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There are different methods to document the written agreement of a short-term occupation of commercial property in land law. This could be through a lease, licence or a tenancy at will. It is also possible to enter a bruton tenancy or a bruton lease. Although this is not usually the case, it can occur, and there are some differences between a standard commercial stand lease and a bruton tenancy. This article will explain a bruton tenancy in commercial leasing.
This cheat sheet outlines what you should be aware of in your lease agreement.
What is a Commercial Lease?
A commercial lease is where a landlord allows another business owner to use their land for a business purpose in exchange for rent. The tenant will receive the right to exclusive possession of the space.
A lease is also a legal contract between the commercial property owner, the lessor or landlord, and the business owner who occupies the property, the lessee or tenant. A written lease agreement usually accompanies a lease, detailing the rights and obligations of both parties.
What is a Bruton Tenancy?
When a person grants another exclusive possession of their property for a commercial lease, they must have the legal capacity to do so. Generally speaking, a landlord would own the land or property they are leasing, meaning they have title to the land.
However, a person who grants a commercial lease may not always have title to the property but may still have the legal capacity to give a lease. In this situation, a commercial lease can still exist, and creating a landlord-tenant relationship is possible. A commercial lease forms as long as the grant of occupation of the commercial property is for exclusive possession. Therefore, the tenant can use the property to the exclusion of others, including the landlord, in most circumstances.
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Why Bruton?
A bruton tenancy takes its name from a court case concerning a commercial lease in 1999. In this case, the person who granted the lease was the licensee rather than the person with title to the property.
A bruton tenancy is a type of commercial lease aside from the lessor not having legal title to the commercial property. A key difference is that the tenant in exclusive possession has no legal estate in the commercial property. They only have a limited property right, which is a circumscribed proprietary interest in the commercial property.
Therefore, with a bruton tenancy, a legal contract forms between the person with legal capacity and the person with exclusive possession in the same way a standard commercial lease does. However, it creates no legal estate. Accordingly, the tenant cannot pass the lease on to third parties, such as through an assignment.
Key Takeaways
A person can grant another the right to occupy their property through different documented means, such as a commercial lease, a license or a tenancy at will. A commercial lease is where a person, often with title to the property, allows another exclusive occupation. In this scenario, a legal contract forms, as well as an estate in land. However, there are times when a landlord and tenant may form a bruton tenant relationship, which is a slightly different type of commercial lease.
This is where a business owner still enjoys exclusive possession of the commercial property and forms a legal contract. However, as the person granting the exclusive occupation of the property does not have legal title to the business premises, it is a bruton tenancy.
If you need help understanding your commercial leasing arrangement, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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