Security of tenure – what is it?
Part II of the Landlord and Tenant Act 1954 (“the Act”) details the concept of security of tenure and seeks to balance the interests of a landlord and a business tenant.
In brief (and subject to various exceptions) the provisions of the Act give a tenant in occupation of, and carrying on business from, commercial premises the realistic prospect that they will be able to renew their lease for a further period when the initial period comes to an end.
In or out of the Act?
IN: The protection given by the Act means that a fixed term lease will not end on the expiry date but will continue automatically on a periodic basis on the same terms (except for termination clauses) and at the same rent until it is terminated pursuant to the Act. Further and as mentioned, a business tenant will have a right to apply to Court for a renewal of the lease which may only be opposed by the landlord on certain statutory grounds set out in the Act. It is also possible for a tenant to be entitled to compensation in the event that an application for renewal is unsuccessful.
OUT: As it suggests, not having the protection of the Act means a business tenant will not have the statutory right to apply for a renewal and therefore the lease will only run as a maximum for the term stated in it.
Consequences of being out
Consequences of the exclusion of the statutory rights include making a lease increasingly less marketable as the end of the lease term approaches (i.e. if the tenant wishes to assign/sell the lease to someone else, it may be unattractive given the short-term nature of the lease and the fact there is no right to seek a renewal); if significant fitting out works are carried out or other costs incurred in setting up the business, there may be limited opportunity of fully recovering all money spent; and there will, of course, be cost implications of the tenant having to relocate at the end of the lease term – finding alternative premises, negotiating another lease, informing customers and suppliers of change of details, etc, etc.
Can a new lease be granted even if the original does not have protection?
Being outside the Act does not prevent another lease being agreed between the parties at the end of the lease term. However, there is no guarantee that such an agreement would be reached and, if there is no agreement, the tenant would have to vacate the property.