Security of Tenure and Business Leases: Advice for Landlords and Tenants

Year Published: 2020

The relationship between a landlord and tenant of business premises is governed by the Landlord & Tenant Act 1954 (“the Act”). Unless the parties have agreed (by following the prescribed procedure) to exclude the terms of the Act that provides security of tenure for the tenant, at the end of the fixed term of the lease, the tenant:

  1. Has a right to remain in occupation; and
  2. Has a right to apply to court for a new lease.

How Can Landlords Remove a Tenant?

Where the business tenant has security of tenure, in order to seek to regain possession, the landlord will need to serve a Section 25 NoticeThe termination date specified in the Section 25 Notice must not be more than 12 and not less than 6 months from service of the notice and cannot be earlier than the last day of the term of the lease. 

Once a Section 25 Notice has been served, a business tenant can apply to court for a new lease (as long as the court proceedings are lodged at court before the expiry of the Section 25 Notice). 

Grounds for Opposing a New Lease

The landlord can only successfully oppose an application for a new lease if one of the below grounds apply: 

a) the tenant has failed to repair the premises; 

b) thtenant has persistently delayed in paying rent;  

c) there have been substantial breaches of the lease by the tenant 

d) the landlord can offer suitable alternative accommodation; 

e) there are complex sub-tenancies and the landlord can obtain a better rental return if the premises are let/sold as part of a larger unit;  

f) the landlord intends to demolish or reconstruct the premises; or 

g) the landlord intends to occupy the premises for his own business.  

If the landlord relies on grounds (e), (f) or (g), then statutory compensation is payable by the landlord.

What Can Tenants Do?

A business tenant can also activate the renewal procedure by serving a Section 26 Notice specifying a termination date and proposing new terms for a lease. A landlord then has two months to serve a Counter Notice.  

The start date for the new lease must not be more than 12 and not less than 6 months from the Notice. A Section 26 Notice cannot be served once a Section 25 Notice has been served by the landlord. If no agreement can be reached, the tenant must apply to court for a new lease before the Section 26 Notice expires. 

COVID-19 Implications on Security of Tenure 

Landlords are presently prevented from forfeiting ‘relevant business tenancies’ pursuant to Section 82 of the Coronavirus Act 2020 until 30 September 2020. It was recently announced that unused commercial property could be rezoned for residential development. If the UK government pursues this as a measure to reboot the economy, it is likely that this statutory protection for retail and other commercial tenants could fall away.   

If you are a commercial landlord or business tenant and would like further advice regarding security of tenure, please contact Kathryn Clare on 01244 305955 or email kathryn.clare@sasdaniels.co.uk.

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