The Importance of Security of Tenure for Tenants

Security of Tenure is the statutory protection under the Landlord and Tenant Act 1954 which gives a business tenant the right to remain in the premises and obtain a new lease after the lease has expired unless there is a statutory ground. 

However, a commercial lease can exclude this protection if both the landlord and tenant formally agree. This is known as ‘Contracting Out’. 

Contracting Out 

In order to ‘contract out’ of the statutory protection, the following procedure needs to be followed: 

1. The landlord must serve a formal warning notice to the Tenant

2. The tenant must sign a declaration (statutory or simple) confirming that they acknowledge and accept the consequences of contracting out.

3. The lease must reference that the landlord and tenant agree to exclude protection.

Why does Security of Tenure matter? 

It is crucial that the tenant considers the benefits of Security of Tenure before it is agreed to the lease being ‘contracted out’.

- It makes a commercial difference to a tenant’s business. 

- It offers greater stability and provides greater certainty knowing that you have the right to remain in the premises and potentially be able to renew the lease avoiding the cost of moving premises.

- It will be a benefit to businesses which rely on the location of their premises. 

- If a tenant is selling their business, it may increase the saleability of the business as potential buyers will be aware that there is a right to remain in the premises. 

- The tenant will have the right to request a new lease on similar terms unless the landlord has valid reasons to object. 

A request for a new lease may be opposed due to statutory reasons. Those reasons are as follows: 

• you’ve failed to repair the property as set out in the lease
• you’ve persistently failed to pay rent on time
• the landlord can provide another suitable property for your business
• you’re renting part of the property and the landlord wants to rent out the whole property
• the landlord wants to demolish or redevelop the property
• the landlord wants to live in the property or use it for business purposes
• you’ve breached other terms of the ease

Consequences of proceeding with contracting out 

If the business tenant agrees to the exclusion of Security of Tenure, there is no automatic legal right to remain in the property and the lease expires on the date stated in the lease. The tenant must vacate the premises unless the landlord has voluntarily offered a new lease. The tenant must make appropriate arrangements for alternative accommodation before the expiry of the lease to avoid the risk of being without any premises. 

Further Advice

It is important to understand the implications of security of tenure before going ahead with a lease. If you require any assistance regarding the security of tenure, our expert team are here to help, please contact our team on 033 03001103 or request a call back.