Business Premise

Taking Possession of Business Premises on Expiry of the Lease

When the lease of most business premises expires. The landlord cannot simply retake possession. Most business tenants are able to remain in occupation paying rent on the same terms as before. Also have the right to request the landlord to give them a new lease.

Unless the tenant leaves voluntarily. The landlord can only regain possession on limited grounds. This is broadly based either on its own future intentions for the property. Or the tenant’s breaches of the terms of the previous lease. The landlord must serve a formal notice on the tenant. It should state that it objects to giving the tenant a new lease. Also setting out the grounds on which it does so.

The service of the notice is a technical matter on which we recommend that landlords take our expert legal advice. Well before the existing lease expires.

If they do not agree to give up possession of the premises in response to the landlord’s notice. Therefore the tenant may apply to the County Court for an order granting it a new lease. The landlord may also apply to the Court for an order for possession. In either case, the landlord will have to provide evidence to prove the grounds on which it objects to granting a new lease.

“Non-fault” grounds

If the landlord objects to the grant of a new lease on the basis of its own future use of the premises it will have to show that it has the intention and ability to put those plans into effect. The landlord will usually have to satisfy the Court that it has any necessary planning permission, and the funds to carry out any proposed works: surveyors’ and other experts’ reports may be required.

If the landlord succeeds in opposing the grant of a new lease only on the basis of these “no-fault” grounds it will have to pay the tenant compensation for the disruption of its business. This will be either one or two times the rateable value of the premises, depending on how long the tenant has been in occupation.

“Fault based grounds”

If the landlord complains of the tenant’s breaches of the previous lease, it will have to produce evidence such as rent demands and accounts, or schedules of dilapidations and surveyors’ reports depending on the breaches complained of.  The tenant is not entitled to compensation for disruption of its business if the landlord obtains possession on the basis of the tenant’s breaches of the lease.

Tenants should seek our advice immediately if their landlord serves a notice. If the tenant does not comply with the requirements of the notice in the limited time allowed, it will lose the right to seek the grant of a new lease, and may have to vacate the premises.

New lease

If the Court decides that the landlord has not made out its grounds of opposition, the tenant is entitled to a new lease. The landlord and tenant can negotiate the terms between them. If they cannot agree the Court will decide the terms.

This is a brief outline of the position for information purposes only. Please contact James Sherratt if you require detailed advice email me or call on 0207 242 1666.

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James Sherratt

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