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If a tenancy benefits from security at tenure, when the contractual term of the lease comes to an end, a tenant can apply to the landlord for a new lease.
A lease may separately include an option for the tenant to renew the lease.
Security of tenure is a statutory right that provides a tenant under a commercial business lease with an automatic right to renew their lease when this contractual term comes to an end, subject to certain exceptions.
This is sometimes referred to as contracting-out, due to there being a statutory procedure by which a tenant can ‘contract-out’ of this right.
Whether a lease is to have security of tenure should be negotiated by the parties in the heads of terms. As a rule of thumb the longer the lease the more likely it is to have security of tenure.
A tenant can request a new lease by serving a notice on the landlord.
The notice has to adhere to strict requirements to be valid. These include that it must:
If the landlord is happy to grant a new lease to the tenant on the terms set out in the notice, then the landlord can accept the notice and grant the new lease. If the landlord is not happy with the proposed new terms, then the parties can negotiate the new lease.
If the parties cannot reach agreement, then either party can make an application to court to determine the terms.
Alternatively, the landlord can oppose the grant of a new lease on certain statutory grounds. In order to do so the landlord must serve the prescribed form of notice on the tenant within two months of the tenant’s notice. The grounds on which the landlord can oppose a new lease include wishing to occupy themselves and that they intend to redevelop the property.
Deadlines in serving and responding to notices are strictly interpreted and it is therefore vitally important that a party adheres to these.
The tenant will occupy under the terms of the expired lease. This is commonly referred to as holding over and can last indefinitely.
If a tenant is holding over, it is likely that a landlord will serve notice to either instigate a new lease or to terminate the lease and oppose a new lease on prescribed statutory grounds.
This notice must be served no more than 12 months, nor less than six months before the termination date set out in the notice
If the landlord and tenant are unable to agree terms of the new lease, either party can make an application to the court for the terms to be ordered. As mentioned above, the landlord can oppose the grant of a new lease on certain statutory grounds, which must be specified in the notice if the landlord does not want to grant a new lease.
It is important that both the landlord and tenant know about security of tenure and the implications of for them as this ultimately involves the security of the tenant’s occupation and the control over the landlord’s property.
A landlord will want to retain ultimate control over their property. This may mean they do not want the tenant to have a statutory right to remain in the property at the end of the term. If a lease does not have security of tenure then any potential lease renewal is simply for the parties to negotiate without statutory protection.
A lease having security of tenure is beneficial for a tenant as it provides them with more bargaining power when negotiating a renewal and also would make an assignment of the existing lease more attractive to any potential assignee.
If you need any advice on lease renewal rights, please contact a member of our commercial property law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
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