Being confronted with a commercial tenant who refuses to vacate premises after the expiry of the lease agreement places a landlord in a frustrating position. It is important to note that attempting physically to remove a tenant and their possessions from a property without a court order is against the law and could result in a criminal prosecution.
The reality is that tenant, even those who remain in a property after the expiry of a lease enjoy certain legal rights and it is imperative that as a landlord, you undertake the process of removing them correctly, in order to avoid any legal and financial complications befalling you.
This blog covers how a landlord can enforce the end of a tenancy and retake possession of their property.
The Landlord and Tenant Act (the Act) 1954
In order to avoid difficulties surrounding a tenant refusing to vacate a property at the end of a lease, it is important to establish at the time of granting the lease, whether or not the lease will include a security of tenure under The Landlord and Tenant Act 1954.
A security of tenure (or protected lease) grants a tenant the automatic right to renew their lease and also remain in possession of the premises after the lease comes to an end. In many cases, commercial tenants will have invested a great deal of money into altering and improving a property in order to meet their business requirements. A security of tenure ensures a landlord can not easily move them out; therefore, it is an attractive clause to include when drafting a lease.
If a landlord decides they do not wish to renew a protected lease, things can get complicated.
Under section 30(1) of the Act, a landlord can oppose the granting of a new tenancy if:
- The tenant has failed to comply with certain maintenance and repair obligations
- Payment of rent is routinely late
- The tenant has substantially breached one or more of the tenancy covenants
- The landlord has secured alternative, similar accommodation for the tenant
- The landlord wishes to demolish or reconstruct the premises, or live in it
- The out-going tenant is occupying a sub-let of a larger premises, and the landlord wishes to rent out the property as a whole
Even if you successfully terminate a protected lease on one of these limited grounds, the tenant may still be able to claim compensation from you.
Contracting out of The Landlord and Tenant Act 1954
One of the simplest ways to avoid having a tenant refusing to vacate the premises at the end of a tenancy is to include a clause contracting out of the Act in the tenancy agreement. However, it must be noted that some potential tenants, especially those who will need to invest a lot of capital into a premises, are unlikely to accept an unprotected lease such as this. As a landlord, you also have a legal obligation to inform potential tenants of the risks of taking on such a tenancy.
Under the provisions of an unprotected lease, a tenant will be required to leave the property if you chose not to offer a new tenancy agreement. They will also have no right to compensation for loss of the business premises.
To ensure the end of a tenancy runs smoothly, let the tenant know well in advance (i.e., a few months) whether or not you wish to renew their lease. If you wish to take possession of the property you need to inform the tenant in writing.
Tenancy at Will
There are times when the negotiations for a new lease will drag on past the date of the original tenancy. If this happens, the tenant assumes the status of a ‘tenant at will’. This grants the tenant short-term occupancy at the original rate of rent, while the negotiations conclude. If an agreement for a new lease cannot be reached a landlord can terminate the tenancy with no financial repercussions.
It is important to note that the payment of rent does not give rise to a presumption of a periodic tenancy (Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited EWCA Civ 303); therefore both the tenant and the landlord are entitled to quit a tenancy at will with no notice required. However, the longer you continue to accept rent from a tenant of an expired lease without taking any steps to enter into negotiations for a new agreement, the greater the risk of the courts interpreting a periodic tenancy is in place. A periodic tenancy cannot be contracted out of the Act. Therefore, if the court rules a lease has become periodical, the only way a landlord can regain possession of the property is by virtue of section 30(1) of the Act.
A landlord can bring a possession order against the tenant of a commercial property by virtue of section 25 of the Act or by forfeiture.
Section 25 Notice
A section 25 notice is a legal notice served by the landlord on a tenant that informs the tenant of the landlord’s opposition to granting a new lease and their intention to take possession of the property.
A section 25 notice can only be used in the case of protected tenancies.
This notice must be served six to twelve months before the current tenancy is due to end. If the landlord successfully argues one or more of the grounds under section 30(1) of the Act apply, then the court will not grant a new tenancy.
A landlord of a commercial tenancy may forfeit the current lease, re-enter and take possession of the property under certain terms, such as the non-payment of rent or breaches of rental covenants by the tenant. You can read all about the law of forfeiture in one of our previous blog posts here.
The main points a landlord needs to be aware of when regaining possession of a commercial property are as follows:
- Obtain legal advice and operate above board. Sending in the ‘heavies’ could land you in court!
- If your tenant has an unprotected tenancy agreement, it is imperative that you end the tenancy properly and cleanly. Allowing a tenant to remain in possession and pay rent after the leases’ expiry date could result in them being granted security of tenure under the Landlord and Tenant Act 1954
- If you have entered into a protected lease make sure you can successfully argue that one of the situations outlined in section 30 of the Act applies so you can avoid the courts granting a new lease if your tenant applies to the court to renew the agreement between you.
If you would like to find out more about the law surrounding commercial leases, please click here or call our office on 020 3588 3500 to make an appointment.
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