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How Much Notice Do I Need to Give at the End of a Tenancy?

How Much Notice Do I Need to Give at the End of a Tenancy?
How Much Notice Do I Need to Give at the End of a Tenancy?

The notice a commercial landlord needs to give their tenant depends on the structure of the tenancy – a lot relies on the clauses and features within the lease agreement.

With the introduction of the Renters’ Reform Bill in May 2023, many landlords are assessing their rights and obligations, but this new piece of legislation is focused on residential tenancies, so the reforms will not generally have any impact on commercial landlords.

However, any business tenant does have rights and legal protections, so it is important you provide appropriate and sufficient notice to avoid any potential liabilities or disputes.

Laws Related to Commercial Leases

The major statutes that are relevant to commercial landlords are included within the Landlord and Tenant Act 1954 and apply to commercial tenancy agreements, setting out the terms under which a landlord can end a fixed-term tenancy.

Security of Tenure means that a commercial tenant, with a lease that is covered by the Act, has a right to maintain their tenancy in a commercial property where their rental agreement runs for a fixed term of more than six months or they have already been in the property for over one year.

In short, the law states that tenants are entitled to extend the lease past the fixed term and be offered a new lease unless there are other circumstances that supersede this right.

That said, if both parties agree, they can sign a lease surrender agreement which proves that both the tenant and landlord have mutually decided that the lease will end earlier than indicated in the rental agreement.

There are no restrictions on ending a tenancy in mutual agreement, but it is advisable to consult a property specialist and have formal paperwork drawn up to avoid any possible future conflicts or claims.

Commercial Lease Legislation for Periodic Tenancies

If the lease agreement is periodic, it is renewable every rental payment period, normally every month or quarter.

The landlord can decide to end a commercial tenancy, where the tenancy is held against a periodic lease agreement, either in agreement with the tenant or by serving notice to quit, which advises the tenant they intend to seek possession of the property.

Most landlords will require a court order to proceed if the tenant objects, although there are grounds when a landlord can seek a repossession order regardless of the tenant’s wishes, such as when they have breached the lease terms.

Assignment of a Commercial Lease

Another option is to pursue a lease assignment, which means the tenant leaves the property but passes the lease to a new occupant – with the permission of the landlord.

Most landlords will ask for some level of assurance before agreeing to proceed with the assignment of the lease to ensure they have sufficient knowledge and background checks to be confident the new tenant will keep up with the rental payments.

Landlords may also ask the existing tenant to provide a formal guarantee against the new tenant to protect their financial interests and allow them to agree with the request. Note that the lease should have a clause that indicates whether an assignment is possible and under what circumstances.

Ending a Commercial Lease on a Fixed-Term Rental Agreement

Commercial property leases often have a fixed term, which is agreed upon at the beginning of the tenancy and agreed to by both parties. If you decide you wish to end a tenancy before that date, the process will depend on whether the other party consents.

If you are a commercial landlord and would like to end a tenancy that has extended beyond the end date, you may be able to:

  • Issue a notice advising the tenant you intend to end the extension, explaining the grounds.
  • Confirm that an implied surrender exists, where the tenant hasn’t formally stated they are leaving the property, but they have returned the keys or otherwise indicated that they are no longer a tenant.

If the original fixed term has passed, the tenant needs to give three months’ notice to terminate a lease, and the landlord should provide six months’ advance notice – these notice periods may differ if you have alternative clauses within the rental agreement.

Reasons a Landlord Can Refuse to Extend a Fixed-Term Commercial Lease

There may be situations where the landlord has the right to end a commercial tenancy and can lawfully refuse to extend a lease past the fixed term. If the tenant breaches the terms of the lease or otherwise acts outside of their obligations, they may forgo the protections provided under the law.

Examples could include:

  • Falling into rental arrears, particularly where the tenant repeatedly fails to pay the rent on time or owes a substantial amount of unpaid rent.
  • The tenant has not kept the property in a reasonable condition or carried out repairs or regular maintenance work as stipulated in the lease.
  • The landlord has offered alternative rental accommodation, which is suitable and with the same terms as the original tenancy agreement.
  • The tenant has breached any other covenant, clause or provision within their agreement.

Other scenarios also allow a landlord to refuse to extend a lease if they wish to redevelop or demolish the premise, want to use the site themselves for any reason, or have decided to let one larger unit as one rental property, and the tenant was previously renting part of the building.

Using a Break Clause to End a Commercial Tenancy

Many leases include a break clause, which provides a point at which the landlord or tenant can decide to end the lease without any liability or legal ramifications. The break clause should be clearly stated within the lease and indicate how and when it can be used.

For example, you may have a break clause that says you can terminate a two-year lease after one year, provided you give notice in writing at least three months in advance.

Break clauses also have conditions, such as requiring the tenant to have paid all rent and service charges in full before they submit the minimum notice to take up the option of a break clause.

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