27 May 2013
The law and business premises
Landlords and tenants of business premises need to know their respective rights and responsibilities. Commercial property partner, Michael Larcombe, at B P Collins LLP explains what the law says about business tenancies.
Business tenants cannot generally be required to give up their premises when their tenancy ends. They can continue to occupy their premises and apply to court for the grant of a new lease.
If, however, the landlord and tenant expressly agree, the tenant’s right to continue in the premises after the expiry of the stated term of the lease– his ‘security of tenure’ - can be excluded at the outset, with no right to compensation.
For example, if the landlord knows from the start that it will want its premises back for development purposes or the lease is to be very short, it may negotiate to exclude the tenant’s rights. For their agreement to be effective, the landlord must serve a formal notice and the tenant must respond with a standard form declaration that he understands the effect of giving up his security of tenure.
If a tenant has not expressly agreed to give up his security of tenure at the outset, a landlord can only get its premises back at the end of the tenancy on certain grounds. The most common are:
• The landlord wants to occupy the premises itself, or to develop them.
• The tenant has a history of failing to comply with lease obligations such as payment of rent at the right time.
• the landlord’s premises comprise more than one unit, and the rent would be higher if they were let as one unit.
However, where a landlord is happy for the tenant to continue to occupy the premises after the contractual term of the lease expires, the two of them usually negotiate a new lease by agreement, rather than go to court.
If a court hearing is required, because a landlord wants its premises back or they cannot agree a new lease, there are strict and rigorous procedures. Formal notices must be served – which even small, technical errors can make invalid – within mandatory, complex time limits that vary according to which of them serves notice first. Specialist advice is strongly recommended except for landlords and tenants who know exactly what they are doing.
If the court decides that a new lease should be granted, it is up to the landlord and tenant to decide what goes into it but of course if they cannot agree, the court can decide its terms. These usually follow the previous lease, although both landlord and tenant can suggest reasonable changes. However, the court cannot impose a lease term of more than 15 years, and it usually provides for a market rent ignoring the tenant’s own occupation, any goodwill in the tenant’s business and certain improvements the tenant may have made.
If the court does uphold a landlord’s claim to repossess premises, failure to leave ultimately makes the tenant a trespasser, liable to pay damages, and the court can order him to vacate them.
For commercial landlord or tenant advice, or legal advice relating to any commercial property matters, contact Michael on 01753 279087 or email firstname.lastname@example.org