Rectification Cures a Landlord’s Drafting Error
Landlords court disaster if they fail to take legal advice before granting a tenancy. If ever there was a case that proved the point it must be that of a property company that wished to grant a lease for a year but inadvertently granted one for 2,000 years.
The company had granted a tenancy of an industrial unit which on the face of it was for just one year, with provision for renewal on the same terms. However it was, in law, a perpetually renewable lease and, by operation of the Law of Property Act 1922, it was automatically converted into a 2,000-year lease. The company preferred to use a simple form when granting short-term leases and the document, which ran to just two pages, had been executed without legal advice.
The First-tier Tribunal (FTT) noted longstanding judicial reluctance to find that leases are perpetually renewable, not least because they are commonly entered into by mistake, make little business sense and represent a windfall for the tenant. On the clear wording of the document, however, that is what it was.
Coming to the company’s aid, however, the FTT found that the tenants had been aware of the error and had set out to create a trap into which the company fell. It thus had no hesitation in rectifying the lease, which would henceforth provide that it would no longer be renewable after it had run for three years
Palo Alto Limited & Ors. v Alnor Estates Limited.