What businesses need to know about the Landlord and Tenant Act 1954

The Landlord and Tenant Act 1954 sets out rules for business rentals, giving tenants certain rights to stay in their rented premises when their lease ends. This law applies by default unless both the landlord and tenant agree to exclude it.

NOTE: If Part II of the Act is excluded, then the tenant will need to leave their business premises when their lease term ends.

Security of Tenure: The Tenants’ right to stay

Instead of leaving when their lease ends, business tenants can request a new lease, thanks to their rights under this law. If the landlord refuses, the tenant can take the matter to court, which will usually order a new lease with similar terms.

To start this process, the tenant sends a formal request called a ‘section 26 notice’ to the landlord, 6 to 12 months before their new lease would begin. Once received, the landlord has 2 months to reply, either agreeing or explaining why they oppose the renewal.

However, in most cases, both sides negotiate a new lease before the old one ends and write down their agreement in a document known as ‘Heads of Terms.’

When can a landlord reclaim their business premises?

If the tenant has security of tenure, the landlord can only take back the property under specific circumstances. The landlord must follow the steps in section 25 of the Act and prove at least one of the following reasons:

• The landlord intends to use the property themselves;
• The landlord wants to demolish or rebuild the premises;
• The tenant has not paid rent on time;
• The tenant has breached the lease terms;
• The business premises have been divided into various subletting’s.

The landlord must issue a written ‘section 25 notice’ 6 to 12 months before terminating the lease. If the tenant has not done anything wrong, they may be entitled to financial compensation unless alternative premises are available.

How can landlords exclude security of tenure?

If a landlord does not want the Act to apply, they must follow a legal process before the lease starts:

• Warning Notice – at least 14 days before signing the lease, the landlord must give the tenant an official ‘warning notice’ explaining the security of tenure rights they are giving up.
• Simple declaration – if the tenant agrees, they confirm this with a ‘simple declaration.’  This is confirmation in writing that they understand and accept the exclusion.
• Statutory declaration – if the lease starts sooner than 14 days after the ‘warning notice’, the tenant must sign a ‘statutory declaration’ in front of an independent solicitor or legal official, confirming they understand and accept the legal consequences of giving up these rights.

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