Disputes between commercial landlords and tenants commonly arise leading up to, upon and following a business lease coming to an end. The general rule is that a business tenancy for a term of more than six months will not expire unless it is terminated in accordance with Part II of the Landlord and Tenant Act 1954.
This also applies where there is no formal lease document but where a tenant has occupied commercial property and paid rent to a landlord for more than six months. This is known as security of tenure. An exception to the general rule is where the lease expressly contracts out of the relevant legislative provisions.
Otherwise, if the landlord wants to bring the lease to an end, a section 25 notice must be served on the tenant specifying a date of termination not less than six months and not more than 12 months after service of the notice and also specifying the ground(s) on which a new tenancy is opposed. In short, the grounds are the tenant’s failure to comply with repairing obligations, persistent delay in paying rent, other substantial breaches of the lease by the tenant, provision of suitable alternative accommodation by the landlord, the landlord’s requirement to dispose of the leased premises as a whole, the landlord’s intention to demolish or reconstruct the premises or where the landlord requires occupation of the premises for its own business purposes. Depending on the ground(s), compensation may be payable to the tenant if successfully relied upon. The tenant may of course oppose the ground(s), in which case a court will need to determine the issue(s).
Sometimes the landlord may prefer the lease to continue. If the existing lease terms are favourable and if it is a good tenant, the landlord may be better doing nothing and allowing the tenant to hold over. If the terms could be more favourable, the landlord can still serve a section 25 notice but indicating a willingness to grant a new lease and detailing the proposed new terms.
There is a similar process for the tenant. If the tenant is happy with the existing terms it may again be better to simply hold over. However, if, for example, a lower rent could be negotiated the tenant can serve a section 26 notice on the landlord specifying proposed terms of a new tenancy. The date of termination specified must again be not less than six months and not more than 12 months after service of the notice (and as with the section 25 notice, above, no earlier than the lease could ordinarily have come to an end by effluxion of time or service of a notice to quit).
With either a section 25 notice or a section 26 notice where new lease terms are being proposed, either party may apply to court before the termination date specified to fix the terms in the event that the parties have been unable to agree these themselves.
A tenant wishing to terminate a business lease must give notice of not less than three months. Again, the termination date specified can be no earlier than when the lease would ordinarily have ended by effluxion of time.
This is a very brief overview of what is a complex, procedural and expansive area of law. Whether you require advice on ending a lease, lease renewal, or if a dispute has already arisen, Woodcocks, Haworth & Nuttall has a specialist team that will be able to provide you with expert advice from a commercial perspective so that the interests of you and your business are well catered for.
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Please contact either Daniel Long or Eleanor Longworth at our Bury office on 0161 761 4611 to discuss any aspect of commercial property disputes.
