Landlord and Tenant – What protection does the law provide?

Landlord and Tenant – What protection does the law provide?

Under the Landlord and Tenant Act 1927, the lettings market was weighted heavily in favour of the landlord, meaning that only tenants who could demonstrate sufficient goodwill, such that compensation for the end of their tenancy would be inadequate, were entitled to renew their tenancy.

The 1954 Act was introduced to strike a fairer balance between the landlord and tenant in business lettings. Now, if a business tenant wants to remain in occupation of its rented premises at the end of its lease term, the tenant can do so as long as the lease qualifies for protection and the tenant complies with specified procedures set out in the act.

Tenants who stay in occupation of the property passed the contractual expiry date (the ‘CED’) of their lease are said to be ‘holding over’. If a lease is protected by the act, then Landlords are only able to end commercial leases if they can prove that one or more of the grounds specified by the 1954 Act exist. Some of these relate to the ‘fault’ of the tenant, whereas others envisage the landlord recovering the premises for its own occupation or redevelopment.

Protection provided by the Landlord and Tenant Act 1954

Section 24(1) of the LTA 1954 affords two principal layers of protection to tenants whose leases are covered by the Act:

  1. The tenancy will continue after the CED of the lease until terminated in one of the ways specified by the 1954 Act and,
  2. The tenant will also have the right to apply for a new tenancy on termination of the current tenancy.

What leases does the LTA apply to?

LTA 1954 applies to “any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes”. The only exception to this is if the parties have agreed that they will contract out of the Act.

What are ‘Contracted out’ tenancies?

Under Section 38(A), the landlord and tenant can agree to exclude the lease from the protection of the 1954 Act prior to the grant of the lease. This is typical for short-term lettings where the landlord wants to be certain it can regain the premises at the end of the lease term.

The agreement to contract out must be carried out in accordance with the following procedure as set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (the ‘Reform Order’):

  • the landlord must serve a warning notice on the tenant at least 14 days before the tenant becomes bound to enter into the lease (i.e. before it completes the lease or any agreement for lease). It is considered good practice to attach a copy of the agreed draft lease to the notice;
  • the tenant must sign a simple declaration stating that it has received and accepted the consequences of this notice;
  • the lease must contain:
  1. a) wording that the parties have agreed to exclude security of tenure; and
  2. b) reference to both the warning notice and the tenant’s declaration.

Where time is short, the 14 day period of the landlord’s warning notice can be waived. Then, instead of the simple declaration by the tenant, a statutory declaration must be made, in front of an independent solicitor, to the effect that the warning notice has been received and the tenant accepts the consequences. Again the lease must contain the wording referred to at (a) and (b) above. This shortened procedure is the most frequently used in practice.

The decision as to whether or not a commercial lease is contracted-out from the protection of the 1954 Act will be a part of the normal negotiation process prior to the grant of a lease. A protected lease could potentially command a higher rent than a contracted-out lease.

How can a tenancy be terminated under Landlord and Tenant Act 1954?

Section 24 provides that a protected tenancy can only be terminated in one of the ways specified by the 1954 Act. This is done by service of notice, the main notices are:

(1) Landlord’s notice under Section 25

This is a specific notice that is served by the landlord on the tenant. It will terminate the current tenancy on a date specified in the notice and informing the tenant either:

  • that the landlord will not oppose the tenant’s application for a new tenancy (‘friendly notice’); or
  • that the landlord will oppose the tenant’s application for a new tenancy and on which 1954 Act grounds of opposition (‘hostile notice’).

The s.25 hostile notice can be served before or after the CED provided:

  • the specified termination date is no less than six months and no more than twelve months from the date that the notice is served; and
  • the specified termination date does not precede the CED. The specified termination date is also when the s.25 notice expire.

The specified termination date is also when the s.25 notice expires, so you may also see this referred to in practice as the ‘notice expiry date’.

(2) Tenant’s request for a new tenancy under Section 26

This is a notice, served by the tenant on the landlord, terminating the current tenancy and requesting a new tenancy (specifying key terms of the new tenancy). The s.26 request has to be in statutory prescribed form.

The s.26 request can be served before or after the CED provided:

  • the proposed commencement date specified in the notice is not less than six months and not more than twelve months from the date that the notice is served; and
  • the proposed commencement date in the notice does not precede the CED. The proposed commencement date is effectively the date on which the s.26 notice expires, so you may also see this referred to as the ‘specified commencement date’ or the ‘notice expiry date’.

