Commercial leases are dealt with under the Landlord & Tenant Act 1954, but what if your commercial lease expires – can your landlord simply evict you from the premises and what rights do you, the tenant, have?
Business tenants usually have rights which mean that they are entitled to a new lease when their current lease expires. These rights are contained in the Landlord & Tenant Act 1954 (“the 1954 Act”).
The Landlord & Tenant Act provides:
1. If a business tenant continues to trade from the property after the end of his lease, the lease will continue to run until either the Landlord or the Tenant gives the other notice to end the lease. This notice must be in a prescribed form and must give between 6 and 12 months’ notice to end the lease. A Landlord’s notice must say:
a. Whether he objects to a new lease and, if so, on which of the grounds specified in the 1954 Act; and
b. If he does not object to a new lease, his proposed terms for the new lease.
A Tenant’s notice must also specify his proposed terms for a new lease. The new lease must be at the then market rent – not the existing rent.
2. Once notice has been served, the parties usually negotiate terms for a new lease. If not, the Tenant must apply to the court for a new lease before the end of the notice period – otherwise, he will lose his right to a new lease.
3. If the parties cannot agree, a court will determine:
a. Whether the Tenant is entitled to a new lease: and
b. What the terms of that new lease should be (length of the term, new rent, etc.).
Going to court is expensive so, in most cases, the parties agree a settlement.
4. A Landlord may only object to the renewal of a business lease on certain limited grounds specified in the 1954 Act. These include:
a. The Landlord intends to develop the property;
b. The Landlord requires the property for his own use (but the Landlord must have owned the property for 5 years to rely on this ground);
c. The Landlord has offered the Tenant suitable alternative accommodation;
d. The Tenant has been in serious and persistent breach of the lease.
Even if a landlord can prove one of these grounds, the Tenant will usually be entitled to compensation equal to the rateable value of the property (or twice the rateable value if the Tenant has been there for 14 years).
5. The rights in the 1954 Act can be excluded if the parties agree to this before the lease is completed. Formal notice (in a specified form) must be served on the Tenant before he signs the lease and the Tenant must sign a declaration to acknowledge receipt of such notice. A specific clause must also be included in the lease.
This is only a very brief summary of complex rules. It is important that Landlords and Tenants take advice on these rights before entering into a lease and immediately on receipt of any notice under the 1954 Act.
For more information, please contact Partner and Commercial Property Solicitor Eleanor Rattay on 0116 281 6224 or email eleanor.rattay@bhwsolicitors.com