Security of Tenure: What is it and how does it affect Landlords and Tenants?

August 21, 2023

What is it?

Security of Tenure is a statutory right granted to commercial tenants under the Landlord and Tenant Act 1954. This grants the tenant an automatic right to a renewal lease after the lease term ends. It also gives tenants the right to apply to the court for another tenancy if landlords do not grant a new lease.

When does it apply?

This applies to:

• A tenant who is in occupation of a premises being used for the purpose of a business.
• Where a tenancy is longer than six months

How does this impact tenants?

For tenants, security of tenure ensures that they have an automatic right to renew their lease when the term ends. This is key for businesses because it provides continuity to customers who have become accustomed to the location.   

Another key impact is the ability to avoid all costs associated with moving to a new premises. If there has been a substantial amount of money spent to renovate the property in a way that works for the business, it can be financially damaging to then move out and leave behind a property the tenant has invested in.

It is important to note that if the tenant is not protected by Security of Tenure, the Landlord may still choose to grant a new lease at the end of the tenancy if the tenant has built a good rapport with the Landlord. Therefore, not having Security of Tenure does not mean tenants will be forced to vacate, it just provides a layer of protection.

How does this impact Landlords?

For Landlords this limits their options at the end of the lease. Ultimately, they have two options:

1. Grant a renewal lease or

2. Oppose the renewal lease based on specific grounds of opposition. Some examples of these grounds are rent arrears, intention to occupy or develop the property themselves and the premises being in disrepair. Landlords should note that whilst opposing the renewal lease is an option, the grounds are limited and the fees for this can be high.

Contracted Out?

If you have contracted out of the Landlord and Tenant Act, the lease will not be protected by Security of Tenure. To contract out, the Landlord must serve a warning notice on the tenant. The Tenant must then sign a Statutory or Simple Declaration to demonstrate that they understand the rights they are giving up. The Landlord should then have sight of this before completion occurs. Contracting out provides Landlords with increased flexibility at the end of the term.   

If you are a Landlord or Tenant who wants to discuss their position in relation to Security of Tenure or any other commercial matters, please contact our commercial property team on 0121 705 7571 or by email enquiries@wallacerobinson.co.uk

Charlotte Peplow
Trainee Solicitor – Commercial Department

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.