Ending business tenancies

The Landlord and Tenant Act 1954 is a key piece of legislation governing the relationship between landlords and tenants of business premises.

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The Landlord and Tenant Act 1954 ('the Act') is a key piece of legislation governing the relationship between landlords and tenants of business premises. The Act provides that the tenant can stay in the premises that are the subject of the tenancy at the end of the lease term provided certain criteria are met. This is known as having 'security of tenure'. This has the huge advantage of enabling a tenant who may have built up their business and goodwill in those premises to stay there.

As a separate point, the parties to a business lease can 'contract out' of the Act and can agree that the security of tenure provisions do not apply to that particular tenancy. 

Even if a tenancy is protected under the Act, a landlord has the right to resist the creation of a new tenancy on certain specified grounds contained in the Act. One of the grounds to oppose the tenant's right of renewal is that the landlord '…intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding.'

A case dealing with this issue was recently before the High Court. The facts are interesting because the tenant was an occupant of the Cavendish Hotel in London and had been there for many years. The tenant served the appropriate notice under the Act to renew its lease of the premises. The landlord wanted to regain possession of the premises and relied on the fact that it wanted to redevelop the premises.

The tenant argued that the landlord's development same was a contrivance which was put together for the only purpose of defeating the application for a new tenancy. The claim failed. The Court held that it was only concerned about the landlord's intention to do the works. The landlord's motive for doing the work was of no relevance. So even if the landlord had no intention of doing the work, this was not relevant. The decision many go to appeal.

The case does not give us any new law but it is a vital reminder of the importance of the Act in this commercially sensitive area of renewal of business tenancies. Getting the law or the terms of an application wrong could be hugely expensive for a landlord or a tenant.

In either case, both a landlord and a tenant would be well advised to take specialist legal advice prior to entering into a business tenancy to ensure that their position is properly protected.

To discuss this or any other commercial landlord and tenant related issue, contact us.

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