Commercial Tenant Rights In The UK

Every tenant has statutory rights and protections against unfair treatment by their landlord – but these are substantially different between residential and commercial tenants.

That said, every business premise landlord should be conscious of their tenant’s rights and entitlements to ensure they manage the lease agreement and other processes correctly, lawfully and according to the relevant regulations.

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Protections for UK Commercial Property Tenants

The Landlord and Tenant Act 1954 covers commercial tenancy agreements, with inclusions that protect the ‘security of tenure’. This law means that a landlord can only terminate a lease agreement by following defined processes, and therefore a tenant cannot be instructed to leave while still within a tenancy unless the correct steps are taken.

If a commercial landlord were to terminate a lease or evict a tenant illegally, the tenant could have grounds to apply to the courts to have their lease reinstated or a new lease granted. The landlord could only oppose this within the terms and provisions contained within the Act.

Key Contents in the Landlord and Tenant Act

Several clauses within Section 23 of the Act relate to commercial tenancies. These stipulate that the tenant must have a lease rather than a licence, and the property must be used for commercial reasons.

For example, a premise rented as a business property should be primarily used for commercial reasons. However, a minority of the space could be residential, such as a multi-use retail shop with a flat above.

Some types of commercial tenancy are excluded, including:

• Business leases related to farming, agriculture, military uses, railways, dockyards and mining.
• Agreements between the landlord and tenant where both agree that either party can terminate the lease at any time.
• Fixed-term commercial tenancies of less than six months – unless the lease terms allow the agreement to be extended or renewed for another six months, making the lease a year or more in duration.

If none of these applies, a commercial lease does not automatically end when the lease expires, and the tenant continues to be a legal occupant of the property, provided they pay rent and continue to uphold the terms within the original lease agreement.

Evicting a Commercial Tenant

When a fixed-term commercial lease reaches the end date, the landlord can terminate the tenancy. The formal process is for the landlord to serve a Section 27 notice at least three months before the date they would like the tenancy to end or before the lease end date is reached.

If the tenant would like to continue occupying the property, they can opt to serve a Section 26 notice, which has to be presented within six months to one year before the initiation date shown in the notice.

A tenant cannot serve this notice if they have already agreed to a Section 25 notice (used when the landlord wishes to extend or renew the lease or objects to renewing the tenancy) and vice versa.

Should the landlord wish to oppose a Section 26 notice, they can then counter-serve, which must happen within two months, outlining the reasons they are not willing to agree – the Act states that acceptable reasons can include:

• Continually late rental payments.
• Rental arrears.
• Breaches of other parts of the rental agreement.

A commercial landlord can also refuse to renew a lease past the end date if they would like to reconstruct or demolish the premise, want to move into the property themselves either as a home or business, or intend to let the whole property, and a partial lease would make that impossible.

Further to this, a landlord can refuse to renew a commercial lease if they can offer an alternative rental premise that is considered reasonable and suitable.

Disputes Between Commercial Landlords and Tenants

If the two parties do not agree on whether to renew or end the tenancy, they may need to apply to a court to either grant a new lease or enforce the termination of the lease. The court system will require documentation and evidence on either side to prove the arguments and show which notices have been served by which party and on which date.

Restrictions apply to periodic commercial tenancies, which renew every month or rental payment date or when the lease has a fixed term of under one year.

Where the commercial landlord is unwilling to grant an extension, the tenant can apply for a new lease according to the tenancy protections included in the Act but must apply before the date shown in any previous Section 26 notice.

Terminating a Commercial Lease

Landlords must serve notice of their intention to end a lease and indicate whether they would oppose a new tenancy agreement or renewal should the tenant wish to apply.

Any opposition to an extended tenancy request should include the grounds on which the landlord relies, taken from the Section 30 allowable reasons. The landlord can then apply to the court to officially terminate the lease.

Compensations for Business Lease Terminations

The Act provides a clause that allows commercial tenants to claim compensation, depending on the circumstances and if the landlord has refused to commit to a new lease without any specific grounds.

One scenario could be where the landlord serves a Section 25 notice or counter-serves a notice objecting to the tenant’s Section 26 notice and wishes to terminate a lease without any fault on the part of the tenant and where neither has applied for a court order.

There are varied complications, and the specificity of issuing notices, counter-notices and ensuring your actions are compliant with the Act means it is always advisable to seek professional, independent advice if you are unsure of the correct next steps or wish to contest a tenant’s request or end a tenancy without breaching the commercial tenant’s rights.

Clearway’s commercial property team is on hand to help if you would like any additional information or support establishing the right response to a notice served or how to apply to the courts for a favourable outcome to repossess a commercial property currently let under a rental agreement.

If you’re in need of assistance, give us a call at 0800 085 8695 or send us a message with your requirements here.