Landlords Break Clauses In Business Leases

Author:Mr Neil Jones
Profession:John Budd & Co

The purpose of this article is to examine how business leases are treated differently than other leases or tenancies and particularly how the statutory provisions preventing agreements excluding the protection of tenants by statute have been interpreted by the courts in different situations.

What Leases Are Covered?

The statute which relates to business leases is the Landlord and Tenant Act 1954. Tenancies covered by that Act are tenancies of premises which are occupied for the purposes of a business carried on by the tenant or for those and other purposes. A business for these purposes includes a trade profession or employment and, indeed, any activity carried on by a body of persons corporate or unincorporate. Consequently a limited company, partnership, and club or a sole trader would be covered. Not only does it include the ordinary meaning of a business but it also covers, for example, a charity shop or tennis club. The absence of a profit motive is not fatal. However the tenant must be in occupation and a tenant sub-letting lock-up garages is not in occupation for these purposes and his tenancy would therefore be excluded from the protection of the Act.

How Are Such Tenancies Treated Differently?

Such tenancies will usually have the benefit of a written Lease, which will provide for a contractual term. When that term has expired the 1954 Act provides that the tenancy shall not come to an end unless terminated in accordance with the Act. The tenant may apply to the court for a new tenancy. There are certain requirements that the tenant or landlord shall have served a relevant notice and the tenant shall have served a counter notice. The tenant must apply to the county court between two and four months after service of the notice. Subject to those procedural requirements the tenant will be entitled to a new lease but the landlord can object to the tenant's application on one of only seven grounds.

Landlord's Grounds Of Objection To A New Lease.

Grounds 1 to 3 relate to breaches by the tenant of his obligations as to repair, payment of rent or other substantial breaches.

Ground 4 applies where the landlord has offered the tenant suitable alternative accommodation. For these purposes suitable means that it is suitable so as to preserve the goodwill of the tenant's business.

Ground 5 applies where the premises occupied by the tenant are in fact sub-let to him and form part of a larger building which the landlord wishes to let as a...

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