Renewing an excluded business lease?
APRIL 2009
A tenant occupying business premises under a lease which excludes
security of tenure afforded by the Landlord & Tenant Act 1954 does not
have the right to a new lease at the expiry of the contractual term and
the landlord becomes entitled to possession of the premises. However,
landlords are often willing to grant such tenants new leases, preserving a
rental income, especially in the current letting market. Unlike in the
case of protected leases, there is no legislative framework which governs
the renewal process.
Frequently the contractual term will expire before the new lease is
completed and the tenant will remain in occupation whilst negotiations
as to the terms of the new lease continue. One of the landlord’s primary
concerns will be to ensure that the tenant’s occupation does not develop
into a periodic tenancy protected by the Landlord & Tenant Act 1954.
Whether or not such a tenancy is created will depend upon the conduct
and intention of the parties. It is therefore essential that the landlord
does not take any action which could override the implication that the
tenant occupies the property as a tenant at will, which is the likely
position where the tenant remains in occupation following the expiry of
the contractual term during the course of negotiations. Interestingly, the
demand and acceptance of rent will not necessarily be decisive in this
respect, but a cautious landlord would not collect any rent once a lease
comes to an end.
Legal advice should be sought at the earliest opportunity if a landlord is
considering renewing an excluded lease and in any event before the
expiry of the contractual term to ensure that the tenant does not
inadvertently acquire security of tenure. Although a tenancy at will may
be implied, it is desirable for the parties to sign a formal agreement
documenting their intentions.
It is not uncommon for tenants to delay negotiations, possibly in the hope
of achieving improved terms or maybe putting off entering into a long
term contractual arrangement in these difficult and uncertain trading
conditions. In such case a landlord may seek to rely on a little known
ancient statutory provision contained in the Landlord & Tenant Act 1730,
which entitles the landlord who has served a notice requiring possession
(i.e. terminated the tenancy at will) and where the tenant has failed to
vacate to require that the tenant pay “double the yearly value” from the
date of the notice until the tenant vacates. This will essentially be twice
the sum that an occupier would have been willing to pay for the relevant
period of occupation. Such threat may have the desired effect in that the
tenant concludes the negotiations quickly and completes the new lease to
avoid paying double. On the other hand, there is always a risk that the
tenant actually vacates and the landlord is left with empty premises and
no rental income.
If you would like further information on the content of this newsletter please
contact Michael Collins on 0207 404 0606 or mcollins@gdlaw.co.uk.
This is a guide for general information and interest and should not be relied upon as providing specific legal advice. |
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