom.

The presumed intention of the original parties to the lease must always be considered. There may be good reason for the current landlord to look to the lease to protect his own commercial interests or those of his other tenants.