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Security of tenure in leases - why is it a big deal?

Well the answer depends on whether you are a landlord or a tenant. In summary, security of tenure is the tenant’s statutory right under the Landlord and Tenant Act 1954 to be granted a new lease of their business premises once their current lease expires. This statutory right can be ‘contracted out’, in other words the tenant’s statutory right to a new lease can be excluded. So should you ‘contract out’ security of tenure or not?

 

So what if you are a landlord?

If you are a landlord then in most cases you will want to exclude the tenant’s security of tenure rights. If you have a tenant you would prefer not to keep on at the end of the lease term (perhaps they have been persistently late in paying rent) you will want vacant possession of the premises at the end of the lease. If you ‘contract out’ security of tenure then at the end of the lease term you can wave goodbye to your current tenant and deal with your property as you see fit. What if you haven’t ‘contracted out’ the tenant’s security of tenure? All is not lost. The 1954 Act has a procedure whereby a landlord can oppose the grant of a new lease if it can prove one or more of a number of grounds for opposition. The grounds include the premises being in disrepair, arrears of rent, other breaches of the lease by the tenant, if the landlord intends to develop the property, or if the landlord intends to occupy the property. It goes without saying that there is a procedure to follow to oppose a new lease on one of these grounds, and it is much simpler for a landlord to take back possession by simply not giving the tenant security of tenure in the first place.

 

So what about from the tenant’s perspective?

If you are a tenant then (depending on your future business plans) it can be a real advantage to have a statutory right to renew your business lease at the end of the lease term. One of the main reasons comes down to business continuity. As a tenant you will probably have spent time and money building up your customer base and, particularly in relation to retail units, your customers will have come to know where your shop is located, and hence where they need to come to spend money with you! Customers may be lost if they suddenly can’t find you because you have been forced to relocate to another space. Which leads to one of the other real advantages of security of tenure, avoiding the costs and disruption of relocating. Particularly if you have spent hundreds (probably thousands) of pounds on fit out, it can be very costly to have to go through the process of removing your fit out from one unit, and fitting out a new unit. So what if your lease is ‘contracted out’? Whether that is a real issue depends on your relationship with your landlord, and whether you actually want to stay in your current premises in any event. If your business has expanded to the point where you need larger premises then not being able to stay in your current premises may not be an issue. And if you have a good relationship with your landlord, and want to stay, then the landlord may be happy to grant you a new lease in any event.

 

Either way, there is lots to think about and consider whether you are a landlord or a tenant and, as you would expect, there is more to these issues than set out here. If you’re a landlord thinking about granting a lease, or a tenant thinking about taking a lease, we can help. Please don't hesitate to contact us via our website or any of our solicitors

 


Please treat the contents of our blogs as general guidance only. Please do not take any action based on their contents unless you have sought specific legal advice. Brethertons cannot accept responsibility for any errors or inaccuracies, loss or damage in circumstances where there is no formal retainer between us and we have not given you personal and specific advice relating to a matter for which you have given us full background details.  You must also bear in mind that the contents of our blogs are based on English Law, and because they contain archival material, that material is likely to go out of date. Therefore, it is important to consider the date that the blog was posted. Please also remember that the law may differ in different Jurisdictions.