Can a periodic business tenant in occupation of premises obtain a lease from their landlord?

You are a commercial tenant running a business from premises and you now want your landlord to grant you a written lease for a fixed term.  You may have been paying rent monthly or quarterly for some years, but your landlord has still not given you a fixed term lease.  What can you do to force the landlord’s hand?

Rights under a periodic tenancy

It is likely that you are a periodic tenant and if you have been in occupation of business premises paying rent for more than 12 months, you will have become a protected business tenant with the rights granted by the Landlord & Tenant Act 1954 Part 11.   As such the landlord cannot simply terminate your lease by giving you one month’s notice.  It would need to serve you with a statutory notice under the 1954 Act giving you not less than  6 nor more than 12 months’ notice and you will then have the right to apply to the court for a new lease on terms to be agreed or decided upon by the court.

Can you require the landlord to grant a new lease?

If the time has come that you need the certainty of a fixed term lease, perhaps in order to grow or sell your business, you will not be able to serve on the landlord a notice under section 26 of the 1954 Act requesting a new lease.  The right to do this only applies to tenants whose tenancy was granted for a fixed term certain exceeding one year or for any term and thereafter from year to year.

So what should the tenant do?

Negotiate with your landlord

A periodic protected tenant should be in a strong position to negotiate a new lease with the landlord who would be keen to regularise the position.  Without a lease, the landlord cannot unilaterally increase the rent, or regulate the use of the premises or prevent the tenant from sharing occupation or assigning its tenancy. It is unlikely that the landlord could easily sell its interest in the property while a protected periodic tenant contiuues in occupation for an indefinite period.  With oral tenancy agreements if a dispute arises the court would need to hear evidence and try to resolve the dispute which could be unsatisfactory to both parties and the uncertaintly of a court case could be avoided by agreeing upon lease terms.

One way in which the landlord can regularise the position is to serve a written notice under section 25 of the 1954 Act terminating the tenancy and stating whether or not the landlord is willing to grant a new lease and if so on what terms including rent and length of lease.  If the landlord opposes the grant of a new lease, then it may only refuse on certain grounds set out in the statute, most commonly refusal on the grounds of persistent rent arrears, being able to demonstrate an intention to occupy the premises for its own use or an intention to redevelop.  The landlord must demonstrate the ability to do these things if necessary by producing plans and specifications and the necessary planning permissions. This can make it difficult for a landlord to regain possession.

If the tenant is a protected business tenant and the landlord does not have grounds to oppose a new lease, the tenant will be able to obtain a new lease on terms to be agreed or if not agreed as determined by the court. Accordingly the landlord cannot simply impose any terms it wishes and the court will look at the implied terms of the periodic tenancy when considering what terms should be inserted in the new lease.

The landlord is therefore likely to be agreeable to grant a lease to a periodic tenant especially since it cannot increase the rent without first terminating the lease under the Act, and the position will remain uncertain.

Taking legal advice

It is best to seek legal advice first before finalising terms in principle with your landlord to ensure that the terms of the new lease are not onerous and reflect the terms of your existing oral tenancy.  Where there is a dispute with the landlord and the landlord is taking steps to terminate the tenancy without offering acceptable new lease terms, it will be important to seek legal advice as to your rights and how to protect your position.

If you need expert legal advice, please contact Alan Zeffertt by email on aze@anthonygold.co.uk or ask for him or a member of our Commercial Property Team, telephone 020 7940 4000.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*