Security of Tenure, Commercial Leases and Property

Security of Tenure and Commercial Leases and Property

When taking a new lease of commercial property, one of the conditions that is sometimes imposed by prospective landlords is a request for you to “opt out” of the protection provided by Part 2 of the Landlord and Tenant Act 1954.

Some landlords will try and sneak this into the lease so unsuspecting prospective tenants who are not represented by a competent legal adviser may not realise what they are signing before it is too late.

All too often, even when you are represented by a solicitor, the landlords will not mention this until the very last minute before exchange and completion, wagering on the probability that most tenants will at that point be so exhausted with the negotiations process that they will invariably capitulate and agree the proposal.

Worse yet, sometimes the only alert you may receive to the fact that your landlord is removing the protection afforded by the Landlord & Tenant Act 1954 is contained in the formal notice your landlord serves on you.

Many people fail to recognise the importance of this before signing a new lease.

Opting out of Part 2 protection has huge significance for tenants and is a step which must not be taken lightly at all. It is therefore one which should only be agreed with full knowledge of the protection that is being given away.

Often this loss of protection will serious impair and reduce the value of your business, should you ever decide to sell your business in the future.

Under Part 2 you are given “security of tenure” of your commercial lease. Put simply, if you have a fixed term lease then when it ends your landlord must grant you a new lease on similar terms.

You can then continue your business in the same location. You have the right to demand that your landlord grants you a similar lease.

By signing an opt out of Part 2 when you take on the lease, you give away your security of tenure.

The result of this is that when your lease ends, your landlord is legally permitted to ask you to leave the premises and refuse to give you a new lease. If your business has been built on being in a specific location then moving will be a problem to you.

Also if you decide to sell the business during the term of the lease, this restriction may well adversely affect the value of the business as the new owner cannot be sure that they will obtain a new lease at the end of the current lease.

Additionally your landlord could insist you pay a much higher rent before granting you a new lease.

This places you in a very weak negotiating position.

In summary you should never agree to opt out of Part 2 protection lightly and certainly not without fully understanding its effect.

Always make sure you are legally represented in commercial lease matters, otherwise you could end up paying a far higher price for signing something that you do not fully understand.

If you are contemplating or negotiating a lease for a business or simply want some advice, as specialist commercial property solicitors in London we are best suited to assist you.

Telephone us on 020 8401 7352 to arrange an appointment or email us at info@solicitorsfirm.com with your question.