Landlord & Tenant Act 1954 Part 2
Commercial (Business Tenancies)
Landlord and Tenant Act 1954, Part II
The Landlord and Tenant Act 1954 (the Act) is an important piece of legislation in England and Wales which affects a large number of properties, in the main most non-domestic premises.
Business Tenancies are basically contractual in nature, i.e., based on a contractual agreement between the parties and usually result from a protracted pre-contract negotiation of the terms between landlord and tenant.
However, Part II of the Act recognises that business tenants need protection since they stand to lose their business any goodwill they may have built up over years, and perhaps much of the value of their stock and equipment, if they have to leave the premises at the end of their lease term.
A Statutory Right to Renew the Tenancy
The Act therefore gives business tenants a statutory right to renew their tenancies, on similar terms to the original lease, at full market rent.
Section 24 of the Act provides that a business tenant’s existing lease is continued until terminated in accordance with the rules laid down in the Act.
If a landlord wants a termination, business tenants are given a right to renew their leases if they so wish. This right is triggered by the service of a statutory notice (section 25 and 26 notices) from either the landlord or the tenant. Until one of these notices has been served, the current tenancy is automatically continued on a periodic basis.
Grounds for Re-Possession of a Commercial Property
The tenant’s right to renew his/her/their tenancy can be resisted, but only on very specific grounds, seven of which grounds of opposition set out in the Act.
If the landlord fails to establish any of these grounds, and this can involve expenses court action, the tenant will be entitled to a new the tenancy. The terms of the new lease must be agreed by the parties on similar terms to the original, or (when they cannot agree) by a county court, in accordance with the rules set out in the Act.
Lease Renewal or Re-possession
Although this may seem a simple process, there is some complex and technical detail involved and a potentially expensive legal process. The exchange of notices between the parties needs some technical precision and particularly if the landlord seeks possession which is opposed.
Business Tenancy Defined
The Act applies to tenancies where the property is occupied for business purposes. “Business” is widely defined to include a trade or profession, and “any activity carried on by a body of persons, whether corporate or unincorporated.”
To qualify for statutory protection, the tenant need not occupy the whole of the premises, nor does he/she/they have to use the premises exclusively for business purposes.
Exclusion of Security of Tenure – Business Tenancies
There are a few specific instances where the right to renew is excluded.
In addition, there is a procedure involving the serving of specific notices, prior to the contract, which allows both to agree to exclude the security of tenure provisions.
Ending a Business Tenancy
There are also ways in which the current tenancy can be brought to an end without renewal:
- Where a tenant wishes to quit he/she/they can serve a notice (s26 Notice) at least 3 months before the contractual term date or before the end of the fixed lease term.
- Where both parties agree to a surrender of the lease.
- Where a tenant in breach of contract can have his/her/their lease forfeited.