Legal News | 6.09.23

What is Security of Tenure?

All your questions answered…

What is Security of Tenure?

Security of Tenure is a central concept of the Landlord and Tenant Act 1954 (“Act”) and is a statutory right for a tenant to be granted a new lease at the end of the contractual term.

Who does it apply to?

The automatic right applies to a tenant who occupies a commercial property for the purpose of carrying out a business.

Additionally, the tenancy must be for a term of more than 6 months and not fall into any other exclusions within the Act.

What does this mean for the tenant?

If the tenant has Security of Tenure at the end of their fixed term of the lease and the landlord takes no action, a new tenancy will be created. This gives the tenant an automatic right to remain in occupation of the property once the lease has expired. From a commercial perspective this may be advantageous as it reduces costs and disruption to the tenant’s business from having to relocate.

How can the landlord stop this?

There is a way for the landlord and tenant to agree to contract out of the Act. Provided it is done following the strict procedure, it will mean at the end of the contractual term of the lease, the tenant will have no statutory right to renew.

Alternatively, if the tenant maintains their right to Security of Tenure, the landlord has the ability to oppose a grant of a new lease on certain grounds, which are set out in section 30(1) of the Act. These include but are not limited to: requiring the property back for development purposes; re-occupation for the landlord themselves; the tenant having a history of non-payment of rent; not complying with the lease obligations; or when subletting the whole premises would attract a higher rent under one lease.

Why would the Landlord want to contract out of Security of Tenure?

More and more landlords are choosing to follow the procedure of contracting out of the Act because it affords them with more certainty and control over who is occupying their property and for how long. It gives landlords more comfort that at the end of a lease they will be able to get back vacant possession of their property; alternatively, if they would like the tenant to remain in occupation, it gives the landlord absolute discretion over the terms of any new lease to be granted.

Where can I get more information?

There are plenty of pitfalls and risks with having Security of Tenure and contracting out of it. If you have a lease that is nearing its expiry or are looking to finalise a lease, please do give us a call on 01380 733300 and ask to speak to the Dispute Resolution team or Commercial Property team.