The Landlord & Tenant Act 1954 Part II deals with the leasing of Commercial (Business) Premises in England & Wales.

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 let non-domestic premises.

This article is based on English law and is not a definitive interpretation of the law, every case is different and only a court can decide. Other UK jurisdictions are similar but there are important differences, particularly in Scotland. If in doubt seek expert advice.

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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 some protection since they stand to lose their business, any goodwill they may have built up over many years, and perhaps much of the value of their stock and equipment, if they have to leave the premises abruptly 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, albeit at a reviewed 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 termination, business tenants are given a right to oppose and to renew their leases if they so wish to do so. 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 these grounds of opposition being set-out in the Act.

If the landlord fails to establish any of these grounds for possession, and this can involve expensive 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 arbitration or 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. Where repossession is granted by a court, the tenant may be entitled to compensation on a scale as defined in the Act.

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.”

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 parties to agree to exclude the security of tenure provisions – known as letting “outside the Act”.

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, which usually involves legal action.

For More Information and Notice Templates see:

Landlord and Tenant Act 1954 http://www.legislation.gov.uk/ukpga/Eliz2/2-3/56/contents

In the UK there is a voluntary code of practice for commercial (business) tenancies – the Code for Leasing Business Premises

If you have any questions about any of the issues here, post your question to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.

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