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What is Security of Tenure?

Put simply, security of tenure is the right of a tenant to stay in a property (or be granted a new lease of a property), even when the contractual terms of their lease would not allow it. Security of tenure in commercial leases is governed by the Landlord and Tenant Act 1954. When considering the question “What is Security of Tenure?”, it is important to remember that people use lots of different phrases that all mean the same thing:

  • “protected tenancy”;
  • “lease with the protection of the Landlord and Tenant Act 1954”;
  • “secure tenancy”;
  • “inside the Landlord and Tenant Act 1954”;
  • “inside the Act”;
  • “not contracted out of the Landlord and Tenant Act 1954”, and so on.

All of these phrases mean the same thing – that the lease has security of tenure. Equally, when HOT’s say “contracted out” or “contracted out of the Landlord and Tenant Act 1954” or “outside the Act”, this means the lease is not intended to have security of tenure.

How does a Lease get Security of Tenure?

In order for a commercial Lease to gain security of tenure and to gain the protection of the Landlord and Tenant Act 1954 (“LTA 1954”), it must satisfy certain conditions:

Does the tenant have a “Tenancy”?

First off, there must be a tenancy – i.e. a lease. The protection of the LTA 1954 doesn’t apply to licences. The House of Lords in Street v Mountford [1985] UKHL 4 (02 May 1985) confirmed that the key features of a lease were exclusive possession, for a certain term, at a rent. Each of those limbs has been looked at in closer detail since then, but that’s the broad gist of it. If a tenant has the exclusive use of premises (such that they can lock anyone out, including the Landlord most of the time), you know how long they have the premises for, and they’re paying rent, then they likely have a tenancy or a lease. If there’s any doubt, it’s best to speak to a legal expert. Give me a ring on 01384 872069 and I can chat it through with you.

Does the tenant occupy “Premises”?

Secondly, the tenant must be occupying premises. Premises is quite a wide term, and includes buildings, land – basically something that is capable of being occupied.

Is the tenant in “Occupation”?

Thirdly, the tenant must be in actual occupation of the premises. This usually means physical presence and control – i.e. the tenant or its business is actually physically there, or their stuff is there. Obviously, there are varying degrees of being “there” – i.e. the tenant or its staff won’t be sat there 24/7. If in any doubt, seek expert help. However, if the tenant has sub-let for example, then they are no longer in occupation, and won’t have the protection of the Landlord and Tenant Act 1954.

Is the tenant occupying for a the purposes of a “business”?

This next one is an important element, but is construed widely. It does not only apply to profit making entities. Section 23(2) Landlord and Tenant Act 1954 states that business “includes a trade, profession or employment and includes any activity carried on by a body of persons, whether corporate or unincorporate”. So this can include not-for-profits, members clubs, as well as the usual commercial enterprises you might expect.

Exclusions

Certain types of leases are excluded from the protection of the LTA 1954, for example:

  • Agricultural holdings;
  • Mining leases;
  • Service tenancies;
  • Farm business tenancies; and
  • Electronic Communications agreements.

This is often because these types of leases have their own types of “protection”. For example, Electronic Communications equipment may be protected by the Electronic Communications Code. They will need specialist advice to get right.

Leases for a fixed term of 6 months or less are also excluded. However, once the tenant has been in occupation for over 12 months, this exclusion will cease to apply.

Do I have security of tenure? Does my tenant have security of tenure?

Often times, it is obvious whether you have a protected tenancy. You have a lease, you are running a business from the premises, and you are in occupation. At other times, it is more tricky. The above is general guidance only, for certain advice you need to speak to an expert. For a free, no obligation chat, please contact me using any of the following methods:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

Client Review

“We do have a new #warehouse, which is great, but the best bit was actually working with John McLean at Nexa Law.  Truly a 5* experience!  If you’re looking at #commercialproperty, do contact John (he is awesome).”

Alexander Irving, Managing Director AC IFM

So I have Security of Tenure…What Does that mean?

What is Security of Tenure? Well, from the tenant’s point of view it is security for your business. It is designed to give you the confidence that if you stay and invest in a location, that you can’t be kicked out on a whim. There are two main consequences of having security of tenure:

  • Right to hold over; and
  • Right to a new lease.

What is Security of Tenure 1 – Holding Over

Leases are a type of contract, at the end of the day (well, with a dose of property law thrown in, but at their basic level they are a contract). Normally, when the contract comes to an end, it comes to an end on its own terms. E.g. if the lease says you can stay for 5 years, you can stay for 5 years and that is it. In order to stay beyond 5 years, you’d need the landlord to agree a new lease.

Where a lease is protected by the LTA 1954, the tenant is entitled to stay in the premises beyond the end of the contractual term. This is called holding over. The lease is automatically extended by statute. This will continue until either a new lease is agreed, or various notices are served to attempt to bring the tenancy to an end (or to grant a new one).

What is Security of Tenure 2 – New Lease

When a tenant has security of tenure, a new lease is not down to the whim of the landlord. The tenant is entitled to a new lease, on materially the same terms as the old one (save for a new market rent). That means landlords and tenants should be careful when agreeing leases in the first place, as any favourable terms can become an entitlement of the tenant when they renew.

