My question is simple. Can a commercial lessee inadvertently but de
facto convert a commercial building lease into a Residential Tenancy
by - after entering into the lease - using it as a PPOR?
Hypothesis
Someone rents a commercial building from a LL and uses it as a place
to make concrete garden ornaments, selling them from the door. After
a year or two, times get tough and the lessee converts a mezzanine
storage area in one back corner into a rudimentary bedroom, making
use of the toilet and related facilities downstairs. Also adds a two-ring
gas cooker with LPG bottle and puts a washing machine next to the
existing washtub and shower, etc. The LL turns a blind eye to all that,
for whatever reason.
Have those actions converted the commercial premises into a residential
premises? The definitions from the RTA seem to imply that it does, viz.
Residential Tenancies Act
Interpretation
commercial premises means premises that are not residential premises
residential premises means any premises used or intended for occupation by any person as a place of residence
It matters not that the Deed of Lease contains a clause that might go like:
. . . as the RTA makes attempting to contract out of the RTA an unlawful act:
137 Prohibited transactions
(1) No person shall—
(a) enter into any transaction, or make any contract or arrangement, purporting to do, whether presently or at some future time or upon the happening of any event or contingency, anything that contravenes or will contravene any of the provisions of this Act; or
(b) enter into any transaction or make any contract or arrangement, whether orally or in writing, or do anything, for the purpose of or having the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act.
(2) Requiring any person to enter into any transaction, or to make any contract or arrangement, in contravention of subsection (1) is hereby declared to be an unlawful act.
(3) Subject to subsection (4), any provision of any transaction, contract, or arrangement entered into in contravention of subsection (1) that would have the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act shall be of no effect.
(4) All money paid and the value of any other consideration for the tenancy provided by the tenant (not being rent lawfully recoverable by the landlord) or, where the transaction takes the form of an option to purchase the premises to which the transaction relates, by the person on whom the option to purchase is conferred, shall be recoverable as a debt due to the tenant or prospective purchaser by the landlord.
If one was to take the RTA provisions generously, any commercial lease
could be turned on its head by a lessee moving in for a while, say in the
case of a marriage break-up. I suspect that sort of thing happens from
time-to-time.
Any forumite know of any case law or TT decisions or pertinent precedents?
facto convert a commercial building lease into a Residential Tenancy
by - after entering into the lease - using it as a PPOR?
Hypothesis
Someone rents a commercial building from a LL and uses it as a place
to make concrete garden ornaments, selling them from the door. After
a year or two, times get tough and the lessee converts a mezzanine
storage area in one back corner into a rudimentary bedroom, making
use of the toilet and related facilities downstairs. Also adds a two-ring
gas cooker with LPG bottle and puts a washing machine next to the
existing washtub and shower, etc. The LL turns a blind eye to all that,
for whatever reason.
Have those actions converted the commercial premises into a residential
premises? The definitions from the RTA seem to imply that it does, viz.
Residential Tenancies Act
Interpretation
commercial premises means premises that are not residential premises
residential premises means any premises used or intended for occupation by any person as a place of residence
It matters not that the Deed of Lease contains a clause that might go like:
Permitted use of premises
Workshop. It is agreed that The Residential Tenancy Act is expressly excluded.
The Lessor is not providing residential accommodation to the Lessee and the
premises are not designed nor intended for such usage.
Workshop. It is agreed that The Residential Tenancy Act is expressly excluded.
The Lessor is not providing residential accommodation to the Lessee and the
premises are not designed nor intended for such usage.
137 Prohibited transactions
(1) No person shall—
(a) enter into any transaction, or make any contract or arrangement, purporting to do, whether presently or at some future time or upon the happening of any event or contingency, anything that contravenes or will contravene any of the provisions of this Act; or
(b) enter into any transaction or make any contract or arrangement, whether orally or in writing, or do anything, for the purpose of or having the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act.
(2) Requiring any person to enter into any transaction, or to make any contract or arrangement, in contravention of subsection (1) is hereby declared to be an unlawful act.
(3) Subject to subsection (4), any provision of any transaction, contract, or arrangement entered into in contravention of subsection (1) that would have the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act shall be of no effect.
(4) All money paid and the value of any other consideration for the tenancy provided by the tenant (not being rent lawfully recoverable by the landlord) or, where the transaction takes the form of an option to purchase the premises to which the transaction relates, by the person on whom the option to purchase is conferred, shall be recoverable as a debt due to the tenant or prospective purchaser by the landlord.
If one was to take the RTA provisions generously, any commercial lease
could be turned on its head by a lessee moving in for a while, say in the
case of a marriage break-up. I suspect that sort of thing happens from
time-to-time.
Any forumite know of any case law or TT decisions or pertinent precedents?
Comment