The Landlord & Tenant Act 1954 is the bedrock of legislation for commercial property leases, with rights for tenants to have their lease renewed at the end of the main lease duration. People tend to appreciate this more with residential property, and realise that a landlord can’t suddenly just ‘kick a tenant out’ when their lease ends as there are certain rights of renewal and requirement for notices and maybe court applications.
This is the equivalent principle for business premises, originally brought in after the Second World War and bomb-damaged property caused reduced stock of business properties and landlords started to be choosy on what tenants could stay on. From a landlord’s perspective this might be fair - hunting down a better tenant, paying more rent, but for a business which relies upon its exact location to run its business, say, your local butcher, being forced to another location can seriously affect trade.
Further down in this article are 5 specific aspects to the 1954 Act, one of these is the way that you can exclude the whole legislation right from the start. This benefits a landlord most, having more flexibility at the end of a lease, and has become more popular in mainstream lettings in modern times where tenants tend to be more mobile and clued-up on matters anyway.
Originally you had to apply to court for a specific lease to be outside this protection, but from 2004 things got easier by additional legislation called The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003.
In terms of how this is implemented, there are two basic principles; firstly that the tenant has formal notice about what rights they are about to give away under this exclusion, and secondly a formal agreement to this after a period of time. After you then mention correctly in the actual lease, it happens automatically without needing any formal court agreement.
Regarding the practicalities of how you do this, here are 5 key steps to go through. You do have to be careful though that these are correctly implemented so that there is no wriggle-room for a tenant (or landlord) to argue afterwards that this exclusion is not valid, and therefore the usual benefits of the Landlord & Tenant Act 1954 kick into place. For some landlords with multiple tenant scenarios like this it’s even worth some initial advice, templates, and procedures being confirmed by a solicitor which a landlord can then practically administer and implement themselves afterwards.
1. The Landlords ‘Warning Notice’
The landlord needs to issue a formal notice on the tenant warning them about what they are about to do. It’s a standard form in the original regulations, and issued before any actual lease or agreement for lease is entered into in this or a substantially similar form (you can purchase one here and see a sample here).
So you may have actually reached the stage of a draft lease being agreed and in circulation, but this can’t have been signed and completed in any way before this notice has been issued and the procedure gone through.
In short, this notice will formally notify the tenant that they’re about to give up security of tenure and rights at the end of this agreed lease, and therefore advise them that they take professional advice in the matter.
Although it’s a standard notice, you need to make sure it addressed to the correct tenant’s name and location, and then correctly served upon them.
The importance of getting this right can’t be stressed enough. The notice has not only got to be technically accurate, but then correctly issued and received by the tenant. Failing this, they could claim it is invalid, and therefore the whole exclusion process void, and the 1954 Act back to being applicable.
2. The Two Types of Tenant ‘Declaration’
The tenant then has to formally reply to this ‘warning notice’ and accept the situation of all rights being excluded from the lease. As with the Warning Notice, it is in a prescribed form and must have all the correct information on in order to be valid.
It can take one of two forms, depending upon the time between the initial warning notice and the final completed lease. If this period is over 14 days, then a ‘Simple Declaration’ will suffice as you’re allowing a minimum two weeks for the tenants to make a reasoned decision (you can purchase one here and see a sample here)).
If you want to push things through in under 14 days, which can be the case in lot of sudden renewals or lettings, then a ‘Statutory Declaration’ is required (you can purchase one here and see a sample here). Not only is this in a different form, but you will need the tenants to sign this in front of another independent solicitor or commissioner for a small charge in order to ensure they are understanding what they are doing.
In terms of what triggers this 14-day time frame, it is technically the time between the initial Warning Notice and completed lease. The Declaration acknowledges that this time frame has been noted, and although this Declaration could therefore fall within the 14-day period on the basis that the initial Warning Notice is acknowledged outside the period, the best way is to ensure that both are agreed, signed, and noted well within the time frame.
Also, make sure you go on the receipt dates rather than just the serve dates, to leave no room for parties claiming afterwards that things were not correctly issued and received in time.
If you go down this Statutory Declaration route but find it taking longer than 14 days, then it’s fine to continue with it rather than having to resort to a Simple Declaration.
3. The Lease Clause
There needs to be a clause in the actual lease referring to this exclusion process, again a standard piece of wording referring to the original landlord’s Warning Notice, the actual Declaration afterwards and whether this was Simple or Statutory, and the ultimate agreement of the tenant to this.
Again, make sure this is correct to give no room for claiming invalid afterwards.
4. The Lease Completion
Okay, usual lease completion principles then apply for arranging the lease to formally be agreed with the right signatures and dates not only on the lease generally, but the above 'exclusion clause' also has a date inserted for the completed Declaration.
With the correct clauses in of course as above, the main factor here is timing, and ensuring that it is after the above Warning Notice and Declaration notice periods.
5. The Lease End
A final point is actually right at the end of the agreed lease, which because it seems long into the future at the time of agreeing the lease, can later crop up with problems at the end because people forget that this is an ‘excluded lease’.
Basically, quickly agree a new form of lease straight after, otherwise you’re in the realm of another lease being implied which over time could bring back 1954 Act rights that you originally excluded. So as no lease is officially rolling over, then as soon as a tenant continues with business occupation of a property and pays rent over a period of time, usual 1954-Acttenancy rights can be inherited.
So diarise this carefully, and make sure that a new renewal lease is agreed ahead of time, and any vacation happens correctly and at the correct lease end timing.
Another point just on the subject of leases ending as well, if they are mutually agreed to be surrendered by both the landlord and tenant before the natural lease end date. If this is directly through a Deed of Surrender then no problem, but if the lease is already protected by the 1954 Act and you are agreeing an initial Agreement to Surrender then a similar exclusion-process will be needed.
Applying the 5 Steps
Following these five steps will enable you to by-pass the whole Landlord & tenant Act 1954 protection in any new lease, which can mean less complications for both a landlord and tenant in the business of wanting to agree new leases.
However, the detail needs to be watched. Because the tenant is giving up a whole array of legal rights, which they may live to regret, the process is deliberately giving them space for them to consider things – if this 14 day period does need to be shorter, then they will need another solicitor or commissioner with them to explain before they sign it all away.
Once this has been understood and you’re on the way to exclusion, then make sure everything is administered correctly. Any standard form you can locate must be carefully scrutinised to get just the right detail on them, and to be served in just the right way.
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