Occupation of commercial space is typically accompanied by ‘tenure security.’ In essence, this means that the tenant will have the opportunity to request a new lease after the initial term has elapsed, on the same terms (except for the rent). This is a statutory privilege deriving from Part II of the 1954 Landlord and Tenant Act. However, it is worth remembering that the landlord may object to the renewal. They may do so only in limited circumstances, such as if the tenant has been late in paying rent during the term, or if the landlord desires to terminate the lease in order to redevelop the property.
In this article, security of tenure commercial lease, we take a look at the process involved.
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How do I know if I have Security of Tenure?
Security of tenure is an inherent entitlement that applies in the majority of cases. Unless you have “contracted out” of security of tenure in your lease, if you occupy premises under a lease for commercial purposes, you will very likely have it. If you have contracted out, your lease will mention so.
There are numerous reasons why a tenant could need security of tenure, such as if they intend to spend money on the property or establish goodwill.
What are the implications for a landlord?
If you are a landlord, you will want to exclude the tenant’s security of tenure rights in the majority of circumstances. If you have a tenant you’d rather not keep at the end of the lease term (perhaps they’ve been consistently late with rent payments), you’ll want vacant possession of the premises at the lease’s conclusion. If you ‘contract out’ of security of tenure, you can say goodbye to your current tenant at the end of the lease period and dispose of your property as you want. What if you have not ‘contracted out’ of the security of tenure of the tenant? Not all is lost. The 1954 Act establishes a procedure by which a landlord may object to the issuance of a new lease on one or more of a variety of reasons. The premises are in disrepair, the tenant is in arrears with rent, the tenant has committed various lease violations, the landlord wishes to develop the property, or the landlord intends to occupy the property. It goes without saying that there is a procedure to follow if a landlord wishes to object to a new lease on one of these grounds, and it is far easier for a landlord to regain possession by simply not providing security of tenure in the first place.
What are the implications for tenants?
If you are a tenant, it can be a significant advantage (depending on your future business plans) to have a statutory right to extend your company lease at the conclusion of the lease term. One of the most compelling reasons is to ensure business continuity.
As a tenant, you’ve probably invested time and money developing your client base, and in the case of retail units, your customers will have developed an understanding of where your shop is located, and thus where they need to come to spend money with you. Customers may become disoriented if they are suddenly unable to locate you due to a forced relocation. This is one of the other significant benefits of tenure security: avoiding the costs and disruption associated with relocation. Particularly if you have spent hundreds (possibly thousands) of pounds on fit out, it can be quite costly to have to go through the process of de-fitting one unit and re-fitting another.
What happens if your lease is contracted out? Whether this is a genuine concern relies on your relationship with your landlord and, in any case, on your desire to remain in your current premises. If your firm has grown to the point where you require larger premises, remaining in your existing location may not be an issue. Additionally, if you have a good relationship with your landlord and wish to remain, your landlord may be willing to issue you a new lease in any case.
How we can help
We have a proven track-record of helping clients draft a commercial lease. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of signing a commercial. However, expert legal support is crucial in terms of ensuring a positive outcome to your agreement.
To speak to a member of our New Enquiries Team today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
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