Contracted out lease but the tenant won't vacate? Here's what you can do.

3rd May 2018 Commercial

Where a tenant of business premises has security of tenure then, on expiry of the lease, it will be entitled to a renewal on substantially the same terms as the original lease unless the landlord can satisfy one of the limited grounds under the Landlord and Tenant Act 1954.

It is often in the landlord's interest for the lease to be contracted out of the security of tenure provisions, to enable it to terminate the lease at the end of the term and thus ensuring the tenant cannot demand a lease renewal.

What if, however, the lease term is coming to an end and the tenant shows no signs of vacating? Or negotiations on a possible renewal lease have slowed or broken down?

Firstly, to protect its position the landlord should send the tenant an open letter demanding possession of the property upon expiry of the lease ('Possession Letter'). This will show that the landlord is not willing to allow for holding over of the lease by its tenant and will avoid the inadvertent grant of a periodic tenancy. Such a letter may also help speed up renewal negotiations or encourage the tenant to vacate on the final day of the term.

If a tenant remains in occupation, then its continued occupation will likely be as one of the following:

1. A Tresspasser

If the landlord has indicated that he does not want the tenant to remain in occupation, the tenant's continued occupation may be deemed a trespass and the landlord could consider issuing court proceedings.

2.A Tenant on Sufferance

This type of tenancy arises where the tenant remains in occupation and the landlord has not demonstrated any desire to recover possession. The longer this situation persists, the stronger the tenant's argument will be that he has a periodic tenancy, especially if rent is paid and accepted. It is prudent therefore, for the landlord to make clear to the tenant, in writing, that he is unwilling for the tenant to remain in occupation following expiry of the term. A Possession Letter would be the ideal starting point.

3. A Tenant under a Tenancy at Will

Under a tenancy at will, either party may determine the lease at any time without notice. This may arise where the landlord has demonstrated his desire to recover possession (e.g. by writing to the tenant), but the tenant has not vacated following expiry of the lease term.

4. A Tenant under an Implied Periodic Tenancy

This is a tenancy where the term is implied by reference to a period of time, e.g. weekly, monthly, quarterly or annually. The term will be inferred where rent is demanded and paid by reference to a relevant period of time. For example, where rent is paid monthly, a 'relevant period' will be one month. The tenancy would continue from month to month until determined by either party serving a notice on the other, which must expire at the end of the 'relevant period'.

It is extremely important to note that a tenant under a periodic tenancy of business premises will have security of tenure under the Landlord and Tenant Act 1954 and any termination notice served by the landlord would also be subject to the security of tenure provisions. To avoid inadvertently granting an implied periodic tenancy, the landlord (or his agents) should not demand or collect any rent payment for any period after the expiry of the lease.

If you are the landlord of a contracted out tenancy which is due to expire and want to avoid the tenant remaining in occupation, please do not hesitate to get in touch with us via email, telephone or using the form to the right, and our team would be happy to advise and assist.

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Richard Parkinson is a Partner located in Manchesterin our Corporate and CommercialSports Law departments

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