Building Legal Solutions
Security of tenure under LTA 1954 - Do you have a right to a renewal lease?
- AuthorBethan Blackburn
A lease must be granted for a fixed length of time and will therefore have an end date of the contractual fixed term. However, provided that a tenant of a business lease meets certain qualifying criteria, they will have the statutory right to a renewal lease of the demised premises at the end of the contractual fixed term under the Landlord and Tenant Act 1954, whether they are an individual or a company. This is commonly known as ‘security of tenure’. What qualifying criteria must a tenant meet?
1. There must be a tenancy
Leases and subleases qualify as tenancies, as do periodic tenancies. The tenancy does not necessarily have to be in writing and could be implied from the behaviour of the parties. Arrangements merely permitting someone to use premises, rather than occupy it exclusively (known as licences) do not qualify. The distinction between a lease and true licence is not always clear cut and specific advice should be sought.
2. Tenancy must relate to premises
The demised premises of the tenancy can be buildings or land, but must be capable of being occupied. Anything from a unit on an industrial estate to a temporary newspaper kiosk to a floor of an office block can qualify.
3. Premises must be occupied for the purpose of a business
The tenant must actually occupy the premises, and for the purpose of a business. The tenant must be present and have physical control of the demised premises, or at least intend for that to be the case. Temporary breaks in the tenant’s occupation (e.g. if the premises are temporarily unusable owing to fire damage not caused by the tenant) are permitted and the tenant will not usually lose security of tenure as a result of such breaks. If a tenant occupies the whole demised premises but only uses some of them for the purpose of a business, broadly speaking they will still benefit from security of tenure of the whole premises. The business carried on by the tenant at the premises does not need to be profit-making or to trade with the general public.
4, The business must be carried on by the tenant
A tenant may carry on the business themselves or through another person/entity e.g. via a group company.
5. The tenancy must not fall into one of the specific exclusions
Certain tenancies are excluded from being protected by the security of tenure provisions, including mining leases, home business tenancies, agricultural tenancies and standalone non-consecutive tenancies which are for a fixed term of less than 6 months.
Can you exclude security of tenure?
Provided the above criteria are met, a tenant will have the right to a renewal lease at the end of the fixed term of their lease. Should the landlord not want to grant the tenant a renewal lease, significant compensation could be payable by the landlord to the tenant. In certain circumstances, it is possible to ‘contract out’ of the security of tenure provisions of the Landlord and Tenant Act 1954 meaning that such compensation would not be payable: A certain strict procedure must be followed at the time the lease is granted. If the procedure is followed correctly, a tenant would not have an automatic statutory right to a renewal lease. For this reason, consideration should be given at heads of terms stage as to whether a tenant should have security of tenure -this is a matter of commercial negotiation between the parties.
This blog is non-exhaustive and is intended to provide general information only - it does not constitute legal advice. If you would like advice, please contact a member of our specialist team on 01926 954694.