Back to basics under the Landlord & Tenant Act 1954
When leasing commercial premises, understanding the provisions of the Landlord and Tenant Act 1954 (“LTA") can be crucial for both landlords and tenants alike. The LTA essentially governs the rights and obligations of landlords and tenants of premises which are occupied for business purposes and offers important legal protection to both parties.
From the tenant's perspective, when leasing new premises, the future preservation and success of their business may hinge upon the 'security of tenure' provided for under the terms of their lease arrangement. Security of tenure refers to the tenant's right to remain in occupation of the business premises upon expiry of the lease term. As such, this is one of the most important basic rights for business tenants provided for by the LTA.
In broad terms, this means that the tenant has a statutory right to renew their tenancy, either on the same or similar terms, when their existing lease comes to an end. In addition, the tenancy will not automatically terminate on expiry of the current lease. Instead, it will continue on the same terms - otherwise known as the tenant 'holding over' - until it is renewed or formally brought to an end, for example, by written notice to quit from the tenant.
From the landlord's perspective, the LTA provides specific, albeit limited, grounds of opposition to the grant of a new tenancy that can be raised. These statutory grounds include where the tenant is in substantial breach of their contractual obligations, such as a failure to pay rent; where the landlord wants to let or sell the premises as a whole, and the tenant occupies only part of the premises; or where the landlord wants to redevelop the premises or occupy the property or land for the purposes of its own business or residence.
That said, even where a landlord is able to oppose the grant of a new tenancy successfully, they may still be liable to pay statutory compensation to the tenant where recovery of the commercial premises has been sought on a non-fault basis.
Accordingly, given the limited grounds upon which a landlord can object to the grant of a new tenancy and the potential exposure to pay compensation, the LTA also provides the landlord with the ability to contract out of its statutory obligations before entering into a commercial lease. This may be, for example, where the landlord is only looking for a short-term let or to keep its options open for the future.
In these circumstances, where a tenant has effectively agreed to forfeit their security of tenure, they will lose their statutory right to renew their tenancy. Unless the landlord subsequently agrees to the grant of a new tenancy, it will determine on the expiry of the lease term. In this way, a landlord can regain possession of its property without justifying its actions by reference to specific tenant default or other non-fault grounds.
That said, the law governing security of tenure for business leases can be complex, not least when it comes to complying with the strict statutory procedures to be used by landlords and tenants of commercial premises in respect of requests, notices and statutory declarations.
In some cases, a failure to follow the correct procedure in the prescribed form can render the process void. By way of example, the net effect of a tenant failing to correctly make a statutory declaration agreeing to waive their right to renew their lease will result in them retaining their security of tenure, contrary to the intentions of the parties.
For detailed advice on the rights and responsibilities of commercial landlords and tenants, expert legal advice should always be sought from a commercial property specialist before entering into a new lease. In this way, your advisor can help to negotiate terms tailored to your specific needs and thereby protect your legal position moving forward.
Legal disclaimer
The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its’ accuracy, and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should always be sought.