The Landlord and Tenant Act 1954 gives businesses “Security of Tenure”. Under this Act, commercial tenants are provided with the right to a lease renewal and the ability to remain in occupation at the property at the end of the contractual term of the lease on the same terms as the old lease.
This applies if the lease is “inside the Act” but is, however, subject to reasonable modernisation and at a new market rent. The Act ensures that commercial tenants cannot be evicted without the landlord, following the requirements of the Act.
On a broad scale, a tenant located in premises where a business is being carried out has security of tenure even if the term of the lease comes to an end. Although the fixed term lease has ended, tenants of the business have the right to:
- remain in occupation at the end of the contractual term of a lease
- apply through a court for the grant of a new lease
Landlord and Tenant Act 1954 – When does it apply?
The Act only applies to leases granted to tenants over business premises as opposed to residential properties. The Act must be occupied by virtue of a lease instead of a licence. There are some situations where this Act does not apply. These include but are not limited to:
- Contracting out of the Act
- Licences
- Tenancies at Will
- Where the tenant’s total period of occupation does not exceed 12 months.
- Agricultural tenancies
- Tenancies where the term of the lease is for six months or less (unless the lease allows for an extension)
- Tenancies excluded from the Act
If the landlord and tenant have agreed that the lease should confer no security of tenure, then the relevant steps must be taken. Before granting the lease or exchanging agreements for the lease, the landlord must ensure the following with the tenant:
- the tenant must respond by making a declaration in a prescribed form, outlining that they understand the effect of the lease being excluded from the protection of the Act.
- the landlord must serve a formal notice on the tenant in a prescribed form;
- If a lease has been excluded from protection of the Act, then it will expire on the term that is stated in the lease (or earlier if any break right is exercised). It will not benefit from the continuation tenancy conferred by the Act. The tenant will not have the right to carry on their business from the premises or to remain there.
Unlike a lease with the security of tenure under the Act, the landlord has complete discretion as to whether he grants a new lease to the tenant and is not required to give any reason for refusing to grant a lease or explain why he wants the premises back.
If the landlord is willing to grant a new lease, there is no presumption that this will follow the terms of the previous lease.
There are some cases where it is possible to exclude leases from the protection provided by the Act, it is common for new office leases to be granted outside of the Act, but for these to apply, some requirements must be followed:
- Landlords must give the tenant notice confirming that the Act will not protect the proposed lease
- The tenant should acknowledge their agreement to exclude the Act before the new lease has been granted.
- If notice from the landlord is served less than 14 days before the lease has been granted, the tenant’s agreement must be in the form of a statutory declaration.
- The agreement must include a statement that ‘relevant’ sections of the Act should have been excluded.
How is a tenancy ended under the Act?
To terminate a lease with security of tenure, the most common notices bringing an existing, protected business tenancy to an end are:
- Both section 25 and section 26 notices must give a minimum of six months, and a maximum of twelve months’ notice.
- Once the landlord has served a section 25 notice, the tenant cannot serve a section 26 notice and visa-versa.
- How does a landlord or tenant request a lease renewal?
- If a landlord or tenant requests a lease renewal but on new terms, the landlord must serve a section 25 notice followed by a court application. If the lease is approaching the end of its term, a tenant can commence renewal negotiations and serve a “section 26 notice”, a request for new tenancy.
It is important to note that if neither party serves a notice prior to the expiry of the fixed term, the lease will be held over. Subsequently, the lease will continue within the existing terms until either the landlord or tenant communicates that they wish to end the tenancy or seek a new tenancy on the updated terms.
Expert Landlord & Tenant Solicitors
The Landlord and Tenant Act 1954, involves strict rules that must be followed, and commercial landlords and tenants should always seek legal advice to determine their legal rights or obligations.
We can provide advice in relation to lease renewals, working with you to assess risks, costs and options to determine the right solution for you. At Eric Robinson, we have over 60 years of experience and high standards of service in law. Our solicitors offices are in locations all over Hampshire and Surrey.
Our dedicated lawyers at our established law firm will provide you with the utmost professional legal advice and will ensure we provide you the best quality advice presented in a straight-talking ethos and in jargon-free style so it is as understandable as possible.
Commercial leases can be very long and complex documents, and you should make sure that you get the best legal advice before entering into one. We are experienced in negotiating favourable terms on behalf of both landlords and tenants, and as part of our service we explain very clearly the implications of every clause.
We have solicitors offices in Southampton, Hedge End, Chandlers Ford, Winchester, Lymington and Richmond-Upon-Thames.
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