Can I renew my lease? Statutory right to a lease renewal
A tenant of a business lease has a statutory right to a lease renewal at the end of the contractual term.
If a tenant satisfies the criteria set out in section 23 of the Landlord & Tenant Act [LTA] 1954, it will be entitled to a new lease of the premises at the end of the contractual term.
The terms of the new lease are to be agreed between the landlord and tenant. If no agreement can be reached, the terms will be determined by the court.
A landlord and tenant are entitled to exclude the LTA 1954 by following a statutory procedure before the tenant becomes committed to take the lease, known as contracting out.
The qualifying criteria for a renewal are:
- Is there a tenancy?
- Does the tenancy relate to premises?
- Are the premises occupied for the purpose of a business?
- Is the business carried on by the tenant?
- Does the tenancy fall within any of the specific exclusions?
If the first four conditions are satisfied and the tenancy does not fall within any of the specific exclusions, the tenant will have a statutory right to a lease renewal at the end of the contractual term.
Is there a tenancy?
This is a matter of law. The facts should be looked at then apply the law to determine if there is a lease or not. The tenancy does not need to be in writing unless it is required by statute or at common law.
The following will not qualify as a tenancy under the LTA 1954: A licence or a tenancy at will, whether express or implied.
Termination of a lease. The LTA 1954 will cease to apply if the tenancy has been terminated by:
- A tenant's notice to quit.
- A surrender.
- A forfeiture.
Does the tenancy relate to premises?
To benefit from the protection of the LTA 1954, a tenancy must relate to premises. The term is not confined to buildings, but can also include open land. To qualify, the premises must be capable of being occupied. Temporary structures, such as market stalls and newspaper kiosks, will qualify as premises for the protection of the LTA 1954.
Are the premises occupied for the purpose of a business?
To have the protection of the LTA 1954, the tenant must occupy the premises for the purpose of a business. There are two aspects to this requirement:
- Occupation and what that means in practice
- Business and what that means in practice.
Is the business carried on by the tenant?
The business carried on at the premises must be carried on by the tenant. In some circumstances, the business can be carried on vicariously. If the business is carried on vicariously, any notice must still be served on, or on behalf of the actual tenant.
Does the tenancy fall within any of the specific exclusions?
Some tenancies are specifically excluded from protection of the LTA 1954. They include:
- Agricultural holdings.
- Mining leases.
- Service tenancies. The LTA 1954 will not apply to a tenancy that is granted as part of the tenant's employment and therefore, capable of being terminated with the tenant's employment.
- Tenancies for six months or less. This exclusion only applies to tenancies with a term certain.
- Farm business tenancies.
- Contracted-out leases If the lease has been validly contracted out of sections 24 to 28 of the LTA 1954, the tenant will not be entitled to a lease renewal (as referred to above).
If you are in any doubt about your rights to renew the lease to your business premises please take legal advice.
Written by Stephen Welfare, a Partner at Royds LLP Solicitors.