The term “contentious” concerns legal relations between two or more parties that are in dispute, such as action before a court or tribunal. By contrast, non-contentious matters concern legal relationships that are not in dispute, such as formation of a contract.
Contentious relations regarding business tenancies may arise where a landlord seeks to terminate a tenancy agreement prematurely. This section will focus on where contentious relations ensue from a business tenancy agreement. There are a number of time limits and criteria to adhere to when terminating a business tenancy, including service of notice before embarking on court proceedings, and so it is highly advisable to consult a Commercial Property Solicitor from the outset of contemplating such an agreement.
The Landlord and Tenant Act 1954 defines a business tenancy as one where the whole or part of a premises is occupied by the tenant for the purpose of a trade, profession or course of employment. The Act lays down several further requirements:
- The tenant must actually occupy the premises, an easement held by the business owner is not sufficient.
- If the tenancy is periodic, it will automatically be covered by the 1954 Act.
- If the tenancy is fixed term, in order for statutory protection to apply it must extend past six months. However, if the preceding tenant also carried on the same type of business, the 1954 Act applies if the cumulative amount of time operating that type of business between both tenants extends past 12 months.
- Where tenancy is at will, or the legal interest is a mere licence, it is not protected under the 1954 Act.
Effect of statutory protection
The effect of the 1954 Act is that when a business tenancy comes to the end of an agreed term, the tenant is statutorily entitled to renew the lease through application to County Court, or the High Court if the dispute qualifies.
Grounds of opposition to renewal by landlord
The business tenant’s statutory entitlement to renew is limited by narrow statutory grounds upon which a landlord can object under section 30 of the 1954 Act.
- The tenant has failed to adhere to obligations to repair.
- The tenant has continually delayed payment of rent.
- The tenant has failed to adhere to conditions of use or management
- The landlord is willing and able to offer reasonable and suitable alternative accommodation.
- The landlord would be able to obtain higher rent if they were to let out the whole premises, rather than part to the tenant.
- The premises is due to be subject to demolition of substantial works, unless the landlord can carry out the works without needing possession of the premises.
- The landlord intends to occupy the premises.
The 1954 Act provides for exclusions even where the business tenancy otherwise satisfies the above criteria. These include: (1) farm business tenancies; (2) agricultural holdings; (3) mining leases; and (4) service occupancy regarding employees.
If the premises is used for residential purposes, as mentioned above it must also be used at least in part for business purposes in order to qualify for protection.
Termination of business tenancy by landlord
Where a landlord seeks to terminate a business tenancy, thereby preventing renewal, they may do so through service of a Section 25 Notice. The Notice must be serviced at least six months, and no more than 12 months, prior to the anticipated date of termination, which will be the day of expiry of the lease agreement.
The Notice must state that the landlord is opposing the renewal based on the abovementioned grounds under section 30 of the 1954 Act. Once served, a Section 25 Notice cannot be unilaterally withdrawn or amended. Once service is made, the landlord will apply to a court to secure termination of the lease.
It is imperative to note that the landlord must be deemed “competent”, meaning they are the owner of the reversionary interest upon termination of the lease agreement, and that their reversionary interest will not come to an end within 14 months of service of the Notice.
Termination after Loss of Statutory Protection
If a business tenancy continues under the Landlord and Tenant Act 1954 but subsequently loses statutory protection, a landlord is entitled to serve notice to quit at least six months but no more than 12 months prior to the anticipated termination date.
Termination of business tenancy by tenant
If a tenant does not wish to renew the business tenancy, they may serve a Section 27 Notice on the landlord, expressing their intention not to renew. This must be done with at least three months’ notice prior to the end date of the lease agreement.
If either party believes their case to be strong enough that trial is not necessary, they may apply to court for summary judgement. That party must argue that their opposition has “no real prospects of success” or another compelling reason not to proceed to trial. In any event, summary judgement must be applied for only after proceedings commence but before acknowledgment of service or filing by the defence.
It is possible for a tenant to waive their statutory right to renewal under the 1954 Act when entering into the lease agreement with the landlord. In order to be effective, the landlord must serve a warning notice under Schedule 1 of the Act at least 14 days prior to the parties entering into the agreement, which outlines the consequences of the waiver and inviting the tenant to seek legal advice. In turn, the tenant must sign a declaration to the effect they agree to waive their statutory rights. If the parties wish to expedite the process to under 14 days, the tenant must sign a statutory declaration in the presence of a qualified independent third party, which is usually a solicitor.
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A failure to adhere to the prescribed forms and deadlines when handling business tenancies can have serious financial consequences for a business enterprise.
At Lewis Nedas, our team of Property Litigation Lawyers have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak to a Property Lawyer at Lewis Nedas, please contact us on 020 7387 2032 or complete our online enquiry form.