I was recently contacted by a marine business stating that their landlord, another marine business, had told them to leave their trading premises after being there for some 18 years. The tenant was given all of three weeks to vacate the site. As is often the case, there was no written lease in place. The tenant had taken occupation pursuant to an informal oral agreement reached many years ago.
Having traded from the premises for such a long period of time, the tenant was understandably concerned by the thought of having to vacate the site at such short notice, and whilst continuing to service the needs of its customers. Thankfully for this business, and many others, business tenants can often benefit from considerable protection from eviction and in some cases have a right to a new written lease. This is irrespective of whether there is a written agreement in existence beforehand.
The law implies terms that regulate a tenant’s right to stay put. The starting point when assessing what security a tenant has is to consider whether the tenancy has been excluded from Landlord and Tenant Act 1954 (the Act). This has to happen through a special procedure. If this procedure is not followed, the tenant will generally have a right to a new tenancy under the Act.
The right to a new tenancy can only be prevented if at least one of seven grounds is proved by the landlord. These grounds fall into two categories, where the tenant is or is not at fault. If the tenant is not at fault and the landlord still satisfies the ground, then compensation will be payable to the tenant for bringing an end to the tenancy.
The process is controlled by notices (both by the landlord and tenant) with strict time periods. Generally speaking, a tenant must receive a notice of termination of at least six, but not more than 12, months in length. Ultimately, if no agreement is reached then the court will determine the right to possession or the relevant terms of any new lease.
The most common issues that are disputed in lease renewals are (1) the level of rent payable by the tenant; (2) the permitted use; and (3) the inclusion of rent review provisions.
The most commonly used ground for opposing a renewal of a business tenancy is what’s known as Ground F. This is where the landlord has an intention to redevelop the premises.
In this instance, the landlord had failed to serve the required notice by only providing the tenant with three weeks notice. After explaining the position to the tenant, it was able to go away and have a sensible discussion with the landlord. In the end, the parties agreed terms for a new lease. The landlord was satisfied as it had a more formal arrangement in place and the tenant was happy as it could continue trading from the premises without any significant disruption.
Whilst all ended well for both parties in this case, there is a myriad of trips and pitfalls to avoid when dealing with the determination of a business lease or engaging in the renewal process. Unless you are confident and familiar with these processes, always seek professional advice.
If you have any questions about this article please contact Toby Claridge on 01872 265100 or drt@stephens-scown.co.uk