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If you are a business owner looking for commercial premises, you will likely enter a commercial lease. This is a legal agreement between you and a property owner who will be your commercial landlord in the lease. Before you enter a business lease, both parties will negotiate terms in the lease agreement that suit their needs. This can include the rent amount, any break clause and repair and maintenance responsibilities. One area you, as a commercial tenant, may want to negotiate is for security of tenure so you have a protected lease. This article will cover some reasons a commercial tenant should negotiate security of tenure in a commercial lease.
Security of Tenure
When you negotiate for security of tenure in your commercial lease, you effectively ask your landlord not to contract out of these provisions in the Landlord and Tenant Act 1954. A lease that does not offer the security of tenure protections is an unprotected lease where the landlord and tenant have agreed to contract out. There is a statutory procedure for this, which parties must follow.
Reasons to Negotiate a Security of Tenure
There are various reasons why a commercial tenant should negotiate the security of tenure structure in your commercial lease. Let us explore some of these below.
1. Security
As the term says, the security of tenure in a commercial lease offers you as a tenant security in the lease. This is a crucial reason why commercial tenants should negotiate security of tenure in commercial leases. It means you enjoy the confidence you will remain in your commercial premises for a long time if you wish to. Accordingly, you can grow your business in the property. Furthermore, if your business is customer-facing, you establish a long-term business base where customers know to find you.
2. Flexibility
While a commercial lease agreement with security of tenure offers you security as a commercial tenant, it also offers flexibility. You retain flexibility in a protected lease because you can decide not to renew when nearing the lease term’s end. Perhaps your business is now too large for the property. Alternatively, you may struggle to pay the rent and wish to find a cheaper option.
If you do want to leave the business premises, you must complete a Section 26 Notice between 6 and 12 months before the tenancy is due to end. In this document, you must say that you do not wish to renew.
This cheat sheet outlines what you should be aware of in your lease agreement.
3. Landlord’s Reasons
A further key reason you, as a commercial tenant, should negotiate security of tenure in your commercial lease is that it makes it difficult for the landlord to end your lease. If your lease does not have security of tenure, your landlord may not want to negotiate a new lease. They may also want to end the existing lease early. However, a landlord can only terminate or not renew a protected lease on a discrete list of grounds. For example, if:
- you are consistently late with rent;
- they wish to occupy the premises for their business; or
- they offer you alternative reasonable premises on lease with the same terms and conditions.
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Key Takeaways
If you are a commercial tenant entering a lease, there are several reasons why you should negotiate security of tenure in the lease. This provides you with a protected lease, which means you enjoy the automatic legal right of lease renewal at the lease end term. Security of tenure is advantageous as it enables you to grow your business, confident in the fact you may remain at the premises for a long period of time. Likewise, you retain the flexibility not to renew the lease should your circumstances require new premises. Lastly, it limits the landlord to end the lease on a limited set of grounds.
If you need help understanding why a commercial tenant should negotiate security of tenure in a commercial lease in the UK, 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 for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.
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