What options are available to tenants when an existing tenancy comes to an end?

The Landlord and Tenant Act (the 1954 Act) gives tenants the right to ask landlords for a new tenancy. There are limited grounds available to a landlord for refusal of a new tenancy with compensation payable to the tenant in certain circumstances. If the grounds do not apply and a landlord acts unreasonably when negotiating a renewal tenancy then tenant can apply to court for a new tenancy.

Statutory protected tenancies

Any tenant taking a new tenancy which is protected by the provisions of the 1954 Act, also known as a ‘contracted in’ tenancy, has the benefit of the following:

The right to ask for a new tenancy

The 1954 Act allows tenants to ask their landlords for a new tenancy thus providing the tenant with an enhanced level of security and business continuity.

Rent control

The right to ask for new a tenancy does allow the landlord to review the rent although any review must be at open market value. Upon expiry of any existing tenancy the landlord cannot unilaterally review the rent without making an application to court for an interim rent.

Continuity of terms for the new tenancy

There must be no substantial departure between the terms of any existing tenancy and any new tenancy offered by the landlord unless any departure is mutually agreed upon or reasonable in the circumstances. Any new tenancy and subsequent future tenancies of the same premises to the same tenant will also have the benefit of the statutory protection of the 1954 Act.

Limited grounds for refusal

The 1954 Act sets out limited grounds on which landlords may refuse a new tenancy which are as follows:

• disrepair;
• persistent delays in the payment of rent;
• breaches of other terms of the existing lease;
• suitable alternative accommodation;
• the tenancy was created by a sub-letting;
• the redevelopment ground;
• the landlord to occupy for its own business or residence.

If one of the above grounds exists the landlord can serve a notice refusing to renew the tenancy. However, some of those grounds trigger a compensatory payment to the tenant.

Compensation

A landlord who refuses a new tenancy on the ground (e), ground (f), or ground (g) would be liable to pay the tenant compensation. Compensation is based on the rateable value of the property and would either be the rateable value or double the rateable value depending on the length of occupation.

Non-statutory protected tenancies

The 1954 Act inevitably gives landlords less control over the terms of which any future tenancy is offered and restricts the landlord’s right for the premises to be returned. It is therefore common for some landlords to ask their tenants to waive their rights to the 1954 Act at the outset of the tenancy. Should a tenancy be offered which is ‘contracted outside’ of the 1954 Act this would mean the tenant has no right to the following:

• No right to remain at the premises after the expiry date of the existing tenancy;
• No statutory right to ask the landlord for a new tenancy; and
• No entitlement to compensation if a new tenancy is refused.

It will be at the landlord’s sole discretion to offer a lease renewal and if refused the tenant has no right to challenge the decision. If a new tenancy is offered with different terms the tenant has no right to challenge any of the conditions which the tenant feels unreasonable. The only options available to tenants in these circumstances would be to either leave or to accept the terms offered.

A tenant is always recommended consider the implications of taking a lease contracted inside or outside the 1954 Act. The 1954 Act is a complex piece of legislation and our commercial property and commercial property litigation lawyers deal with the 1954 Act on a daily basis and are well placed to advise on the implications.

How Pinney Talfourd can help

If you are a tenant with an existing tenancy is coming to an end and would like legal guidance, our Commercial Property team is more than happy to assist.