The Landlord and Tenant Act 1954 (the Act) is a key piece of legislation which provides security of tenure to tenants in commercial leases. This grants them a statutory right to a new lease at the end of their current lease term, unless the landlord can demonstrate a specific reason for opposing it.
Can a Lease be Excluded from the Act?
The Act automatically applies to commercial leases, however landlords and tenants can agree to “contract out” of this and exclude Sections 24 to 28 of the Landlord and Tenant Act 1954. This means the tenant won’t have the right to automatic lease renewal when their lease expires. This is typically done for underleases and short-term agreements, where both parties know the lease won’t be renewed.
Key Features of the Act
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Commercial tenants have the right to request a renewal of their lease, unless the lease has been “contracted out”.
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Landlords can refuse renewal if:
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The tenant has breached the lease terms (e.g. non-payment of rent or allowing the property to fall into disrepair).
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The landlord wants to occupy the property or redevelop it.
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The tenant has unlawfully sublet the property.
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If the landlord successfully ends the lease, the tenant may be entitled to compensation based on the length of the tenancy and other factors.
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Disputes can be taken to court, where the landlord must prove they have valid grounds for not renewing the lease.
Benefits to Each Party
Having security of tenure is beneficial for a tenant as it means they have stability and certainty when entering into a lease. The benefits for a landlord are intertwined with the benefits to the tenant, as the tenancy will be likely to attract more favourable tenants, and there is a reduced risk of the property being left vacant further down the line, for example, if the landlord cannot find a willing party to take over the tenancy.
Contact a Commercial Property Specialist
Sections 24 to 28 of the Landlord and Tenant Act 1954 ensure that tenants have the right to stay in their business premises, offering them security against eviction without cause.
It is important for both parties to understand the possible impact and implications when deciding whether to have security of tenure, or whether to “contract out” of this provision.
A commercial property solicitor will be able to provide advice to a landlord or tenant during the lease negotiation to ensure their best interests are protected.
Farleys has a team of commercial property specialists available to advise on and negotiate a commercial property lease. For comprehensive legal advice tailored to your situation, get in touch today on 0845 287 0939 or complete our online contact form and a member of the team will get in touch with you.
