Security of Tenure for Business Tenants
What is security of tenure for business tenants?
In general, tenants of commercial premises have security of tenure, which
means they have the right to remain in occupation of the premises at the
end of the term of the lease and can apply to court for a new lease to be
granted. The landlord can only resist such an application on certain
grounds (see below).
How to exclude security of tenure from a lease
The landlord and tenant can agree that a lease will be granted without
security of tenure. Before 1 June 2004, a court order was required in order
to exclude the security offered to business tenancies. A court order is no
longer required: instead, a three step procedure must be followed by the
landlord and tenant. The procedure is set out below. A failure to follow
this procedure risks the tenant acquiring security of tenure.
Step 1 involves the landlord giving a “landlord’s notice” to the proposed
tenant. This notice contains a "health warning" which explains to the
proposed tenant the effect of entering into a lease without security of
Step 2 requires the tenant to sign a “simple” declaration or swear a
statutory declaration confirming that the tenant has received and read the
landlord's notice and that the tenant accepts the consequences of entering
into a lease without security of tenure.
Step 3 is the inclusion of a statement in the lease referring to the
landlord's notice, the tenant’s declaration and the parties' agreement to
exclude security of tenure.
Leases with security of tenure – grounds for the landlord to oppose
If security of tenure has not been excluded using the procedure outlined
above, the tenant will have the right to seek a new lease when its lease
expires. There are limited grounds on which the landlord can object to the
grant of a new lease. These are set out in section 30(1) of the Landlord
and Tenant Act 1954 and can be briefly summarised as follows:
(a) tenant’s failure to comply with repair obligations;
(b) tenant’s persistent delay in paying rent;
(c) tenant’s breaches of other obligations or use or management of the
(d) landlord has offered suitable alternative accommodation;
(e) landlord requires the whole of the premises for subsequent letting
(applies only where the lease in question is an underlease of part);
(f) landlord intends to demolish or reconstruct the premises;
(g) landlord intends to occupy the premises itself.