Landlord and Tenant Act 1954
Under the Landlord and Tenant Act 1954 (“1954 Act), most tenants have a statutory right to renew their tenancy at the end of the term if they occupy the premises for the purpose of their business and meet the qualification criteria set out in the 1954 Act. If a lease is protected by the 1954 Act, a tenant has security of tenure at the end of the contractual term and has a right to remain in occupation. If a tenant wishes to renew a protected lease, a landlord would only be able to object to it on certain limited grounds that are set out in the 1954 Act in order to avoid a landlord and tenant dispute.
‘Contracting out’
A landlord and tenant can, however, agree to exclude the security of tenure provisions of the 1954 Act when negotiating a lease, which means a tenant will not have an automatic right to renew its lease at the end of the term. In such circumstances, the lease will come to an end on the contractual expiry date and any renewal of the lease at the end of the term will be subject to fresh negotiations between the parties. This process is often referred to as ‘contracting out’.
Landlord and tenant obligations
To contract out of the relevant provisions of the 1954 Act, a landlord must serve a warning notice on the tenant in the prescribed form before the lease or agreement for lease (as appropriate) is entered into, and the tenant is required to acknowledge the landlord’s notice by making a simple or statutory declaration. This procedure is prescribed by the 1954 Act so even if an exclusion clause is included in the lease or agreement for lease (as appropriate), the agreement to contract out of the 1954 Act will only be valid and effective if the procedure is followed correctly.
Seek legal advice
Whether or not the lease is contracted out will be a key consideration for both landlord and tenant and will depend on the commercial terms agreed between the parties. However, it is important that agreement on contracting out is reached at the outset and we recommend that professional advice is taken before making this decision.
If you are thinking of granting or taking a lease, or you are party to an existing lease which is approaching the end of its term, and would like advice our Commercial Property team can assist. Our Disputes Resolution team is also experienced in, and can assist with, 1954 Act claims. Please contact us at enquiries@bpcollins.co.uk or call 01753 889995.
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