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What is Security of Tenure?

Security of tenure means that once a business tenant’s lease expires, the tenant has the right to request a new lease on the same terms as the previous lease, except where the landlord has a statutory ground to refuse the grant of a new lease. The accepted grounds for refusing a new lease are;

  • the tenant has failed to keep the property in good condition or has breached the lease in some other way (for example, using the property in a way not permitted by the Lease.
  • the landlord has arranged or can provide suitable alternative accommodation for the tenant
  • the landlord wants to sell the premises as a whole and the tenant occupies at least part of the premises
  • the landlord wishes to develop or rebuild the premises.
  • the landlord wants to use the property to live there or for their own business purposes.

Why Might Security of Tenure be Needed?
From a Tenant perspective, Security of Tenure offers long term foundations for a commercial occupation and may be extremely desirable where a tenant wants to “invest” in the property or generates significant goodwill by operating from the premises.

Whilst Landlord will typically want to avoid a Lease with Security of Tenure to maintain flexibility in dealing with the property, offering a Lease with Security of Tenure can be a way to attract Tenants.

Excluding Security of Tenure (“Contracting Out”)
If the Tenant and the Landlord agree that a Lease will exclude Security of Tenure in it’s terms and the correct procedure is followed, the effect is that when the Lease comes to an end the Tenant will not have any right to request a further Lease from the Landlord and, if required to do so, must vacate the property.

There is an agreed statutory procedure for serving and acknowledging this change. The Tenant needs to

  • accept and read a ‘warning notice’ from the landlord setting out that you will not have the right to renew the lease, under statute, at the end of its term; and
  • swear a “statutory declaration” at an independent firm of solicitors in response to the landlord’s warning notice, confirming that you are aware of the rights you are giving up. The Tenant should ideally carry this out at the same time as they sign the Lease.

 

Conclusion
Both the Landlord and the Tenant should carefully inspect any Heads of Terms as to whether the lease will be ‘protected’ with security of tenure, or ‘contracted out’/’excluded’ from security of tenure as failure to comply with the statutory procedures could have significant long term effects for both parties.

If you are either a Landlord or Tenant looking to take on a new Lease and would like advise as to Security of Tenure, please contact us here at Walker Solicitors and we will be more than happy to assist.




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