The Implications of the Landlord and Tenant Act 1954: Why is Security of Tenure Important? A Tenant’s Perspective.

Understanding your rights as a commercial tenant is essential prior to entering into a lease for your business.

What is the Landlord and Tenant Act 1954?

The Landlord and Tenant Act 1954 is a central piece of legislation which impacts the rights and responsibilities of both landlords and tenants. It governs landlords and tenants’ obligations in relation to premises occupied for business purposes.  Whilst the Landlord and Tenant Act 1954 has significant consequences for both landlords and tenants, we shall consider it from a tenant’s perspective as it provides a degree of protection to those who wish to navigate the commercial property market.

Security of Tenure

Commercial leases currently benefit from ‘security of tenure’ ensuring that qualifying business tenancies do not automatically come to an end upon the expiration of their term. It provides a statutory right of protection to tenants allowing them to remain in occupation of the premises and renew their lease when the contractual term comes to an end. Where security of tenure applies, the Landlord will only be able to oppose the renewal of the new lease on certain limited grounds. Security of tenure, as a general rule, is automatic however, the tenant may agree with their Landlord to “contract out” of the security of tenure provisions (Section 24-28 of the Landlord and Tenant Act) from the outset if the correct procedure is followed. This requires the tenant to make a statutory or simple declaration confirming that they understand the rights that they are giving up.

Security of tenure provides stability and certainty for tenants who wish to remain in the premises for a longer period. It provides a sense of business continuity for the tenant’s future business plans, especially for those working in the retail sector but also for tenants who have established themselves with a market presence in a certain area. Tenants may also want to consider the amount of investment and planning that they require to put into the property to ensure that it meets the standard of their business. For instance, where the tenant will need to carry out fit-out works prior to the commencement of the contractual term and they may need to consider the expense in carrying out the same on a new premises. Where security of tenure is obtained, the tenant benefits from legal safeguards as the Landlord will only be able to object to the renewal of a new business tenancy on specific grounds in accordance with Sections 30(1)(a) – (f) of the Landlord and Tenant Act 1954.

By opting out of Section 24-28 of the Landlord and Tenant Act 1954, the tenant will have no statutory right to renew the tenancy at the end of the contractual term meaning that they will have:

• No legal right to remain in the property after the expiry of the contractual term of the lease.
• No right to remain in occupation of the property at the end of the term unless the landlord chooses to grant the tenant a new lease.
• No right to compensation from the landlord on leaving the property at the end of the lease.
• No right to ask the Court to fix the rent or the terms of the lease if the landlord choses to offer another lease.

Due to the nature and complexity of the security of tenure provisions, it is important that you seek clear advice from your solicitor prior to entering into a new lease to enable you to make the best decision for your business.

 For further advice and assistance, please contact our Commercial Property team on 01604 828282 or email them at info@franklins-sols.co.uk.