Can a Landlord end a business lease and occupy a property themselves?
23 March 2023
Taylor Bracewell
To answer this question, we need to consider a number of issues. The starting point is always the lease itself. If this lease is granted for a period of time, say for a term of 5 years then the Tenant is normally allowed to remain in occupation during that term.
However, the lease may contain a break clause, which is a right to bring the lease to an end early on service of a notice. If the lease does contain a break clause a further question arises as to who can exercise this break clause. Most break clauses are for the benefit of the Tenant only. So check what the lease says as a starting point.
However, that is just a starting point. If the term of the lease has come to an end the Tenant may still have a right to continue to occupy the property and call for a new lease.
This is because the usual position on a commercial lease is that the Tenant who occupies a property for its business will have the benefit of “security of tenure” which is a statutory right to remain in occupation even when the lease comes to end. This right is granted by the Landlord and Tenant Act 1954 (the 1954 Act) and the reason is that Government wants to encourage businesses to thrive without the inconvenience (and expense) of being forced to find new business premises.
This statutory right can be excluded before the lease is granted. This is often known as “opting out” which is following the statutory procedure to exclude the lease so the tenancy does not gain protection from the security of tenure provisions in the 1954 Act. This procedure needs to be followed fully and therefore it is always advisable to obtain legal advice to make sure this is done properly.
Even this is not the whole story. There are certain circumstance set out in the 1954 Act which allows the Landlord to resist the Tenant’s right to call for a new lease and one of these is a genuine intention on the Landlord’s part to want to take the property back and run the business from there itself. The ground is hard to prove and is coupled with a requirement to pay compensation to the Tenant based on the rateable value of the property for the Tenant’s relocation costs. It has to be the Landlord that wishes to run the business from the property. The ground will not be made out if the Landlord has fallen out with his current tenant and wants to put another tenant into occupation of the property to run the business from there.
As you can see this is not a simple question to answer but the steps to take can be summarised as:
- Check the lease.
- Has the term expired?
- Is there a break clause and if so who can exercise this?
- Does the Tenant have security of tenure?
- Can the Landlord show an intention to occupy the property and defeat the tenant’s security of tenure?
- Do take legal advice to make sure you get this right both when a lease is being entered into and on your desire to bring it to an end.
Our Commercial Property team are experts within their field and are always happy to help, they can be contacted by calling 01302 341414 or 0114 272 1884, alternatively you can fill out our online enquiry form.
We have further articles on our website relating to commercial property, here are three that you may find informative:
