Share this page

The risks of allowing tenants in before completion

22 May 2018 • Danielle Leeming

We have seen a significant increase in the number of commercial landlord clients allowing tenants into properties they are letting pending completion of the lease, with a view to helping their tenants get their businesses up and running - but is this a risk worth taking?

The landlord could be subconsciously granting the tenants a right to security of tenure where the landlord has agreed to grant a lease which:

  • has been excluded from sections 24-28 of the Landlord and Tenant Act 1954;
  • is referred to as ‘outside the 1954 Act’; or
  • is referred to as not having security of tenure,

So what do the 3 phrases above mean? The simple answer is that they all mean the same thing.

If a lease has been excluded from sections 24-28 of the Landlord and Tenant Act 1954, the tenant does not have an automatic right under statute to request a renewal lease based on the same or similar terms at the end of the term of the current lease.

Where a tenant has a lease of a commercial property which:

  • is within the scope of sections 24-28 of the Landlord and Tenant Act 1954;
  • has not been excluded from sections 24-28 of the Landlord and Tenant Act 1954; or
  • has security of tenure...

...then the tenant will have an automatic right under sections 24-28 of the Landlord and Tenant Act 1954 to make a formal request for a renewal lease based on the same or similar terms, save for duration and term.

Why is this important?

Compensation

It becomes important if the landlord is considering developing the property or occupying the property for their own purposes at any point in the future. If a tenant has security of tenure, thereby giving the tenant an automatic right under statute to formally request a renewal lease based on the same or similar terms, the landlord would be liable to pay the tenant compensation in the event the landlord refuses a tenant’s formal request for a renewal lease based on the same or similar terms.

 

The level of compensation owed to a tenant in such instances also increases the longer the tenant remains in occupation.

 

Avoid issues down the line

Whilst the tenant may think the landlord is being deliberately unhelpful in not letting them in earlier, by the landlord refusing the tenant’s requests to occupy the property before the lease has completed, it can save issues later down the line, particularly where the lease negotiations take longer than expected or there is a breakdown in the negotiations for any reason.

 

Allowing a tenant into the property early can also mean that the transaction becomes protracted as there is no incentive for the tenant to finalise the lease as soon as possible if they are already occupying the property.

 

If you are thinking of letting a commercial property, or have recently agreed terms for a commercial letting and want to ensure a tenant does not gain any security of tenure rights, please contact our Commercial Real Estate Team – click here.

 


〈 BACK
Women In Housing  Finalist
Chambers UK 2015
Lexcel
Conveyancing Quality
Legal 500
Investors in People

Croftons is the trading name of Croftons Solicitors LLP, a limited liability partnership registered in England and Wales with number OC343375. The term ‘partner’, if used, denotes a member of Croftons Solicitors LLP or a senior solicitor of Croftons Solicitors LLP with equivalent standing and qualifications. A full list of members is open to inspection at the office. Croftons is authorised and regulated by The Solicitors Regulation Authority (SRA) number 508041. Croftons has its principal place of business at The Lexicon, Mount Street, Manchester, M2 5FA.

 

 

© Croftons 2019 | All Rights Reserved

Scroll to Top