Part 3: Enforcement by Taking Control of Goods Schedule 13: Taking control of goods: amendments Section 75: Commercial premises
366.This section defines what is meant by “a lease of commercial premises”. A lease (lease A) will not be “a lease of commercial premises” if any part of the let premises is let under lease A (or let under any sublease B) as a dwelling, or occupied as a dwelling. So, for example, a lease of property comprising a shop and a flat will not be a lease of commercial premises if the flat is used, or is required by the lease to be used, as a dwelling. But if that lease does not impose any requirements as to the use of the flat, and the tenant chooses to use it either as a storeroom or office for the shop, then the lease will be one of commercial premises because no part of the demised premises is let or occupied as a dwelling.
367.This section makes it clear that any occupation as a dwelling will not count if it is in breach of the terms of lease A or any lease that is superior to lease A. Similarly if the property has been sublet then any sub-letting as a dwelling will not count if it is in breach of the terms of a lease that is superior to lease B. The purpose of these provisions is to ensure that a commercial tenant cannot seek to prevent his landlord from using CRAR against him by, for example, allowing a third party to occupy part of the premises as a dwelling. So the landlord can still use CRAR against his tenant in those circumstances, even though there are residential occupiers present. But the provisions are also designed to ensure that a landlord (who is himself a commercial tenant under lease A) cannot rely on his own breach of lease A to use CRAR against the tenants to whom he has sublet the property as a dwelling under lease B. So in those circumstances, the landlord cannot use CRAR because lease B will not be a lease of commercial premises.