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When you enter a commercial property lease as a tenant, you have rights. The main details of these are in your commercial lease agreement. This also outlines the landlord’s rights and your responsibilities concerning the commercial property. A lease agreement is a legally binding contract, so you must adhere to it. Also, it is only fair that you can enjoy the lease rights, which are yours. The rent for your commercial lease is one of the most significant expenses in your business, so it is only right that you get what you are entitled to. This article will explain three key UK commercial tenant rights.
1. Exclusive Possession
A fundamental right that you, as a commercial tenant, usually enjoy is the right to exclusive possession of the commercial premises on the lease demise. This means you have the right to sole occupation of your business premises, so you do not have to share it with any third party, including your commercial landlord. This also includes someone wishing to use your commercial premises to enter into another.
Some tenants, however, will not enjoy this right but instead have the right to non-exclusive possession. This can mean your commercial landlord has the right to move you between places within the commercial premises.
2. Right to Compensation in Certain Circumstances
As a commercial tenant in a lease, one of the rights you potentially enjoy is the right to compensation in certain circumstances. One of these circumstances is where you have security of tenure in the lease. This is a statutory right, as it is detailed in the law.
A commercial lease that has security of tenure is protected. You, as a commercial tenant, have statutory protection to legal automatic lease renewal once your lease reaches the lease end term date. This means the lease will renew unless your landlord has one of seven legal, reasonable grounds to refuse this.
However, if your commercial landlord does not grant you this lease right, such as if they oppose it only on ‘no-fault’ grounds, you will have a right to compensation where:
- neither of you applies to the court concerning the refusal to renew the lease, and you, as the tenant, opt to vacate the premises; or
- you do apply to the court and the court does not grant lease renewal.
The rate of compensation will depend on your lease term. If it is less than 14 years, the compensation calculation will be based on the property’s rateable value at the date the landlord serves the Section 25 notice or counter-notice. However, it will be twice this rate if you have been in occupation for more than 14 years from this date.
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3. Rights Conferred by the Minimum Energy Efficiency Standards (MEES)
The Minimum Energy Efficiency Standards give commercial tenants the right to have a minimum energy efficiency rating on the commercial property they lease. Your business premises should have an Energy Performance Certificate (EPC), and by law, it should be no less than an E rating. As of April this year, any commercial property that does not meet this standard means that the commercial landlord of the property has committed an offence.
A commercial tenant’s right to an EPC of a rate E does not apply if a specific exemption applies to the commercial property. These are generally as follows where:
- your fixed term is more than 99 years;
- your fixed term is six months or less; and
- you lease a listed building and making it a rate E means its character or appearance changes as a result.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
You, as a commercial tenant, have key rights in a commercial lease. This article has explained three of these key rights. Firstly, it points out that commercial tenants have either the right to exclusive possession or a non-exclusive position in the commercial lease. The article then explains that as a commercial tenant, you potentially have the right to compensation if you are in a protected lease. This can occur when your landlord does not correctly grant you your right to security of tenure. The final right that tenants enjoy, which is highlighted in this article, is the right to an Energy Performance Certificate for the commercial property of at least an E rating.
If you are a commercial tenant and need help understanding your rights, contact our experienced leasing lawyers 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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