 (3) Notice by the tenant terminating the tenancy under Section 27

This is a tenant’s notice, served on the landlord, simply to terminate the current tenancy without renewing it. This notice is only necessary if the tenant does not plan to vacate the premises by the CED (s.27(1A)). This notice does not have to be in statutory prescribed form.

A lease which has been excluded from the protection of the Act will expire on the term expiry date stated in the lease (or earlier if any break right is exercised) and will not benefit from the continuation tenancy conferred by the Act. Accordingly:

  • the tenant will have no right to carry on his business from the premises or to remain there;
  • unlike a lease with security of tenure under the Act, the landlord has complete discretion whether he grants a new lease to the tenant and does not have to give any reason for refusing to grant a lease or explain why he wants the premises back;
  • if the landlord is willing to grant a new lease, there is no presumption that this will follow the terms of the previous lease.

If the tenant remains in occupation of the premises, which is not what the landlord wants, then the tenant would be a trespasser and would therefore be liable to the landlord for damages. The landlord would also be entitled to obtain a court order requiring the tenant to vacate.

If you are in negotiations to take or grant a commercial lease, and you want to know whether you should be inside or outside of the act, or what the options or benefits are, then please let us know and we would be happy to give you further information.

Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.

 

What our clients say

Great value for money. Everything went smoothly and I was very pleased with the service provided
Rachel Whitfield
Rachel Whitfield
20:59 12 Oct 18
Excellent! Very responsive, and really helped to push the purchase. There were unexpected delays during the process, but Anthony really helped to reassure me that he was doing everything he could to progress the sale. Ultimately, it all worked out in the end, and I would highly recommend! I would also recommend for auction purposes.
Sean Stevens
Sean Stevens
09:14 21 May 18
Very happy customer. Understanding of our needs and recommended a really fantastic solicitor.
Jack Hearne
Jack Hearne
17:49 12 Oct 18
I have just completed the purchase of my flat with them. They were recommend by the estates agents Phillip Arnold and they were fantastic. My case was handled by Milena who was really helpful and always available on the phone. The online system is also really easy to use. If I buy or sell a property I will definitely be using them again.
Sharon Kelly
Sharon Kelly
18:27 20 Dec 17
I used this service following a recommendation. The online case tracker worked really well. I would recommend this service as it's vital in the coordination between Estate Agencies and between Solicitors. The service proved invaluable in helping progress the conveyancing work efficiently and effectively. Completed the transaction just before Christmas having instructed the Solicitors on the 4th.
Shelly Harrill
Shelly Harrill
16:30 19 Dec 17
Excellent Service. Final Price same as quoted.
A Google User
A Google User
14:26 19 Dec 18
Have used them twice. Both times completion happened in less than 4 weeks, even over Xmas! Totally amazing. They take the stress out of the whole process.
Daniel West
Daniel West
13:04 21 Dec 18
Excellent Service. Final Price same as quoted
Parsa Khamooshi
Parsa Khamooshi
15:54 21 Dec 18
Being a first time buyer they guided me smoothly through the whole process of moving into my first home. Very professional and economical.
Uday Seth
Uday Seth
12:31 24 Dec 18
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
James Ellis
James Ellis
11:43 30 Apr 19
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
Michelle Preston
Michelle Preston
12:20 30 Apr 19
ThanksThanks for handling my sale and purchase. No complaints from me. Rebecca was regularly on hand to help with my queries and deal with issues.
Claire Miles
Claire Miles
17:48 07 May 19
I bought my first home in South London with Express Conveyancing . Great professional service, I was regularly updated and looked after. Top marks, 100% recommendation from me!
Dale Griffiths
Dale Griffiths
15:58 02 May 19
Good service and happy with the conveyancer
Chris Jenkins
Chris Jenkins
22:01 17 May 19
Great service from start to finish. Was great being able to see progress online! Very quick and efficient! All staff were helpful. Highly recommend
Reece Moseley
Reece Moseley
06:20 30 May 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:13 10 Jun 19
Fair prices good efficient service
Sue Batchelor
Sue Batchelor
18:46 01 Jun 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:14 10 Jun 19

Our News