Security of tenure is one of the most fundamental principles in commercial property law in England and Wales. Without it, commercial tenants would be in an impossible situation of risking being evicted from their property at the end of their tenancy or forced to accept massive rent increases or onerous terms to stay.
In this article, we’ve answered the most common questions our lawyers receive concerning security of tenure in commercial tenancies. Remember, you can always call us if you need any further information. Our team are only too happy to assist you.
What is security of tenure?
If a commercial property tenant has security of tenure, they have an automatic statutory right to renew their lease on similar terms to the expired tenancy. A landlord can only refuse to renew the lease for specific reasons set out in the Landlord and Tenant Act (LTA) 1954, namely:
- The premises are in disrepair
- The rent is in arrears
- There‘ve been other breaches of covenants
- Suitable alternative accommodation is available
- The tenancy was created through sub-letting
- The landlord intends to redevelop the site
- The landlord wants to occupy the property
Landlords must be genuine when citing one of the reasons on the section above. Misrepresentation can lead to the court awarding compensation to the tenant.
Why is security of tenure important?
For a small business, having to find and re-fit a new commercial property once its existing lease expires is incredibly expensive in terms of money, time, and resources.
Furthermore, the commercial property market may have changed significantly since you last signed a Commercial Lease Agreement, meaning you could be forced to take on the proposed terms that maybe are less advantageous to you and for a higher rent to secure a similar business premises to the one you’ve to vacate.
When does security of tenure apply?
Security of tenure only applies to commercial premises and tenancies with a term of six months or more. In addition, the tenancy mustn’t fall under any further exclusions set out in the LTA 1954.
Please note: if you only have a licence, security of tenure won’t apply. If you’re unsure if your tenancy is protected by security of tenure, please contact one of our commercial property solicitors who can advise you.
Can parties contract out of security of tenure?
Yes, but the process must be undertaken correctly. The landlord is obliged to serve a warning notice stating that security of tenure will be excluded and set out the consequences for the tenant if they’re unable to rely on the LTA 1954 provisions.
In turn, the tenant must sign a declaration stating that they understand the consequences of contracting out of security of tenure. Tenants must receive independent legal advice before agreeing to exclude the Tenant Act 1954 security of tenure provisions.
The Lease Code 2020 provides several mandatory requirements and best practices for agents or landlords that are RICS members or RICS-regulated firms.
Can landlord remove tenant with security of tenure?
Where the landlord proposes to grant a lease contracted out of the security of tenure provisions of the LTA 1954, the landlord should set this out on the Heads of Terms (if there’s vacant possession) to ensure the tenant can seek independent legal advice as soon as possible.
What happens if you waive security of tenure?
Think carefully before agreeing to contract out of security of tenure. The landlord may offer you a reduced rent to secure your agreement; however, this may be little compensation compared to the upheaval and expense of finding new premises.
If security of tenure is excluded, then the tenant, must vacate the property at the expiry of the lease (and in accordance with the contractual terms) unless you’ve negotiated a new lease with the landlord separately.
Why would a landlord want to avoid security of tenure?
There’re several reasons, the main one being that if a tenant doesn’t have security of tenure, the landlord can find a new tenant and/or raise the rent or change the tenancy terms to their advantage once the existing tenancy ends. A landlord would also have the option to sell the property with vacant possession.
In addition, even where a landlord can show one of the specific reasons under the LTA 1954 for not renewing a tenancy, despite the tenant enjoying security of tenure, they must go through the time and expense of issuing a Section 25 Notice to obtain possession. If the tenant challenges the Notice, the landlord may be forced to take them to Court.
Can a lease with no break have security of tenure?
Even if your lease lacks a break clause, you may still have security of tenure. This means you have the opportunity to negotiate a new lease and continue operating your business in the same location, ensuring stability and avoiding the hassle of relocation. However, it's crucial to consider that certain exceptions and conditions apply as highlighted above. It’s always recommended to speak to a commercial property solicitor if you’re unsure.
Get legal assistance from LawBite
Security of tenure is a crucial principle in commercial property law that provides tenants with the right to renew their lease on similar terms when it expires. This protection ensures that tenants are not at the mercy of eviction, exorbitant rent increases, or unfavourable lease terms.
LawBite offers expert advice and assistance to businesses regarding security of tenure and other commercial property matters. Our experienced commercial property lawyers can help you navigate the complexities of the law and protect your rights. To find out how we can help you, book a free 15 minute consultation or call us on 020 3808 8314.