In plain site - failures over security of tenure in retail

During my time with a major retailer operating approximately 500 stores, the organisation underwent a structural reconfiguration that had profound—and largely unexamined—legal implications. In a single strategic decision, the Finance Director effectively relinquished the company’s rights to statutory protection under the Landlord and Tenant Act 1954 (the “1954 Act”), specifically the security-of-tenure provisions afforded by Part II. This was done primarily for tax-planning purposes. Operationally, the company converted its individual trading subsidiaries into dormant shell entities, consolidating all rental obligations, wage liabilities, and revenue through a central trading company.

Crucially, this restructuring was carried out without obtaining specialist legal advice on its potential consequences for lease renewal positions across the estate. As a result, the statutory renewal rights of approximately 500 occupational interests were inadvertently placed at risk. Internally, the change was not widely communicated; operational teams continued to act under the assumption that the pre-existing tenancy structures remained intact.

Prior to the restructuring, it had been standard practice to serve Section 26 requests under the 1954 Act at the earliest suitable opportunity in order to secure downward rent adjustments. Remarkably, neither landlord’s agents nor their solicitors ever questioned the validity of those notices or investigated the identity of the “competent tenant” or the actual party in occupation for the purposes of the Act. The disconnect between the nominal tenant/lessee and the entity in occupation was simply not scrutinised by the professional parties involved.

This phenomenon is by no means unique. In the wider retail sector—particularly following corporate acquisitions or multi-brand consolidations—it is not uncommon for the original lessee to differ from the operational entity in occupation or the entity paying rent. In several retail organisations I have worked with, the occupational reality and the contractual position diverged significantly, yet the statutory implications of this misalignment were rarely appreciated.

A further contributing factor is the varying level of expertise among landlord-side surveyors and agents, many of whom are not specialists in landlord and tenant law. Similarly, landlords’ solicitors were either not instructed, or did not consider it necessary, to verify the chain of occupation, rental responsibility, or the presence (or absence) of a formal assignment. In a challenging retail environment, landlords were often content merely to maintain income flow, even where statutory compliance via Section 40 notices (designed to clarify the identity of the competent landlord and competent tenant) was overlooked.

Franchise arrangements often replicate these structural issues. Frequently, the franchisor is not the occupier, and subleases are routinely contracted out of the 1954 Act, leaving the franchisee with no statutory protection. Nevertheless, there are mechanisms—when properly applied—to secure a form of tenure protection even within such frameworks.

In my professional practice, and now in my teaching, I emphasise the procedural significance of correctly serving Section 40 notices and identifying the competent landlord or competent tenant before issuing Section 25 or Section 26 requests. These are foundational requirements that are too often neglected in practice, particularly where commercial pressures create a tendency to prioritise occupation over compliance.

Given the potential legal and financial exposure associated with procedural errors, it is imperative that retail surveyors and property professionals reacquaint themselves with the statutory framework governing business tenancies. Failure to do so risks compounding systemic vulnerabilities within an already fragile retail landscape and may precipitate a future wave of avoidable disputes—a “retail timebomb” in waiting. For high end retailer where their shop fits can be £1 million plus it can be a costly mistake if they are ill advised even a fast food franchise shop fits can stretch to near a million.