My business lease is to be outside the Act – What does it mean?
Quite often clients will ask me to explain what the heads of terms mean where it is said that the lease will be outside the protection of the Landlord and Tenant Act of 1954.
Tenancies to which the Act applies
The Landlord and Tenant Act 1954 applies to any fixed term or periodic tenancy where the property comprised in the tenancy is or includes premises that are occupied by the tenant for the purpose of a business carried on by him.
By definition a business generally includes a private members club.
A tenancy of premises
The Act makes it clear that the occupation must be under a tenancy accordingly licences are not protected. A business sub-tenancy even where granted in breach of a covenant in the tenant’s own lease is governed by the Landlord and Tenant Act 1954.
The Landlord and Tenant Act 1954 applies to a tenancy of land with no buildings on it. The Landlord and Tenant Act 1954 does not however apply to a lease of a right of way although it appears it may potentially apply to a tenancy of other incorporeal rights.
The legislation is designed to prevent occupying business tenants being deprived of their premises from which they operate rather than protecting those who are simply investing in property. In order to qualify for the right to a new lease at the end of the old lease the tenant must in principal being in continuous business occupation right up to the date of any Court hearing. The extent of that occupation is a complex area and will depend upon the nature of the premises and of the tenant’s business.
Generally you should be wary of vacating all or part of the premises or ceasing business as you will lose your rights.
Occupation by the tenant
Occupation must be by the tenant himself or his agent or employee.
For the purpose of a business carried on by the tenant
The tenant must occupy at least part of the premises for the purpose of his business. Where the tenant is an individual business includes a trade, profession or employment.
An activity that amounts to no more than a hobby would not amount to a business that is protected. The activity must be purposeful rather than casual.
Provision of residential accommodation and mixed purposes
In certain circumstances the provision of residential accommodation for students or employees can be regarded as a business activity. Where the premises are used for mixed purposes appropriate business use bring the tenancy within the Landlord and Tenant Act 1954 because that statute does not require the whole of the premises to be used for exclusively business purposes. It should be noted that the Landlord and Tenant Act 1954 does not apply to an agricultural tenancy that is either a farm business tenancy or an agricultural holding meeting the appropriate statutory requirements.
Certain tenancies are excluded such as agricultural tenancies, mining tenancies, tenancies granted for a term certainly not exceeding six months providing that the tenant has not been in occupation for a period exceeding 12 months.
Contracting out of tenancies
If the heads of terms say the tenancy is to be outside the Act this means the parties to the proposed business tenancy have agreed that the Landlord and Tenant Act 1954 sections 24 to 28 (as amended) shall be excluded in relation to that tenancy. This means that the tenancy expires on its contractual term date and that the tenant has no right to apply for a new tenancy. There are strict legal and documentary requirements that need to be followed to make the tenancy outside the protection of the Act. Specialist legal advice should be sought in relation to the correct procedure to be followed.
We provide legal services in commercial property from our Lancaster, Kendal and Barrow offices. We serve clients throughout the Country in relation to commercial lease matters.
Matthew Winder, Clarkson Hirst Solicitors