Security of Tenure

Question 1

Which leases does security of tenure apply to?

Answer 1

Commercial leases (i.e where premises used in the course of business) and where the premises is occupied (not left vacant or sublet in whole or in part).

Question 2

What is security of tenure?

Answer 2

Where a commercial tenant is permitted to remain in the premises at the end of the lease and the landlord can only force them to vacate using a s.25 notice.

Question 3

Which tenancies are excluded from security of tenure provisions?

Answer 3

• Agricultural tenancies
• Mining tenancies
• Service tenancies
• Fixed term tenancies for a term of 6 months or less (as long as not successive).

Question 4

Is it possible to contract out of security of tenure? How?

Answer 4

Yes, for fixed term tenancies ONLY.

Must serve a notice on the tenant in the prescribed form before completion. A signed declaration will be required if completion takes place in 14 days or longer and a statutory declaration (14 days or less). The lease should confirm that has taken place.

A statutory declaration requires the signature to be witnessed by

Question 5

What are the consequences if the tenant refuses to vacate but is not protected by security of tenure?

Answer 5

Treated as trespasser and landlord can recover possession. Otherwise, tenant has a right to stay in occupation (“hold over”) and landlord may not evict unless using certain methods.

Question 6

What is a s.25 notice and how can it be served?

Answer 6

• By the landlord only
• Friendly (renewal of lease) or hostile (requesting vacation on several grounds)
• States when tenancy will end (must be on / after contractual ending)
• Must be served no more than 12 mths before end date but at least 6 mths before
• End date must be on first or last day of term.
• Landlord can apply to court any time after notice served.

Question 7

What is a friendly s.25 notice?

Answer 7

Landlord willing to renew the lease to start the day after termination
* proposes rent and principal terms
* may contain rent review clause to start on last day before end of contractual term to ensure tenant pays market rent during holding over.

Question 8

What is a hostile s.25 notice?

Answer 8

A notice to oppose renewal of the lease on one of the prescribed grounds.

• Compensation at 1x rateable value if tenant < 14 years
• Compensation at 2x rateable value if tenant occupied for 14 years or more.

Question 9

What are the statutory grounds on which renewal of the lease may be opposed (s.25 notice)?

Answer 9

1. Persistent breach of the repairing obligation (Discretionary and non-compensatory)
2. Persistent delay in paying rent (discretionary and non-compensatory)
3. Persistent and serious breaches of covenant (discretionary and non-compensatory)
4. Landlord offers suitable alternative accommodation (suitable from tenant’s perspective) = (mandatory and non-compensatory)
5. Landlord intends (must be settled and firm) to demolish / reconstruct / do substantial construction work requiring possession of the whole of the premises = (mandatory and compensatory)
6. Landlord intends to occupy himself (mandatory and compensatory).

Question 10

What is a s.26 notice?

Answer 10

A notice on behalf of the tenant that they intend to renew the lease.

• once served, cannot serve a s.27 notice
• Must have lease originally granted for term of more than 1 year; otherwise, only option is for landlord to use friendly s.25 notice

Question 11

How is a s.26 notice served on the landlord?

Answer 11

• Proposed commencement of new lease between 6 mths and 12 mths + on first / last day of term.
• Landlord has 2 mths to serve counter-notice opposing notice on statutory grounds
• After tenant has waited out 2 mth period or landlord has served counter-notice, can apply to court.
• If landlord does not serve counter-notice within 2 mths then loses right to object to the tenancy.

Question 12

What is a s.27 notice?

Answer 12

Notice to vacate served on landlord. No obligation to do this but it is good practice, should serve giving at least 3 months notice of intended termination date (which must be no earlier than the date on which the lease ends).

Question 13

What can the court order in terms of the new lease?

Answer 13

1. Up to 15 year term
2. Open market rent
3. Other terms having regard to the circumstances and current tenancy.

Generally will grant a new lease on the same terms and the burden of proof will be on the party seeking to change certain terms to justify this.

Question 14

What is interim rent?

Answer 14

The rent paid in the holdover period. Tenant continues to pay rent as was last reviewed by the lease.

Payable from earliest date of termination that could have been specified in the s.25 notice or the earliest date that could have been specified as a proposed commencement.

Question 15

What can the tenant do if the landlord opposes renewal?

Answer 15

Apply to the court for grant of a new lease anyways. If the tenant is not happy with the new lease granted by the court or changes its mind, it has 14 days to revoke and then the right to renew will be permanently gone.

*Brings tenancy to an end 3 mths + 21 days after the date of the order. New lease starts day after termination of existing lease.

Question 16

What can Landlord opposing renewal on statutory grounds do?

Answer 16

Can apply for an order terminating the existing lease and this will bring the tenancy to an end 3 months + 21 days after the date of the order.