The end of a Business Tenancy – what next?

If you are a Landlord and you have a tenancy that is nearing the end of the term, then you will need to consider your options.

In the first instance, you will need to determine whether the tenancy is covered by a ‘protected lease’ – i.e. if it is protected by the security of tenure provisions of the Landlord and Tenant Act 1954. If so, then the tenant will be entitled to a statutory right to renew the lease. The Act gives the landlord a right to refuse renewal only on certain specific grounds.

Non-protected Lease

If the lease is not ‘protected’ under the Act, then after the term expires, you must not demand or accept any rental payments. If you continue to demand or accept rent, then this could automatically create a new protected lease!

If you intend on negotiating a new tenancy, then a simple short term tenancy should be put in place to cover the period of negotiation – this will allow you to continue collecting the rental payments from the tenant. The legal costs for the short term tenancy should also be relatively low.

Protected Lease

If you wish to negotiate a new lease with the tenant then by continuing to demand and accept rental payments will not damage your position. However, you must be wary of any delaying tactics by the tenant who may be in the hope that the rental market continues to fall and so a lesser rent can be agreed or if the tenant is on the lookout for alternative premises. The tenant may also attempt to serve a Section 26 Notice in order to obtain a reduction in the rent.

Other considerations

  • Try to establish the tenants’ intentions at the earliest stage possible
  • If you use managing agents, then get feedback from them in relation to the tenant. For example, were rents paid on time and on a regular basis?
  • Consider if there were any breaches in relation to the premises – has the tenant kept the property in in state of good condition and repair?

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