What Happens When a Commercial Lease Expires ?
Whether you’re a landlord or a tenant, there may come a time when you want to renegotiate your lease or terminate it altogether. A key factor both parties must consider is whether the lease in question has security of tenure.
Kimberley Fox, a Solicitor in our property team, briefly discusses the effect of security of tenure on the parties’ decision to bring the lease to an end.
What is Security of Tenure?
The Landlord and Tenant Act 1954 provides business tenants with the automatic right to renew their lease on the same terms, subject to the landlord’s inability to make out any of the statutory grounds for refusal.
Generally business tenants will benefit from such protection, unless specifically excluded from the lease. In such an event, the tenant will need to sign a statutory declaration confirming their awareness of this exclusion. Where such an exclusion clause exists, the tenant has no statutory right to remain in occupation beyond the expiry of the contractual term.
In the event the tenant wishes to remain in occupation, but on differing terms, the tenant can serve a Notice on the landlord for a new lease. If the landlord cannot make out any of the statutory grounds for refusal to oppose such a request, then the tenant has the right to a new lease on terms to be agreed by the parties or determined by the court.
Can the Landlord still terminate a lease that is ‘protected’?
Prior to the expiry of the contractual term the landlord can serve a Notice on the tenant between 6 and 12 months before the proposed expiry date. The Notice sets out whether the landlord wishes to renew the lease and the terms of the renewal, or whether the landlord wishes to terminate the tenancy and the reasons why.
If the landlord wishes to terminate a tenancy that is protected, there are limited grounds under statute on which he may do so. For example, the landlord may wish to re-develop the property or he may want the property back for his own occupation. There are further statutory provisions that provide the tenant with compensation if the landlord proves a ground not to renew the lease.
There are still occasions where the landlord has the right to take possession of the property and can even oppose the tenant’s request for a new lease.
There are various statutory protections in place for business tenants but equally there are strict statutory procedures which must be followed. If you wish to discuss the intricacies of your business lease, please do not hesitate to contact our commercial property team.