Commercial Lease Agreement in the UK
A business tenancy in England and Wales carries automatic security of tenure under Part II of the Landlord and Tenant Act 1954 unless the parties contract out, and contracting out works only if a prescribed warning notice is served before the tenant becomes contractually bound. The 1954 Act does not extend to Scotland or Northern Ireland, and a lease granted for more than seven years must be completed by registration.
Governing law
Part II of the Landlord and Tenant Act 1954 governs security of tenure for business, professional and other tenants in England and Wales. Section 70(3) provides that the Act does not extend to Scotland or Northern Ireland.
What a commercial lease agreement has to contain in the UK
The parties to a tenancy to be granted for a term of years certain may agree to exclude sections 24 to 28, but only where the landlord has served a notice in the form, or substantially in the form, set out in Schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 and the Schedule 2 requirements are met.
A landlord terminates a protected business tenancy by notice in the prescribed form given not more than twelve nor less than six months before the termination date specified in it. The notice must state whether the landlord opposes the grant of a new tenancy and, if so, on which grounds.
Opposition must rest on one of seven statutory grounds: the state of repair of the holding, persistent delay in paying rent, other substantial breaches, suitable alternative accommodation, sub-letting of part where the landlord needs the whole, intended demolition or reconstruction, and the landlord's own intended occupation.
The Act does not extend to Scotland or Northern Ireland, so a lease of premises there is not protected by Part II and the contracting-out machinery has no application.
Form, notarisation and registration
The grant of a term of years absolute for a term of more than seven years from the date of the grant is a disposition of a registered estate required to be completed by registration, as is the grant of a lease taking effect in possession more than three months after the date of the grant.
What catches drafters out
Serving the contracting-out warning notice too late. Section 38A requires the notice and the Schedule 2 declaration procedure to be completed before the tenant enters into the tenancy or becomes contractually bound to do so, so a notice served at completion does not save the exclusion.
Using an England and Wales lease for Scottish or Northern Irish premises. Section 70(3) states that the Act shall not extend to Scotland or to Northern Ireland, so the renewal machinery, the section 25 notice and the section 30 grounds simply do not exist there.
Treating a lease of more than seven years as complete on execution. Until registration, the grant is not completed as a registrable disposition under section 27 of the Land Registration Act 2002.
Commercial Lease Agreement in the UK: common questions
- What does contracting out of the Landlord and Tenant Act 1954 involve?
- It is the agreed exclusion of sections 24 to 28, the security of tenure provisions, for a tenancy granted for a term of years certain. Section 38A permits it only where the landlord has served on the tenant a notice in the form, or substantially in the form, set out in Schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, and the requirements in Schedule 2 to that Order are met, which involve the tenant making a declaration or statutory declaration before becoming contractually bound.
- How does a landlord end a protected business tenancy?
- By a section 25 notice in the prescribed form given not more than twelve nor less than six months before the termination date specified in it. The notice must state whether the landlord opposes a new tenancy, and if it does it must specify one or more of the grounds in section 30(1), which range from disrepair, persistent late payment and other substantial breaches through suitable alternative accommodation and sub-letting, to intended demolition or reconstruction and the landlord's own intended occupation.
- Does a commercial lease have to be registered?
- In England and Wales, section 27(2)(b) of the Land Registration Act 2002 makes the grant of a term of years absolute for a term of more than seven years from the date of the grant a disposition required to be completed by registration, along with leases taking effect in possession more than three months after the grant. The Landlord and Tenant Act 1954 itself does not extend to Scotland or Northern Ireland, which operate separate systems.
Sources
Every statement on this page is drawn from one of these. All were fetched on .
The same document elsewhere
Other UK documents
Commercial Lease Agreement: the jurisdiction-neutral guideBack to Document Library