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Granting a New Lease? - What You Need to Know About Security of Tenure

on Friday, 20 January 2017.

It is important for a landlord to consider, when granting a new lease, whether its tenant will have 'security of tenure', as this will affect the landlord's ability to regain possession of the property at the end of the lease.

What is security of tenure?

Security of tenure gives security for tenants to remain in occupation of the premises when the lease comes to an end. If a tenant has the benefit of security of tenure, the tenancy will continue on the same terms until it is terminated in accordance with the procedures set out in the Landlord and Tenant Act 1954 (the Act).

In addition, the Act gives rights to tenants to apply to Court for a new lease, on expiry of the fixed term of its current lease. The Court will grant the tenant a new lease unless the landlord can prove that one or more of the grounds for opposing the grant of a new lease apply - see below.

Tenancies with the benefit of security of tenure under the Act are often called 'protected tenancies'.

When will a tenant have security of tenure?

Security of tenure applies to most commercial leases with a term of over six months unless Part II of the Act has been contracted out.

There are certain tenancies that are excluded from the Act. Details of the excluded tenancies are beyond the scope of this note, but these can be found at section 43 of the Act.

How to Bring a Protected Tenancy to an End

If the landlord would like to bring a protected tenancy to an end it must serve notice under the Act to terminate the tenancy.

The notice cannot bring the lease to an end before the end date specified in the lease. It must be served not less than six months and not more than twelve months, before the termination date stated in the notice.

The notice must state whether the landlord will grant the tenant a new tenancy, or whether it will oppose the grant of a new tenancy.

The landlord can only refuse the grant of a new lease if it can demonstrate one or more of the limited grounds listed in section 30(1)(a)-(g) of the Act.

The most common ground relied upon is ground (f). This gives the landlord a right to oppose a new tenancy on the ground that the landlord intends to demolish or reconstruct the premises. If a landlord is considering relying on this ground, legal advice should be sought at an early stage.

How to Grant a Lease That Does Not Give the Tenant Security of Tenure

If a landlord would like possession of the property at the end of the lease, it should consider excluding the security of tenure provisions of the Act.

If a landlord wants to grant a lease without security of tenure, it must serve a prescribed notice on the tenant which explains to the tenant that it will not have the right to a new lease at the end of the term. The tenant must make a declaration to confirm that it has received the notice and accepts the consequences of entering into a lease that does not have security of tenure.

Conclusion

If the tenant has the benefit of the security of tenure provisions of the Act, the tenant will have a right to a new lease at the end of the term of its current lease, unless the landlord can establish one of the grounds set out in the Act.

It is therefore important for a landlord to consider when granting the lease, whether to exclude it from the security of tenure provisions of the Act.


For more information please contact Georgina Little in our Commercial Property Law Team on 0117 314 5348.

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