Dealing With Business Tenancies At The End Of A Fixed Term Lease

When a lease of commercial property has been excluded from the provisions of the Landlord and Tenant Act 1954 (“LTA 1954”), many landlords overlook the need to take appropriate action towards, or at the end of, the term to regularise the position. This puts the landlord’s plans of taking back possession at risk.

A tenant under a lease which has the protection of security of tenure under the LTA 1954 has the right to request a new tenancy at the end of the fixed term, provided they satisfy the relevant criteria. On the other hand, a tenant under a lease which has been excluded from the LTA 1954 does not have the same protection, meaning the landlord can take steps to regain possession at the end of the fixed term. However, a landlord who doesn’t act quickly could face difficulties in regaining possession and, in the right circumstances, potentially be forced to provide the tenant with a new tenancy under the LTA 1954.

Where a tenant continues to occupy the premises after the end of the fixed term, the more time that passes without the landlord taking any action, the more likely the status of the tenant’s occupation will be deemed to be either a tenancy at will or a periodic tenancy.

A tenancy at will is a tenancy on terms that either party can end at any time and does not give the tenant a right to a renewal lease under the LTA 1954. A periodic tenancy can, in circumstances give a tenant the protection of security of tenure and by extension, a right to a renewal lease. The status of the continued occupation depends in particular on the conduct of the parties.

The courts have found that a periodic tenancy can be implied where, following expiry of the fixed term of the lease, the landlord accepts rent from the tenant but does not enter negotiations for a renewal lease or provide any indication that the tenant is no longer able to occupy the premises.

If a periodic tenancy has been created and by consequence the tenant has security of tenure, the landlord may only regain possession by following the procedure under section 25 of the LTA 1954 and will need to establish one of the limited grounds set out in section 30 of the LTA 1954.

Given the potentially adverse position the landlord could find itself in, they should take pre-emptive steps to avoid the position entirely:

• Diarise the date on which the lease is due to expire with sufficient reminders.

• Enter early communications with the tenant on their plans for the premises, at least 6 – 12 months before the end of the fixed term (keeping in mind any periods of notice which needs to be served under the lease). If the tenant indicates an intention to remain after the fixed term, the landlord can consider negotiating a new lease which can commence from the end of the existing lease.

• If the landlord intends to regain possession at the end of the fixed term, it’s important to instruct solicitors without delay who will be able to consider what legal steps will be required to protect the landlord’s position.

• If a landlord is in a position of uncertainty closer to the end of the fixed term, it is best to take urgent legal advice and instruct solicitors to act accordingly. This may include sending a letter to the tenant demanding possession of the premises at the expiry of the lease. It is also vital that the landlord does not demand or accept any payment from the tenant under the lease in respect of any period after the end of the fixed term.

If you are a landlord (or tenant) of business premises faced with a lease which is due to expire or has expired and wish to discuss protecting your position, please call our Dispute Resolution department on 0116 289 7000 or by email at info@bhwsolicitors.com.