Leonard Kasler & Company
Business Tenancies
(20 Things for a Landlord to Know)
1. A Business Tenancy can be inside or outside the Landlord & Tenant Act 1954.
2. In yesteryear, a Business Tenant could occupy Premises and, over a number of years, build up a goodwill and reputation there
3. At the end of the Lease, the Landlord could evict him or demand an exorbitant rent
4. The Business Tenant had little choice. He needed to stay. He had to agree
5. This was deemed unfair. The 1954 Act allows such a Tenant to stay in the Premises at a reasonable rent
6. The old terms of the Lease apply and the Business Tenant carries on paying the same rent
7. The Landlord can bring that automatic arrangement to an end by serving 6-12 month notice under Section 25 of the Act
8. In the Section 25 Notice, the Landlord says whether he wants the Premises back for redevelopment, for use for his own purposes, because the Business Tenant has been a bad tenant or on certain other grounds
9. The Landlord also indicates whether he is willing to grant a new Lease at a new rent to the Business Tenant
10. Similarly, the Tenant is given the right to serve 6-12 month Notice claiming a new Lease under Section 26 of the Act
11. If market rents are rising, the Landlord will wish to serve his Section 25 Notice as soon as possible.
12. If market rents are falling, the Landlord will do nothing and let the Business Tenant carry on paying rent at the old higher level
13. Many Landlords forget to serve a Section 25 Notice
13.1. Should the Business Tenant hang on as long as possible taking advantage of the lower contractual rent?
13.2. Should he try to pre-empt the Landlord by serving a 12-month Section 26 Notice?
13.3. If he does not, then he risks the Landlord "waking up" and serving a 6 month Section 25 Notice
14. At issue is 6 months worth of the difference in rental between the old contractual rate and the current market rent This could be quite substantial
15. The Act is thwarted to a certain extent by allowing the Parties to contract out of its terms
16. Despite various Property recessions, many Leases are contracted out of the Act by means of a Court Order
17. Many regard that situation as farcical, being little more than a rubber stamping exercise by the Court and one which serves to increase costs and delay completion of Leases
18. If you are a Business Tenant outside the Act, you can be required to move out at the end of the Lease
19. A Business Tenant’s negotiating advantage is that, the Landlord will inevitably suffer a period when the Premises are empty but he will have to pay rates. He may need to refurbish them to attract new tenants.
20. Against that, the terms of the old Lease may require the Tenant to hand back the Premises in good and substantial condition, but that is another story….!
Michael Breeze
Leoanrd Kasler & Company
Sunday, 13. October 2002