Commercial leases generally benefit from the security provisions under the LTA 1954. This security applies to all premises used for commercial reasons except for specific exceptions which are set out in the LTA such as. Some examples of these exceptions are tenancies for a term of 6 months or less, tenancies at will and agricultural or farm business tenancies.
Under the LTA, the protection is given to the tenant and the importance of it is twofold. Firstly the business tenancy will not come to an end at the expiration of a fixed term. Secondly, a tenant which is in the occupation of the premises for the purposes of its business has a statutory right to renew its lease at the end of the term to which the landlord can only oppose on certain grounds, for example, constant delay in paying rent.
When agreeing to the terms of the lease, the landlord and tenant have the option to agree at the outset to “contract out”, in other words, exclude themselves from the security provisions under the LTA 1954 act so that the tenant will not have the benefit of the right to a new lease.
Looking at this from the tenant’s point of view, if the tenant is looking for premises for its business for a long term venture the security provisions are desirable. However, if the tenant is looking for a shorter lease, contracting out might be a better option.
Similarly, if the landlord is letting out the premises purely an as investment and for a longer run, letting the lease have the benefit of the security provisions will be preferred. On the other hand, if the landlord is looking for flexibility and prefers to have more control, he may wish to exclude the security provisions in which case the lease would need to be contracted out.
The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (RRO) sets out the revised procedure for contracting out.
Firstly the landlord must serve notice on the tenant warning him of the consequences of entering into an agreement which excludes the protection provided under section 28 notice of the LTA. The landlord must within this notice advise the tenant to seek independent professional advice so he fully understands the consequences.
After the notice is served, the tenant must confirm in the form of a declaration that he has received the notice, read it and accepts all consequences of entering into the agreement.
References to the notice, declaration, and the agreement to contract out will then be made in the tenancy agreement.
If you would like to talk to a specialist about the Landlord and Tenant Act 1954 please do not hesitate to get in touch with the commercial property team in Leicester
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The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.