As part of our ongoing series discussing important commercial landlord and tenant issues, our Commercial Property team examines how the security of tenure can impact both landlords and tenants.
Understanding Security of Tenure
Security of tenure, as established in the Landlord and Tenant Act 1954 (Sections 24 to 28), refers to the right of a tenant to continue occupying commercial premises beyond the initial lease term. This protection is particularly important for tenants who have established their businesses at a specific location and want to safeguard against disruptions caused by sudden lease terminations.
Qualifying Criteria for Security of Tenure
In order for a lease to be eligible for security of tenure, it must meet these important conditions:
- Commercial Intent: the property must be used for business purposes
- Active Occupancy: the tenant must be in occupation of the property
- Duration Threshold: The tenancy must exceed 6 months
Landlord and Tenant Act 1954 – Inside the Act vs Outside the Act
When it comes to commercial property leases, a key consideration is whether the lease falls within or outside the scope of the Landlord and Tenant Act 1954. This has implications for tenancy security for both parties. Leases under the 1954 Act automatically grant tenants the right to a new lease on expiry, while leases outside the Act require landlords to prove specific grounds to deny tenants this automatic right.
What Tenants Need to Know
For tenants, understanding the scope of the lease and its implications for security of tenure is essential.
Inside the 1954 Act:
- Opting for a lease under the 1954 Act provides you with the security of tenure, granting the right to a new lease upon expiry.
- This means you have the assurance of continuing your business from the same premises, subject to similar terms and rent.
- Landlords face more hurdles in reclaiming the property under this arrangement, as they need to prove specific grounds outlined in the Act.
- If possession is regained, compensation might be due based on factors such as property value and your duration of occupancy.
Outside the 1954 Act:
- Leases outside the Act offer landlords more control over the property and potentially simpler possession recovery.
- However, you won’t have an automatic right to renew the lease when it ends.
- Landlords may not be obliged to provide compensation upon lease termination.
- Remember, without a specific agreement, the lease might unintentionally fall under the 1954 Act.
What Landlords Need to Know
Deciding whether to offer security of tenure within or outside the 1954 Act is an important choice for landlords.
Inside the 1954 Act:
- Leasing under the 1954 Act provides tenants with automatic rights to renew, promoting longer-term tenancies.
- Regaining possession can be challenging and might necessitate proving specific grounds under the Act.
- Compensation may be required if you regain possession, depending on factors such as property value and tenant occupancy duration.
Outside the 1954 Act:
- Leases outside the Act give you more control over your property and simplified possession recovery.
- You’re not obligated to provide compensation upon lease termination.
- Remember, it’s important to follow specific steps, including an exclusion clause in the lease and serving valid notices to tenants, to ensure the lease operates outside the Act.
Our Support for both Landlords and Tenants
In conclusion, the considerations surrounding security of tenure within or outside the Landlord and Tenant Act 1954 are key for both tenants and landlords. Navigating this decision involves a clear understanding of the implications for lease continuity, rights, and responsibilities. By addressing lease situations proactively and seeking legal guidance where needed, both parties can create a lease agreement that protects their long-term commercial interests.
Whether you’re a commercial landlord or a tenant, don’t hesitate to seek advice, guidance and support from our Commercial Property team. Contact us today via 02920 237777 or email law@robsols.co.uk.