Procedures

There are various notice procedures that can be used to either request a new lease from the landlord, or propose a new lease to the tenant. Those are the realm of real estate litigators, and I won’t go into detail on that here. Other than to say that they can be complex, and it is important to serve notice on the correct party (the so-called qualifying landlord). It is a process that definitely warrants legal advice. Give me a ring on 01384 872069 and I can introduce you to a friendly litigator who can handle the whole thing for you.

What if the Landlord objects to the New Lease?

Well, although the Landlord and Tenant Act 1954 gives strong protection to tenants, it is not infinite. The law recognises that there are circumstances in which a landlord should be entitled to get its premises back. These are bagged as either “fault” grounds (e.g. non-payment of rent, or non-compliance with tenant covenants). Alternatively, there are “non-fault” grounds (e.g. redevelopment, or the landlord requiring the premises back for themselves). The tenant is entitled to compensation from the landlord for the termination of a lease in such circumstances, based on length of occupation and rateable value. The various grounds have plenty of nuance, and expert advice is highly recommended.

Contracting Out

It is important to note that a landlord can also exclude security of tenure, by having the lease “contracted out” of the protection of the Landlord and Tenant Act 1954. There is a set procedure, involving specific wording in the lease, the service of specific notices and the swearing of a declaration or statutory declaration. All elements of the procedure must be followed to effect a successful contracting out. If you are a tenant, it means that you won’t get any of the protection mentioned above. Your lease will end when it says it will end, and you are not entitled to a new one.

My recommendation is never to attempt a contracting out procedure yourself. It is a technical procedure, which if not followed to the letter, will fail. I’ve seen plenty of agents try to do it, and get it very wrong (e.g. statutory declarations with no actual content, or failing to include the requisite wording in the lease). I’ve seen plenty of lawyers get it wrong too (e.g. serving the wrong notice, or failing to weed contrary wording out of their precedent leases, for example wording referencing holding over after the lease is expired). All of these mistakes can prove costly for a landlord who does actually want to get the premises back, so I would say always, always seek competent legal advice for this procedure.

Get in Touch

If you would like to have a further chat about any of the above, or ask me to give you a quotation, please do contact me.  For a free, no-obligation discussion you can:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

I aim to respond to enquiries within 24 hours.  Just let me know when you contact me which is your preferred means of contact.

John McLean Commercial Property Solicitor

John McLean Commercial Property Solicitor

I’ve done lots of work with the Landlord and Tenant Act 1954:

  • Acting for tenants taking contacted out leases and protected leases.
  • Acting for a self-storage operator to consider procedure and effective exclusion of security of tenure.
  • Acting for landlords wishing to exclude security of tenure.
Favell's Garage

“John acted for me on a new lease of an office at my business premises. John acted swiftly and effectively to get the new tenant in as quickly as possible. I have been very happy with his service, and am happy to recommend him for commercial property leases.”

Nicholas Favell, Favell’s Garage Ltd

Security of Tenure – Summary

If you are still asking “What is Security of Tenure? then give me a shout. I find this is referenced in Heads of Terms without much explanation, and many tenants do not fully understand what it means for their business. It is an issue that should be carefully thought through.

If you are a landlord with an investment property, which your main aim is to get fully let, then you probably aren’t too fussed about granting security of tenure. You want tenants to sign up, be secure in their premises and to invest and stay there. If you are thinking about redevelopment or reoccupation for yourself at some point in the future, then you need to think about contracting your leases out.

If you are tenant, you need to understand the consequences of taking on a contracted out lease. Also, if you have protection, you need to understand what it is, and how to use it, especially if the landlord changes and there are attempts to remove you.

I’m always happy to speak to people with queries about commercial properties. Landlords and tenant both want the job completed on time and on budget, and that is what I pride myself on delivering.

Contact Me

If you would like to have a further chat about any of the above, or ask me to give you a quotation, please give me a call or contact me.  For a free, no-obligation discussion you can:

Lines and chat are open 24/7 and 365 days a year – contact my New Enquiry Team today!

I typically respond to enquiries within 24 hours.  Just let me know when you contact me which is your preferred means of contact.

If instructed, all work is carried out through Nexa Law Limited, who carry all the necessary professional indemnity insurance and infrastructure to ensure that your transaction is handled safely and securely.  You can find out more detail about Nexa here.

You won’t find yourself dealing with a more junior solicitor, or a paralegal – all work is carried out by me, so you have an experienced pair of hands at all times, and a single point of contact.

If you have any further queries, please do not hesitate to contact me.

The Legal Bit

Finally, the above article is for general information purposes only.  I am not providing legal advice in the above and it may or may not be appropriate for your specific circumstances.  This is particularly true re the Landlord and Tenant Act 1954, on which there is acres of case law, and many nuances. If you require legal advice, please do get in touch at enquiries@mcleanlegal.co.uk and I will be delighted to assist.

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John McLean is a Partner with Nexa Law, which is authorised and regulated by the Solicitors Regulation Authority (Licence Number 633024). All work is carried out through Nexa Law.

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