The Landlord and Tenant Act 1954 (the “Act”) regulates the way in which business tenancies can be terminated and gives business tenants security of tenure. Major changes to the provisions of the Act came into force in 2004.
WHAT IS SECURITY OF TENURE?
The right for a tenancy to continue automatically at the end of the contractual term, on the same terms and at the same rent, until it is terminated in accordance with the Act.
The right for the tenant to apply to court for a new tenancy which the landlord can only oppose on certain grounds (some of which involve the payment of compensation to the tenant if he has to leave).
WHICH TENANCIES ARE PROTECTED?
Broadly, there are three requirements:
- A tenancy – this is typically a lease, but other agreements may be tenancies where they grant exclusive possession for a term and at a rent. Certain tenancies do not qualify – see Excluded tenancies below.
- The tenant must be in occupation.
- Occupation must be for the purposes of a business.
a. Excluded tenancies
The Act does not protect certain tenancies, including:
Tenancies which have been “contracted out” – see Contracting out below.Fixed term tenancies for less than 6 months, unless there are renewal or extension provisions or the tenant has already been in occupation for more than 12 months.Tenancies at will, where occupation is permitted but no rent is paid and either party can terminate at any time. They can arise where a tenant takes occupation before a lease is formally granted.
b. Contracting out
A court order is no longer required to exclude the security of tenure provisions of the Act. Instead, the landlord must serve a notice on the tenant in a prescribed form and the tenant must sign a declaration that he has received the notice and accepts the consequences of the agreement to contract out. If the notice is served within 14 days prior to the grant of the tenancy or any agreement to grant it, the tenant must make a statutory declaration before an independent solicitor.
The lease must contain reference to the exclusion agreement, the notice and the declaration.
c. Terminating a protected tenancy
A protected tenancy can only be terminated in one of the ways set out in the Act. The most usual ways are:
BY THE TENANT
If the tenant vacates before the end of the contractual term, there is no tenancy to be continued under the Act and no notice is needed. However, simply vacating after the end of the contractual term will not bring the tenancy to an end.
Otherwise, to terminate a protected tenancy the tenant may serve a notice on the landlord:
Before the end of the term – no less than three months before the end of the term, the tenant can serve notice on the landlord to end the tenancy on the expiry of the contractual term.
After the end of the term – the tenant can serve notice on the landlord to end the tenancy on any date giving at least three months’ notice.
If the tenant serves either of these two notices, he may not then request a new tenancy (see Requesting a new tenancy below).
BY THE LANDLORD
The landlord can serve a statutory notice to terminate the tenancy. The notice must be served not less than six months, nor more than twelve months, before the date of termination specified in it, which can not be before the contractual term end date.
The landlord’s notice must state whether the landlord will oppose an application by the tenant for a new tenancy, and if so, on which ground(s) of opposition.
Requesting a new tenancy
Rather than wait for the landlord to serve a notice, the tenant can request a new tenancy, which may have tactical advantages for him. Not all tenants can request a new tenancy. A counter-notice is required from the landlord within two months if the landlord wants to oppose the tenant’s application. The counter-notice must state the ground(s) of opposition.
Grounds of opposition
The most frequently used grounds are:
- That the landlord has a firm intention to demolish or reconstruct the premises at the end of the tenancy and cannot do so without obtaining possession from the tenant.
- That on termination of the current tenancy the landlord intends to occupy the premises for his own business purposes.
If either of these grounds are successfully used by the landlord, compensation may be available for the tenant.
Other grounds include the tenant’s failure to repair the premises, the tenant’s persistent delay in paying rent, the tenant being in substantial breach of other obligations or that the landlord has offered alternative accommodation.
Either party can apply to the court within prescribed time limits to have the matter determined, either to terminate the tenancy or to apply for a new tenancy. It will usually be the tenant who applies to the court in order for a new tenancy to be granted, and he must do so to obtain a new tenancy even if the landlord does not oppose one.