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A protected lease enjoys security of tenure, meaning it will automatically renew by law at the end of the lease term. On the other hand, a non-protected lease is a lease that contracts out of security of tenure. Understanding your lease and the rights you receive from it is crucial to avoid misunderstandings or disputes with your landlord. This article will explore the differences between a protected and a non-protected commercial lease.
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 business owner occupies and runs their business from a property for a fixed term in exchange for rent. A lease agreement is a legally binding contract between a commercial landlord and a tenant. Both parties will sign this at the start of the lease, and it binds them throughout the lease term. The lease agreement contains all the rules of the commercial lease. Typical lease terms include:
- the lease end date;
- the rent amount and due dates;
- repair and maintenance obligations for both parties;
- any rent review clause to review the rental amount periodically;
- any break clause to allow either party to terminate the lease before the lease end date; and
- any assignment clause to allow a commercial tenant to pass the lease to a third party.
What is a Protected Lease?
A protected commercial lease enjoys security of tenure. Security of tenure is a statutory protection from the Landlord and Tenant Act 1954. It allows a lease to automatically renew with the same lease terms at the end of its term. A tenant does not need to request the renewal; the lease will automatically continue.
Although the security of tenure is a statutory right, there are limited legal grounds in which a commercial landlord can refuse to honour the lease renewal. These include, for example:
- if the landlord wants to demolish the property;
- where the landlord intends to occupy the property; and
- where the tenant has repeatedly missed rental payments.
When a commercial landlord and tenant have a protected lease, there are specific legal procedures to follow towards the end of the lease term.Continue reading this article below the form
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What is a Non-Protected Lease?
A non-protected lease is a lease without the security of tenure. You may hear this as an excluded lease or a contracted-out lease. Contracted-out refers to the fact that the lease does not enjoy security of tenure, and a commercial landlord and tenant agree to contact out the relevant provisions in the Landlord and Tenant Act. Most commercial leases tend to be non-protected leases.
As a non-protected lease does not have the security of tenure, a tenant has no legal right to a new lease at the end of the tenancy. Instead, they should vacate the premises. Of course, a tenant can request a new lease through a fresh process, but their landlord is not obligated to accept this.
The following table outlines the key differences between protected and non-protected leases.
|Contains security of tenure.
|No security of tenure.
|Includes the relevant security of tenure provisions in the Landlord and Tenant Act 1954.
|Excludes the relevant security of tenure provisions in the Landlord and Tenant Act 1954.
|Provides a tenant with an automatic right to lease renewal at the end of the lease’s term.
|Does not grant any rights to remain in the property once the lease reaches the end of its term, so it does not renew.
|There are specific limited legal reasons for the landlord to refuse renewal.
|There are no exceptions to the rule that a tenant cannot remain in the property at the end of the lease term
|Where occupation continues because the lease renews, the tenant has an automatic legal right to the same lease conditions.
|Where occupation continues and parties agree to a fresh lease, the tenant has no right to the same lease conditions as the current one.
|The commercial lease does not need to state that the lease is protected.
|The commercial lease must contain a clause that states the lease is unprotected and that the correct procedures were carried out to make it a contracted-out lease.
|Applies to few commercial leases in reality.
|Most commercial leases are non-protected leases.
Commercial leases are either protected leases or non-protected leases. This means they either have security of tenure or contract out of the statutory protection. When a lease has security of tenure, the commercial tenant has an automatic right to renewal at the end of the lease term. A lease without security of tenure means the lease does not legally automatically renew when it ends. Accordingly, the tenant has no right to remain in the property.
If you need help understanding or drafting your commercial lease, 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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