Commercial tenants have various rights and legal protections – but these differ significantly from those relevant to residential leaseholders. It is important for both landlord and tenant to have full oversight of their rights, responsibilities and obligations within a rental contract to avoid any disputes or misunderstandings.
Landlords should ensure their commercial rental contracts cover all the appropriate points, including clauses that uphold their entitlement to evict tenants who fail to abide by the lease terms or breach a covenant within the lease contract.
Let’s look at the primary rights – and how this relates to the eviction process.
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The Legal Rights of Commercial Tenants in the UK
The Landlord and Tenant Act 1954 is a piece of legislation that grants several rights, such as ‘security of tenure’. That means that a commercial tenant who is occupying a rented property and in full compliance with the terms has the right to continue their tenancy – even after the end date within the lease – unless either party takes steps to terminate the agreement.
Several conditions must be met for a rental agreement to be covered by the Act:
- The contract is a tenancy – not a licence allowing a business to use a premise.
- The tenant must be the occupant rather than a third party.
- The property must be occupied for business reasons. While other activities may be permitted, the primary reason for the tenancy should be for a commercial tenant to conduct business activities.
Some types of tenancies are excluded and are not protected by the Act. These include tenancies related to agricultural leases, tenancies that include provisions allowing either party to terminate the agreement without notice, and fixed-term tenancies that run for up to six months.
The Act can cover the latter type of tenancy, but only if the agreement includes clauses that show how the contract can be renewed or extended beyond six months or if the tenant has occupied the property already for over a year.
What Rights Does the Landlord and Tenant Act Give Commercial Tenants?
The main protection the Act offers is the ‘security of tenure’ we mentioned earlier. In short, that means commercial tenants have the lawful right to request their lease be renewed when it reaches the end date shown in the agreement.
If that happens, the landlord cannot impose additional charges or restrictions – the renewed lease must have the same terms as the original rental agreement.
While that doesn’t mean a landlord cannot increase the rental charge in line with the property market and average rental premiums, or where a premise has been modernised and offers better facilities, they cannot arbitrarily increase the rent as a condition of lease renewal.
Landlords can evict a commercial tenant or bring the lease agreement to an end when the date shown in the rental contract arrives. However, they must comply with the regulations within the Act and serve appropriate notice.
In short, a commercial landlord cannot order a tenant to leave without providing a minimum notice period. They should follow the correct procedure, depending on why they wish to bring the tenancy to an end.
Types of Notices Commercial Landlords Can Use to Evict a Tenant
Section 21 Notices
Landlords in England and Wales can evict their commercial tenants without giving a reason by issuing a Section 21 notice.
In England and Wales, a section 21 notice, also known as a section 21 notice of possession or a section 21 eviction, is the notice which a landlord must give to their tenant to begin the process to take possession of a property let on an assured shorthold tenancy without providing a reason for wishing to take possession.
Normally, this can only be done when the initial fixed term has ended.
This notice might be ruled invalid if the landlord has failed to stick to certain rules, for instance by failing to properly protect a tenant’s deposit.
The normal notice period for this type of eviction is two months, but this has been extended to three months in England because of the Covid-19 crisis.
In Wales this period is now six months, except for cases relating to anti-social behaviour.
Most landlords will issue a Section 25 eviction notice. Tenants can also present a Section 26 or 27 notice to inform their landlord of their intention to either request a renewal or to end the lease.
Section 25 Notices
Section 25 is a formal process where the landlord informs the tenant whether they would like the lease extended or renewed or if they want to file an objection to continuing the tenancy agreement. Note that a landlord cannot serve a Section 25 if the tenant has already issued them with a Section 26 (we cover this notice procedure shortly).
- Provide at least six to 12 months’ notice, based on the termination date shown in the notice document, and clarify whether they intend to oppose a tenant’s request for a new tenancy.
- If the landlord wants to object to renewing the tenancy, they need to state why, using one of the allowable terms shown in Section 30 of the Act (as below).
- The landlord then needs to apply to the court to formalise the lease termination, while the tenant also has the right to apply through the courts for an extension.
If there are any issues with negotiations around the terms of a new lease, and provided the landlord does not plan to object, the tenant needs to apply to the court before the Section 25 notice expires to avoid sacrificing their protections.
Section 30 Grounds for Lease Termination
The Act outlines several grounds a landlord can use to support their plan to either terminate a tenancy agreement or oppose a renewal request:
- Breaches of the lease terms, such as repeatedly late rental payments, other failures to meet contractual obligations, or failure to keep the property in good condition.
- Having an alternative accommodation that is considered reasonable and suitable.
- Planning to let a unit as a whole premise, where a tenant currently leases a section of the property.
- The landlord intends to occupy the property themselves or plans to demolish or rebuild the premises.
Section 26 Notices
Tenants can issue a Section 26 to the landlord to formally request an extension to their lease, giving six to 12 months’ notice before the proposed new lease start date shown in the notice document. Section 26 notices should include the terms of the renewed tenancy agreement and cannot be issued if the landlord has already served a Section 25.
If the landlord objects, they can serve a counter-notice within two months of receipt of the Section 26, stating the grounds for the objection from the list above.
Section 27 Notices
Section 27 applies when the tenant wishes to end the lease at the contracted expiry date shown in their tenancy agreement. In most cases, they will need to provide notice at least three months before the current lease ends and ensure they vacate the premises by this date.
Section 8 Notices
To evict a commercial tenant who has fallen behind on rent, landlords must issue a Section 8 notice. If the tenant does not leave by the specified date, landlords can then apply to a court to enforce it.
The government has put new rules in place for when new repossession proceedings are allowed to start again after 23 August.
Under the new rules, landlords will have to say how the pandemic has affected their tenants financially when applying for a hearing.
They will also be required to produce a tenant’s full rent arrears history in advance of proceedings, rather than at the hearing itself.