What Kind of Lease Do I Have and Why Does It Matter?

Other than home offices, most businesses, large or small, operate from business premises. A business may own their own freehold premises, but many will rent their office, warehouse or manufacturing site. It may be a GP surgery, a high street shop or a nationwide commercial undertaking.

Both parties (landlord and tenant) need to know what type of tenancy has been created. If you had a lawyer when the tenancy was created or acquired, they should have discussed this with you. Unless and until the law is reformed (see consultation below), the type of tenancy you have granted, taken or inherited is absolutely key.

The Government has launched a 2-part Consultation Process “Business Tenancies: The Right to Renew” reviewing options to replace those in the, now 70 year old, Landlord & Tenant Act 1954. Part 1 is out now. Consultation is invited from anyone who might have an interest. Deadline 19 February 2025.

It matters

The Right to Renew (also called Security of Tenure) is important for all parties at all stages in the life of a tenancy. What type of tenancy you have is set at the beginning of a tenancy and cannot be changed later without agreement of all parties and significant expense. The type of tenancy may have been set unwittingly, especially if it was set up without lawyers acting for both parties.

Why does it matter?

Because it affects value, cost and choices for all parties, at the beginning, during and especially, at the end of the term.

Do you have a copy of your lease? The final, signed and dated version? Or do you just have one of the drafts your lawyer sent you part way through the process. Dig it out, take a look.

You might think you have just granted/taken a licence, informal with nothing very significant in it beyond the rent clause.

Think again ...

9 times out of 10, any occupation will be a tenancy, not a licence. It might be 50+ pages, 5 pages or completely unwritten. If the occupier has sole use and possession of a defined space, it is almost certainly a tenancy. How you use it, pay for it and end it will depend upon which type of tenancy it is.

Did anyone tell you?

In short, unless and until the law changes, if the occupation is under a “protected tenancy” the tenant has a Right to Renew at the end of the lease term. There are certain steps both parties need to think about when the fixed term is coming to an end, critically, whether either party wants to renew or end the tenancy. If the tenancy is not protected (also known as “contracted out” or “outside the Act”) the tenant has no right to remain once the fixed term is at an end. The former tenant is immediately a trespasser. This has significant and immediate implications for both parties.

If the occupation is via an unprotected lease, the tenant in particular has to be making plans well before the end of the fixed term. If the lease is a protected one, there are different considerations, but equally important for landlord or tenant.

If you want to know what type of lease you have, have granted, or intend to grant, contact me and we can review what your next steps might be.

To discuss any of the above further, please contact Emily: emilycarey@bexleybeaumont.com  |  07300 927480