The Landlord and Tenant Act 1954 is a crucial piece of legislation for all commercial leases. It governs the relationship between landlords and tenants of commercial premises and offers several rights and obligations to both parties.
For the Act to apply the property must be occupied by the tenant for the purposes of a business and it must be written into the contract. Here we outline some of the intricacies of the Act and what the rights and responsibilities are of each party involved.
What Is The Key Benefit Of The Landlord And Tenant Act?
The Act principally offers business tenants security of tenure. This means commercial tenants have the right to remain in occupation of the property when the agreed term of the lease expires and the right to apply to renew their lease.
However, a landlord can regain possession of the property if certain situations outlined below.
How Do You Contract Out Of The Act So It Does Not Apply?
Where landlords do not want their tenants to have these renewal rights, parties are able to officially ‘contract out’ of the Act before committing to the actual lease.
This can happen in circumstances where the landlord may develop the property in future, or the property is only a short-term lease or the property may be only part of a building and other parts are under different leases.
In these circumstances, the landlord must serve 14 days’notice on the tenant, confirming the lease will not be protected by the legislation. The tenant must then confirm in writing that they understand what rights they are giving up and appropriate wording entered into the lease.
If the 14 days’notice period is not adhered to then the tenant must agree to exclusion in the form of a statutory declaration.
What Happens When A Contracted-Out Lease Comes To The End Of Term?
In this situation, there is no right for the tenant to remain in the premises or renew the lease and therefore it is really in the landlord’s control. If either party wishes to renew the lease, then they can approach the other party and negotiate with them, with no statutory timeframe to restrict them.
What Happens When The Landlord Wishes The Lease To Continue Or End?
If the Act is included in the contract and the landlord would like the tenancy to carry on or they object to a tenancy renewal, then they can issue what is called a section 25 notice on the tenant.
This formal paper states that the landlord will not oppose a new lease, and the date on which the existing tenancy comes to an end. Alternatively, if the landlord objects to the renewal then it must clearly identify the grounds on which they object.
Strict timescales must be adhered to: the notice must be served between 12 and 6 months before the end of the leases’ contractual term. It also cannot be served after the tenant has served a section 26 notice.
What Happens When The Tenant Wishes The Lease To Continue?
The tenant can serve a section 26 notice on the landlord if they would like the lease to continue. This must be before any section 25 notice is placed upon them.
This notice must set out the tenant’s proposed terms for a new lease and be served within 12 to 6 months before the end of the current lease.
Do Renewal Negotiations Have To Go Through Court?
Either party has the right to apply to a court for the grant of a new tenancy. This can be a significant benefit to either party as if they cannot agree on the terms of the new lease, such as the length of the lease, the rent payable and the terms of the new lease to be granted.
The court can decide for them.
How Can You Surrender The Lease?
A landlord and tenant may agree to surrender the lease by mutual agreement. This can happen in circumstances such as when landlords intend to carry out a redevelopment or the lease is for a very short term.
In most cases, these applications can be made without court proceedings.
What Happens If The Tenant Is Happy For The Lease To End?
If the tenant is happy for the tenancy to end on the agreed term, then they can serve a section 27 notice on the Landlord. This must be issued at least three months before the end of the current lease, or ensure they leave on or before the contractual expiry date.
Is It Wise To Seek Legal Advice On Landlord And Tenant Act 1954?
Yes. The provisions of the Landlord and Tenant Act 1954 are quite complex for both landlords and tenants. The correct response to relevant notices within The Act is essential and therefore we advise that you seek professional advice.
If you are seeking to renew your commercial lease, whether you are a landlord or tenant, we can help ensure you maximise your position. If you would like any further advice, please get in touch with one of Prideview’s property experts here.