Solicitors in Swansea.

What is security of tenure?

This refers to a situation where, subject to satisfying certain conditions, including procedural conditions and timetables, the tenant will be able to renew the lease at the end of the term. Security of tenure for commercial leases is generally dependent upon whether the lease (and the tenant) have the statutory protection laid down in the Landlord and Tenant Act 1954. The reasoning behind the legislation is to protect goodwill that a business tenant builds up in a location.

If I assign my lease, does this end my obligations under it as a Tenant?

Not automatically. The first thing you will need to do is to check the lease. Many commercial leases include a specific stipulation that assignment (transfer) of the lease, where otherwise permitted, is also dependent upon the outgoing tenant signing an Authorised Guarantee Agreement (AGA) before allowing the assignment of the lease. This would mean that should the new tenant not be able to pay the rent or breaches the terms of the lease then the Landlord can seek the rent from the previous tenant.

What are the differences between a lease and a licence ?

The starting point for this answer is that this can be a difficult issue to determine and what is stated on any documents is not necessarily conclusive. It is a matter of considering various factors which case law has determined are indicative of the status of any occupancy. In general terms a lease is a more permanent form of occupation whereas licences are intended to be flexible and personal to the licensee. The factors indicating the likely status are :-

For a lease :-

• A covenant for quiet enjoyment
• A forfeiture clause
• Clauses describing a specific premises or area of occupation
• Clauses reserving rights of entry, inspection or rights of way to the owner
• Clauses prohibiting or restricting assignment or underletting
• Clauses granting a fixed or periodic term for a definite rent
• The rent being exclusive of services or other property outgoings

For  a licence :-

• The absence of a covenant for quiet enjoyment;
• A clause preserving the owner’s right to occupy and to control the premises
• Clauses permitting the owner to require the licensee to move to different premises
• A short term of less than six months
• No fixed or definite term
• The inclusion of furniture, fixtures and fittings.

It is important to remember that these are only guiding factors and a court would consider each case on its own facts.

Is there anything a Landlord can do to oppose a lease renewal where the right exists and I have complied with procedure ?

There are a number of specified grounds on which the Landlord can oppose an application for a new tenancy. These include

• A genuine intention by the Landlord to redevelop the premises
• The landlord wishes to occupy the premises
• A history of breaches of the Lease terms.

The most common ground of opposition is redevelopment. In order to successfully oppose the renewal of a tenancy on this ground the Landlord must prove an intention to demolish or reconstruct, or carry out substantial work of construction to the premises or a substantial part of them. In the case of substantial work of construction the Landlord must also demonstrate that the work could not reasonably be done without obtaining possession. In order to demonstrate this, the Landlord will need to obtain planning permission and any other relevant consents and arrange finance for the development, amongst other things.

What terms should a tenant consider when negotiating a new Lease?

• Length of lease – how long will you require the premises for your business needs?
• Assignment provisions – will you be able to assign the Lease to a third party or sublet it?
• Break clauses – it may be possible to negotiate a break clause to determine the Lease early, at specified times, upon notice, during the term of the Lease. The Landlord may insist on also having the mutual right to a break clause.
• Option to renew – Under the Landlord and Tenant Act 1954 most business tenants are protected with a statutory right to renew a lease on expiry. If you agree to exclude the Act, then you will have no right to renew the Lease and the Landlord may decide not to offer you a new Lease.
• User clause – you should check with the Landlord what the premises can be used for under planning legislation to ensure that you can use to the premises for your intended use.
• Repairing obligations – Under a lease, you can be responsible for either the full maintenance and repair of the premises, or the tenants repairs can be limited to only internal / non-structural repairs. This is a very important consideration.
• Rent Review clause – If the Lease is for a period 5 years or more, then it is common to have a review clause every 3 or 5 years, depending on the term of the Lease. There are different types of rent review clause and it is easy to be caught out by this as a tenant, with clauses potentially being drafted on an “upwards only” basis. As always, this is negotiable when the lease is first negotiated.
• Landlord’s costs – it is becoming more common for Landlord’s to request Tenants either pay their legal cost on granting a new Lease or make a contribution towards them. This is something that should be taken into account when negotiating Lease terms.

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