Security of Tenure

Generally speaking a tenant of business property acquires what is called ‘security of tenure’. This means that when the expiry date of the lease is passed the lease does not end but rather is continued by operation of the law. The tenant is usually referred to as ‘holding over’. The lease can only be terminated by one of the procedures that are laid down in the Landlord and Tenant Act 1954. The reasoning behind the legislation is to protect the goodwill that a business tenant builds up by running a business from certain premises.

In order for a lease to acquire security of tenure certain conditions need to be satisfied:

  • the lease must be for a fixed term or for a periodic term - consider a tenancy at will, see Useful links
  • the premises must be occupied for business purposes
  • the premises must be occupied by the tenant

If a landlord wishes to terminate a business tenancy then he has to give notice in a prescribed form to the tenant. This is a notice served under Section 25 of the Landlord and Tenant Act 1954 - as amended by The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. This notice has to comply with certain requirements.

In order to be valid a Section 25 notice must:

  • be served by the competent landlord (if the immediate landlord is the freeholder then that is the competent landlord – if the immediate landlord has a leasehold interest then he is only the competent landlord if his lease has more than 14 months left to run);
  • be served on the tenant or all of joint tenants;
  • be in the prescribed form, or one substantially to the like effect - there is a different form dependent on whether or not the landlord intends to oppose the grant of a new tenancy;
  • state a date of termination which is no earlier than the contractual term date or a date upon which the landlord could have terminated the tenancy by a notice to quit;
  • give a period of notice which is no more than 12 months nor less than 6 months before the specified date of termination;
  • relate to the whole of the demised premises;

There are only certain grounds upon which the landlord can oppose an application by the tenant for a new lease. Some of these are based upon grounds that the tenant has not paid the rent on time or there has been some other substantial breach of the lease terms. If these can be established then the tenant will be barred from acquiring a new tenancy. There are other grounds that are not due to the tenants default – such as the landlord wanting the property back for his own occupation or to redevelop – if these grounds can be established then again the tenant would be barred from acquiring a new tenancy though the landlord would have to pay compensation. More details about these grounds of opposition are to be found on the Section 25 Notice.

For more information about termination of a business tenancy, see Useful links.

Both forms of Section 25 Notice are supplied as part of our form of lease, however they can also be purchased separately if you wish for £5 each.

Notice to terminate Business Lease - Section 25 Notice
Where Landlord does not oppose the grant of a new tenancy
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Notice to terminate Business Lease - Section 25 Notice
Where Landlord does intend to oppose the grant of a new tenancy
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If you wish to assign an existing lease, see Useful links.

Most leases of business premises do benefit from security of tenure. Although there are exceptions, the only safe way before 1st June 2004  of avoiding a tenant acquiring security of tenure was to obtain an order of the County Court excluding the proposed lease from the operation of Sections 24 -28 of the Landlord and Tenant Act 1954. That though changed with effect from 1st June 2004 when The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 came into force, see Useful links. The requirement for a Consent Order was abolished and replaced with a 'health warning' which should be given to a tenant 14 days before the lease is entered into.

If you have more questions see Useful links for some frequently asked questions (FAQs) about leases.

On the grant of a lease the Landlord, or on an assignment (transfer) of a lease the seller, is required to provide free of charge to the tenant or buyer an Energy Performance Certificate.

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The documents available on this site have been prepared for use in England & Wales. They may not be valid if used in other areas.