Does a business have the right to remain at the end of its lease?

Legal Review by Coffin Mew

Whilst desperately wanting to avoid sounding like a typical lawyer, the answer is ‘it depends’.

The ability for a company (no matter its size) to be certain of its location is important for stability and growth, so the end of a lease can throw a company into turmoil.

The starting point is the lease itself and whether the lease is ‘contracted out’ of the Landlord and Tenant Act 1954.

If the 1954 act does not apply, the tenant does not have the right to remain at the end of the lease.

This does not mean that a new lease cannot be agreed.

The 1954 act provides tenants ‘security of tenure’, ie the company’s right to remain at the end of its lease and, crucially, the ability to compel its landlord to grant a new lease.

If a new lease cannot be agreed, then the court can decide.

End of story? Not quite.

Even if the tenant has rights under the 1954 act, the landlord has the upper hand.

If the landlord is able to establish certain grounds, then they can still oppose the grant of a new lease and there is nothing that the tenant can do about it.

These grounds can be broken down into two categories – ‘fault grounds’ and ‘no fault grounds’.

Tenants are likely to be aware of ‘fault grounds’ – such as evidence that they have broken the terms of their lease – but they may find an eviction on the basis of ‘no fault grounds’ very frustrating if it comes as a surprise.

If the landlord can establish one of the ‘no fault grounds’, then the court has no discretion and the tenant will not be granted a new tenancy.

The most common ‘no fault ground’ cited is the landlord’s intention to redevelop the premises.

However, in certain circumstances the landlord can also rely on the fact that they intend to occupy the premises for their own purposes.

This course of action could be extremely galling for a company that is left with no option but to vacate in favour of a business started by their landlord.

When planning for the future, it is important for companies to be aware that the location of their operations may be out of their control.

Maintaining a positive relationship and good communications can help both landlord and tenant to avoid the pitfalls common at the end of a lease, but there is no substitute for a sound contract and professional legal advice.

If you would like further information, please contact Adrian McClinton, senior associate solicitor in the dispute resolution team specialising in property litigation at Coffin Mew, at adrianmcclinton@coffinmew.co.uk or telephone 01273 069997.