When negotiating a new lease both landlords and tenants need to be mindful of the security of tenure provisions of the Landlord and Tenant Act 1954 (“the Act”).

 
Part II of Act provides that at the end of a lease, a business tenant has a right both to remain in occupation of the premises and to a new lease of the premises on substantially the same terms. The Act provides that at the end of the contractual term, the tenancy will not automatically terminate but is, instead, continued under the Act on the same terms as the expired lease.  

Accordingly, if no action is taken by either the landlord or the tenant the tenant will simply hold over on exactly the same terms.  

Additionally, either party is entitled to apply to court for a new lease to be granted in respect of the premises on, essentially, the same terms as the original lease with the exception of rent. This happens where either the parties agree that a new lease should be granted but cannot agree the lease terms or  where the landlord refuses to grant a new lease.  

The landlord does have the ability to oppose the grant of a new lease but that ability is limited and the landlord must prove one or more of the seven statutory grounds set out in the Act. Dependent upon the ground used the landlord may be obliged to pay the tenant compensation if he successfully opposes the grant of a new lease.  

If the landlord is not successful in opposing the new lease, the court will order a new tenancy and settle the terms if the parties themselves are unable to do so.  

Section 23 of the Act provides that the security of tenure provisions apply to:

“any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes”.

Accordingly, the Act will not apply if the tenant is not in occupation of the premises or if the tenant only occupies for residential use.

There are essentially three ways where a lease protected by the Act will come to an end: –

1. The tenant requires a new lease and the landlord does not oppose renewal
2. The tenant wants a new lease but the landlord opposes renewal; or
3. The tenant does not wish to renew the lease when it expires.

Accordingly, the lease will continue beyond its expiry date unless and until it is terminated by one of the methods set out in the Act which are –

1. The landlord serving a notice terminating the tenancy under section 25 of the Act;
2. The tenant serving a notice seeking a new tenancy under section 26 of the Act;
3. The tenant vacating the premises on or before the contractual expiry date of the lease or giving notice terminating his lease under section 27 of the Act; or
4. The landlord and tenant agreeing a new tenancy under section 28 of the Act.

It should be noted that special provisions apply for the service of the notices and therefore legal advice should be obtained prior to serving as such.

As noted above, there are seven statutory grounds for the landlord to oppose a tenants request for a new lease. The grounds are set out in section 30 (1) of the Act as follows:

1. the tenant’s disrepair of the premises;
2. the tenant’s persistent delay in paying rent;
3. the tenant’s other breaches of the lease;
4. the landlord’s offer to the tenant of alternative accommodation;
5. complex sublettings;
6. the landlord’s intention to demolish, reconstruct or carry out substantial construction at the premises; or
7. the landlord intending to occupy the premises himself.

Grounds (1), (2), (3) and (5) are, of course, discretionary grounds and grounds (5) brackets, (6) and (7) bring with them the prospect of statutory compensation being paid to the tenant.