Part II of the Landlord and Tenant Act 1954 (LTA 1954) affords business tenants security of tenure i.e. the right to a new tenancy on expiry of the current tenancy, on like for like terms, save for a change in the market rent, if appropriate.
Leases can be drafted outside of the security of tenure provisions contained in the LTA 1954 if the appropriate wording is included in the lease at the time of drafting and a certain, strict statutory procedure is followed before the lease completes.
The statutory procedure involves the landlord serving an ‘exclusion’ notice on the tenant and the tenant acknowledging receipt of the notice (and acknowledging its consequences), by swearing or signing a prescribed form of declaration. This is called the ‘exclusion procedure’.
So, what happens if the exclusion procedure was followed correctly but the lease was not validly executed? For example, the tenant under the lease was a company and the lease was only signed by one director and the director’s signature was not witnessed. In cases such as these, the lease is treated as invalid and provided that the tenant has taken occupation and has been paying rent on a regular basis, a periodic tenancy can arise.
Excluding security of tenure
It is only possible to validly exclude security of tenure in relation to a tenancy which has a term certain. A periodic tenancy is a tenancy on a periodic basis i.e. if the tenant pays the rent monthly, a monthly periodic tenancy will arise and the tenancy will continue on a monthly, rolling basis. It is therefore essential that not only is the exclusion procedure followed correctly – the lease is correctly executed as well.
If a tenant has security of tenure, there are only limited circumstances where a renewal lease can be successfully opposed by a landlord. In some circumstances (where the tenant is not at fault), if the landlord objects to a new tenancy, the tenant can be entitled to compensation which is calculated with reference to the rateable value of the property. Errors and omissions like these at the outset of a new lease can be costly for a landlord and legal advice should always be sought at the outset of a tenancy.
For more information on security of tenure or to discuss your lease renewal, contact Partner and Commercial Property Solicitor Beverley Merrell on 0116 281 6221 or email firstname.lastname@example.org