What is security of tenure?
The Landlord and Tenant Act 1954 (the Act) provides security of tenure to businesses that occupy under a lease. If the Act applies, the relevant business tenancy will not automatically come to end upon the expiry of the contractual term of a lease, provided that the tenant remains in occupation for the purposes of a business. The tenancy can still be terminated by the completion of a surrender, or the landlord forfeiting the lease (i.e. bringing the tenancy to an end due to a breach by the tenant).
What happens at the end of my lease?
If you have Security of Tenure, the short answer is nothing! The Act keeps the lease going passed the strict end date, known as holding over. This can continue indefinitely but normally one of the landlord or the tenant takes action to either end or renew the lease.
The intention is that a renewal lease will be issued on broadly the same terms, although the rent can increase. If the tenant does not want another lease, they can serve notice and simply end the lease (on 3 months’ notice). If the landlord does not want another lease, they can only object on certain grounds within the Act.
How can the landlord object to a renewal lease?
The Act sets out a number of grounds split into ‘fault’ and ‘non-fault’ grounds. Fault grounds includes constant late payment of rent or failure to repair; the Act does not force a landlord to take on a bad tenant again. The non-fault grounds include redevelopment. If the landlord uses a non-fault ground, the Act requires them to pay compensation to the tenant.
Is Security of Tenure compulsory?
It is possible to exclude the protection provided by the Act. It is quite a simple process. Not having the protection of the Act means a business tenant will not have the ability to hold over or the right to apply for a renewal and therefore the lease will only run, as a maximum, for the term stated in it.
Can a new lease be granted even if there is no Security of Tenure?
Being outside the Act does not prevent another lease being agreed between the parties at the end of the lease term. However, because there is no statutory right to a renewal lease, the balance of power lies with the landlord and if terms cannot be reached, the tenant will have to vacate.
The Landlord and Tenant Act 1954 is highly technical. It is essential to take specialist legal advice about the effect of any notice and what action should be taken to protect the position under the Act.
If you would like us to review your lease at a free appointment to determine your position on security of tenure, please contact Lochana Gabrielsen.