LEGAL CORNER: When is a fixed-term lease not fixed? When the tenancy is commercial...
It may seem obvious that commercial premises leases covering a fixed term of five years will automatically end in five years' time but this is not necessarily so.
The Landlord & Tenant Act of 1954 creates a legal mechanism by which a lease can be continued after the fixed term has ended, until either the landlord or the tenant takes action to bring it to an end – and this little caveat can make a big difference, both to landlords and tenants, when their five-year term is up.
If you are a tenant running a business, the 1954 Act enshrines certain tenancy rights that offer you security and end-of- lease choices including the right to request a new lease. So, if you are considering investing money to refurbish your shop or office, you may do so in the knowledge that when your current lease comes to an end your landlord cannot simply kick you out without good reason or without offering you compensation.
However, there is a catch. Your landlord may, in certain circumstances, reclaim the property – although not without jumping through some very specific hoops in order to do so. Even then, unless your landlord can show you have been a persistently bad tenant, you should be entitled to financial compensation for being forced to leave the premises.
So far, then, so good. As long as you are using the property for business purposes, under the Landlord & Tenant Act of 1954 all is well. But beware – landlords often ask tenants to waive their rights by invoking a set procedure: a landlord must provide the tenant with a specifically-worded notice that the tenant acknowledges by signing and returning the document or swearing a declaration. If this procedure is presented as an integral part of signing the lease for your new property, it is easy to overlook its significance without fully understanding what you may be sacrificing.
Make sure you establish your prospective landlord’s expectations when it comes to your rights under the 1954 Act and, if you are asked to give them up, be sure you are getting a commercial benefit in return.
Remember this is a point for negotiation rather than an obligation on your part, and do not be persuaded that the 1954 Act simply does not apply to you – and, if you have any doubts about your commercial property lease, or would like advice about signing a new tenancy agreement, contact George Ide’s experienced specialist team on 01243 786668.
Partner and head of commercial property
George Ide, LLP
Solicitors of Chichester and Bognor Regis