Unless previously agreed commercial tenants usually benefit from the protection provided under Part II of the Landlord and Tenant Act 1954. If the commercial tenant is protected under this Act then the tenant should consider their position well in advance of the expiry of their lease in order to know what action to take (if any). Here are some matters for tenants to consider and timescales within which they should be considered:
Continuation of the Lease
Consideration as to whether the commercial tenant wishes to remain in the premises should be undertaken in advance of any notice periods required under the lease. Although the lease will have an end date, it may require written notice to be provided in order for the tenant to end their obligations under the lease. Accordingly the tenant should consider the lease and decide before any potential notice period commences whether they wish to end the lease or seek for it to continue.
Should the tenant wish for the lease not to continue beyond the contractual period then they must move out by this date. The tenant may wish to serve a section 27 notice in order to confirm that their tenancy is not to continue although they will still need to move out in order to stop any claim against them by the landlord concerning their occupation after the contractual period.
As to whether the tenant chooses to end the lease or force the landlord to end it; it should be considered whether or not the landlord would wish to end the lease irrespective of the tenant’s intentions. If the landlord would wish to end the lease because of their intention to reconstruct, redevelop, demolish or occupy the property themselves then the tenant may be entitled to statutory compensation. In such situation any action to end the lease by the tenant may be the wrong action as far as the tenant is concerned as the landlord would need to pay compensation in order to end the lease in any event.
Renewal of Lease
Subject to the service of the relevant notices by the landlord, following the expiry of the contractual term a commercial tenancy will continue as a periodic lease as long as the tenant remains in occupation of the premises. However a tenant may wish to secure their occupation for a greater period than it would take the landlord to bring the lease to an end. In order to achieve this, a tenant may be able to obtain the landlord’s agreement to grant them another lease for a specific period. Alternatively a tenant could make a formal request under the 1954 Act for the landlord to grant them another lease upon similar terms as their current lease. Such request is made under a document known as a section 26 notice. This request may not be made if the landlord has already served a section 25 notice or if the tenant has already served a notice to quit or notice under section 27 of the Act. Further the request must be in the prescribed form and contain certain information including a request that the new tenancy is to begin not more than twelve nor less than six months after the making of the request.
Once the notice has been served by the tenant, the Landlord must respond within 2 months of the request with the basis or bases for their refusal to grant a new tenancy. If the tenant does not accept the basis or bases upon which the landlord refuses the renewal of the tenancy then this will then need to be determined by the Court.
If the landlord does not refuse the renewal but the parties are unable to agree the terms of the new lease then these terms will need to be determined by the Court. However the tenant must issue a claim to renew the lease or to determine its terms before the expiry of the section 26 notice or any section 25 notice served by the landlord (unless an extension of time is agreed in writing).
Should the landlord serve a section 25 notice and the refusal to renew is not accepted by the tenant then the tenant must apply to the court before the expiry of the notice. Such application will be for the court to determine whether the basis or bases of the refusal to renew are genuine or well founded.
The determination or renewal of a commercial tenancy can be a complicated matter and deadlines must not be missed. At Benchmark Solicitors LLP we can assist with all matters arising out of commercial tenancies.