Most leases are for a confirmed number of years (or sometimes months). The agreed-upon duration of the contract is known as the ‘term’ of the lease. One inevitable question for landlords and tenants is what happens when the term expires or ends. What are the available options? Depending on whether a commercial lease is protected or non-protected, commercial tenants may need to vacate business premises immediately, or they might be allowed to stay. It depends on the type of tenancy, how the tenants occupy the premises, and whether they wish to continue occupancy. Unless expressly excluded from the lease, the Landlord and Tenant Act 1954 provides ‘security of tenure’ and grants commercial tenants the right to remain on the business premises and to request a new lease. Whether you — or your commercial tenant — have security of tenure depends on the content of the lease.
What Happens When a Protected Commercial Lease Expires? At the end of a commercial lease, a tenant must either vacate the property because their lease is ‘unprotected’. or if the tenancy agreement is ‘protected’, they have the option to stay. Unless expressly excluded, a commercial lease is protected under Part II of the Landlord and Tenant Act 1954. The Act grants commercial tenants security of tenure and automatic rights of renewal. Essentially, the Act guarantees a right to a new lease. The tenant can remain until they decide to leave after the lease has expired or the landlord gives them notice. However, the right to remain under a protected lease can be negated if the tenant has breached the agreement’s terms significantly, such as by damaging the property or failing to pay rent on time. The legal grounds for refusing a tenant the right to renewal include:
- Repeated failure to pay rent on time
- Renovation, refurbishment or demolition of the property
- Landlord wishes to occupy the property
- Neglect or misuse of the property
- Substantial breaches of the lease
- Landlord offers an alternative property of “a suitable and reasonable standard”
- The lease is for a portion — not the whole — of a property