Chapter 14: Security of Tenure for Commercial Tenants

Question 1

What is security of tenure?

Answer 1

A commercial tenant’s right to stay in leased premises for an additional term at the end of tenancy unless landlord terminates lease via statutory method. This is provided by the Landlord and Tenant Act 1954.

Question 2

Under the Landlord and Tenant Act 1954, a tenancy will automatically continue unless it is brought to an end in which four ways?

Answer 2

• Forfeiture by landlord
• Surrender (both parties agree to ‘give up’ lease
• The landlord serves a valid Section 25 notice on the tenant to terminate the lease or suggest a new lease
• The tenant serves a Section 26 notice on the landlord to request a new lease

Question 3

To which tenancies does the the Landlord and Tenant Act 1954 not apply?

Answer 3

• Fixed term tenancies for less than 6 months
• Service tenancies
• Contracted out tenancies

Question 4

What is a ‘contracted out’ tenancy?

Answer 4

An agreement whereby the prospective landlord and tenant agree to exclude the security of tenure provision

Question 5

What are the requirements for a ‘contracted out’ tenancy?

Answer 5

• Health warning
• The tenant’s declaration (tenant signs to confirm that they agree to contract out of tenancy)
• Lease references health warning, the tenant’s declaration and the agreement to contract out

Question 6

When must a health warning notice be served?

Answer 6

At least 14 days before the lease is completed

Question 7

When must the landlord serve a Section 25 notice?

Answer 7

6-12 months before they wish for the existing tenancy to end.

Question 8

A Section 25 notice must specify a statutory ground for possession. What are the six grounds?

Answer 8

1. Tenant has breached repairing obligations
2. Tenant is persistently delayed in paying rent
3. Tenant substantially breaches another obligation
4. If part of premises sublet and landlord requires whole premises for subsequent subletting
5. Landlord wishes to demolish or reconstruct premises
6. Landlord intends to occupy premises

1 and 3 are discretionary (Court may order new tenancy even if ground established). If 4 - 6 established, Court must refuse to allow new tenancy.

Question 9

What is a Section 26 notice?

Answer 9

When tenant requests a new lease.

Question 10

When must a Section 26 notice be served?

Answer 10

6 - 12 months before they wish for tenancy to start.

Question 11

Once a landlord has received a Section 26 notice, how long do they have to inform the tenant whether they intend to oppose request?

Answer 11

2 months. If they are unwilling, they must specify one of the statutory grounds.

Question 12

What is considered a no-fault ground?

Answer 12

1. If part of premises sublet and landlord requires whole premises for subsequent subletting
2. Landlord wishes to demolish or reconstruct premises
3. Landlord intends to occupy premises

Question 13

What is considered a fault ground?

Answer 13

1. Tenant has breached repairing obligations
2. Tenant is persistently delayed in paying rent
3. Tenant substantially breaches another obligation

Question 14

Will the tenant be entitled to compensation if fault ground and no fault ground established?

Answer 14

Only if there is a no fault ground. Namely:

1. If part of premises sublet and landlord requires whole premises for subsequent subletting
2. Landlord wishes to demolish or reconstruct premises
3. Landlord intends to occupy premises

Question 15

If a no fault ground is established, what compensation is the tenant entitled to?

Answer 15

• If premises occupied for at least 14 years (or took over business from someone else and their combined occupancy is at least 14 years), twice the value of the holding
• If occupied for less than 14 years, the rateable value of the holding.

Question 16

If parties agree a new lease or the court orders a new lease and the parties cannot agree the term, what is the maximum fixed term that the Court can set?

Answer 16

15 years