In a recent Court of Appeal case, the court had to consider whether a tenant who had the option to renew its lease in an existing tenancy was a substitute to its statutory rights to renew or whether such a contractual option was in addition to its statutory rights.
The case concerned the leases of two cake factories which expired in June 2026. Under the leases, the tenant, Park Cakes Limited had contractual options to renew each lease. The issue was that the annual rent which would be payable under any new leases granted pursuant to the contractual options would be index- linked which it turned out, would result in higher rents than the open market rents that would be payable under renewal leases granted pursuant to the 1954 Act.
Park Cakes Limited therefore decided to exercise its rights to renew under the 1954 Act. The landlord (Caterpillar Property Ltd) contended that as the tenant had a contractual option to renew under its current leases it could not also rely on its statutory rights. Using a novel argument, the landlord argued that a little known provision in the 1954 Act (section 28) was the legal basis for its case
The County Court rejected the landlord’s arguments and so it appealed to the Court of Appeal. However that court also unanimously rejected the landlord’s arguments.
The court decided that there were clear differences between a contractual option to renew and a tenant’s statutory right to renew (eg the contractual option may be subject to various conditions whereas a statutory right does not) and that if the parties intended to exclude the protection of 1954 Act then they should have followed the contracting out procedure when the leases were first granted.
Caterpillar Property Limited v Park Cakes Limited [2026] EWCA Civ 575
