Helping businesses manage their tenancies

A commercial tenancy is a legally binding contract between a landlord and a business tenant that gives the tenant the right to use a property for commercial purposes on payment of rent to the landlord. A tenancy can be created in writing (a lease), verbally or can be implied.

Jennifer Rogers, legal director in Napthens litigation team, looks at common questions that businesses can have around their tenancies, and provides guidance on what options are open to support businesses as they navigate those issues.

My lease is due to end shortly – I don’t want to leave, what will happen?

We would first need to establish what type of lease you have. When occupying a property for the purpose of a business, many (but not all) tenants benefit from statutory protections, which mean that their lease will not automatically end on the expiry date stated in it and it will continue to run (known as ‘holding over’) until either the landlord or you as tenant serve a notice to bring the lease to an end or propose terms for a new lease.

As a tenant, you would receive a notice under Section 25 Landlord and Tenant Act 1954, which will tell you if your landlord wants you to leave the property or whether they are happy for you to stay under a new lease on certain terms. It will also set a deadline for expiry of your current lease.

Even if your landlord states that they are happy to grant you a new lease, if you wish to occupy the property beyond the date set out in the notice, it is extremely important that you protect your right to do so and you should seek legal advice on how to do that. If the deadline passes without you protecting your position, you could become a trespasser.

If your lease doesn’t benefit from these protections, then it may be that your lease will end on the date stated in it and you could become a trespasser, so it is important to know what your rights are in good time to prepare an exit strategy or to attempt negotiations with your landlord.

I don’t want to continue with my lease. How do I end it?

We first need to consider your lease.

• Is it for a fixed term? If so, has the initial fixed term expired?
• If not, are there any contractual rights for you to end the lease early? If so, it may be possible to serve notice upon your landlord to end the lease.

If your lease contains a contractual right to end it on a specific date, and you haven’t served the required notice by the required date (many leases requiring at least six months’ notice), the right to end the lease could be lost entirely.

If there is no way that we can end the lease, your landlord may be prepared to enter into negotiations for the lease to be ‘surrendered’ (which usually requires payment of a premium) and/or, depending upon any restrictions in your lease, it may be possible to pass the lease to a new tenant.

My landlord is trying to increase my rent. Do I have to agree?

It is common for leases to include rights for a landlord to review the rent at certain periods, usually by reference to inflation or market value. If a landlord ‘misses’ a date to review the rent, the right to increase the rent is not lost and the landlord can exercise a rent review, at a later date.

If a rent review is exercised late, a landlord may have a claim against a tenant for the shortfall between the rent that could have been achieved during the intervening period, together with interest.

Whether you need to pay the increased rent being proposed by the landlord will depend on what the lease says and whether the landlord has followed the correct procedure.

If the lease has already contractually expired and you are ‘holding over’ then the landlord may serve a Section 25 notice to end the lease and offer to grant you a new lease at a higher rent. Whether you need to pay the proposed higher rent will depend on whether the rent being proposed by the landlord is a ‘market rent’.

If your lease has expired and you don’t have any statutory protection to remain, then the landlord may seek to use your uncertain occupational position as a bargaining tool.

My landlord is asking me to undertake repairs to my property. Do I have to complete them?

If you have a written lease, it is likely to set out what your repairing obligations are. If you are in breach of those obligations, your landlord may be able to serve notice on you requiring you to complete necessary works and if you fail to do so, your landlord may have a number of options open to them.

For example, the landlord may have a right to enter the property to undertake works themselves and recharge you for the cost or in some cases, a landlord may have a right to seek forfeiture of your lease.

It is important that you fully understand the extent of your repairing obligations, and what your landlord’s rights are.

If you do not have a written lease, then your obligations are less clear, however, you should not automatically assume that you do not have any.

I’d like to alter my leased property. Can I do this?

This will depend on the type of alteration you’d like to undertake and what your lease says. Your lease may prohibit alterations or alternatively require you to seek your landlord’s consent to any such alterations prior to undertaking any such works

The risk of undertaking works in breach of your lease could mean that your landlord potentially has a right to seek forfeiture of the lease (i.e. to evict you) or could give rise to a claim for damages.

I am in breach of my lease and my landlord is trying to evict me. What can I do?

Depending on what your lease says, your landlord may or may not have a right to try to evict you. This will depend on the wording of your lease and the nature of the breach.

A landlord must be sure to follow the correct process before trying to evict you (for example, for breaches, other than non-payment of rent, a landlord is required to serve a notice upon you before taking any forfeiture steps).

Even where a landlord has correctly and lawfully exercised forfeiture, there may be a right for a tenant to seek ‘relief from forfeiture’ by application to the court, however, the tenant must act quickly if it wishes to do so.

Napthens litigation team are experienced the negotiation needed to obtain the optimum result for a business’ commercial lease matter, at the earliest possible opportunity.

For support on these and other matters relating to a commercial lease, contact Jennifer Rogers on 07889 595 067 or email jennifer.rogers@napthens.co.uk