Compensation for commercial tenant of more than 14 years?

by Readers Question

9:42 AM, 15th February 2021
About 3 weeks ago

Compensation for commercial tenant of more than 14 years?

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Compensation for commercial tenant of more than 14 years?

My tenant has one year remaining of a five year Lease on my commercial premises which he has occupied on a succession of 5-year Leases for 25 years. He owns and operates a Limited Company (registered at his home) but has always signed the Leases as a private individual.

I don’t want to renew the Lease next year as I plan to use the premises as a base for my own business.

I’ve been told that if he should object to my taking over the premises and wants to remain, I could be obliged to pay him compensation of twice the rateable value as he has been there more than 14 years, but that this might not be the case given that he signed the Lease not as a Company Director or Secretary but as an individual.

Could anyone please advise if this is indeed the case?

Thanks in advance.

Nancy

Comments

michael@mjproperty.co.uk

10:18 AM, 15th February 2021
About 3 weeks ago

Have the commercial leases been within the landlord and tenant act 1954?
If they are then evicting the tenant will be difficult and you will have to negotiate with them. If they aren’t within the act then you aren’t obliged to renew the lease although you will have to provide a minimum of 6 months notice ( although I am not a qualified commercial solicitor so it may depend on the clauses within the lease)

Hedley

10:24 AM, 15th February 2021
About 3 weeks ago

I think you will find that the tenant is entitled to compensation. Protection is given under Part II of the Landlord & Tenant Act 1954 and the protection is given to a tenant as follows:

Occupation or the carrying on of a business—
(a)by a company in which the tenant has a controlling interest; or
(b)where the tenant is a company, by a person with a controlling interest in the company,shall be treated for the purposes of this section as equivalent to occupation or, as the case may be, the carrying on of a business by the tenant.

The tenant is entitled to a renewal of the lease unless you are able to prove, to the satisfaction of a court, that you have a genuine intention to use the premises yourself. It would be sensible for you to use a professional (solicitor or chartered surveyor) to serve the appropriate notices.

Ian Narbeth

10:25 AM, 15th February 2021
About 3 weeks ago

Hi Nancy
It is very likely the tenant has security of tenure and you will have to pay compensation if you successfully oppose the grant of a lease on the grounds of wanting to occupy for the purposes of your business.
s23 (1A) of the Landlord and Tenant Act 1954 says:
Occupation or the carrying on of a business—
(a)by a company in which the tenant has a controlling interest; or
(b)........[not relevant]
shall be treated for the purposes of this section as equivalent to occupation or, as the case may be, the carrying on of a business by the tenant.
If the tenancy comes within s23 then the security of tenure and compensation provisions of the 1954 Act apply.
If the tenant has a controlling interest in the company then the occupation will count.

PS Hedley beat me to it by seconds!

Nettie Osborne

12:33 PM, 15th February 2021
About 3 weeks ago

Did you offer the lease without security of tenure, i.e. did you issue the tenant with the requisite notice - excluding the protection of the Landlord and Tenant Act 1954. I only have short term leases and always serve these.

Ian Narbeth

16:26 PM, 15th February 2021
About 3 weeks ago

Reply to the comment left by Nettie Osborne at 15/02/2021 - 12:33
Nettie
The lease is obviously not "contracted out". The OP has been renting for 25 years and would be aware if the leases over the years had been excluded from the protection of ss24-28 LTA 1954.

Nancy Metz

22:59 PM, 16th February 2021
About 3 weeks ago

Thanks for all your helpful comments, everyone.


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