Commercial Tenancy Agreements- Tenants, be aware of your rights

In this week’s blog, we look at commercial tenancy ‘agreements’ and licences.

In today’s uncertain property market, when you are looking to occupy commercial premises, a short-term ‘tenancy agreement’ could be just what you are looking for, giving you flexibility to adapt as your situation changes. Some landlords are keen to offer short-term tenancies, possibly because of long-term development plans or because the buildings they own are more suitable for short-term lettings. However, if your business does well and you would like to stay for the foreseeable future, there is no guarantee that extending your tenancy will be easy. Your landlord may want a much higher rent or perhaps prefer someone else to occupy his premises. In either case, at the end of your agreement he may ask you to leave. If you have settled well into your premises and have begun developing relationships in the area, this could be the last thing you need. If the landlord is determined that you must leave, is there anything you could do to stay where you are?

The answer can depend on the document you signed at the start of your tenancy. Most tenancy ‘agreements’ are in fact licences, which grant you a right to remain at the property but have less rights and benefits than under a formal lease. This makes them attractive to those landlords who prefer the freedom to change tenants frequently. The key here is in the name – by not calling the tenancy agreement a ‘Lease’, the landlord wants to make clear that he is entitled to remove you from the premises at the end of the term. However, just calling a document an ‘agreement’ or a ‘licence’ does not mean that it will not in reality be a lease.

Commercial tenancy agreements are also often drafted to minimise the risk that an occupier could be granted exclusive possession and so potentially claim they have a lease. This is because commercial leases can provide business tenants with ongoing occupational rights and protection under the Landlord and Tenant Act 1954, unless this has been ‘excluded’.

Looking at the ‘tenancy agreement’ you have signed, the length of your occupation and your ability to renew the occupancy are important. Many agreements last for fixed six-month periods and once they expire, a new agreement must be signed. However, if you have been granted possession for twelve months or more, or your agreement contains a provision allowing it to be renewed after its six-month period expires, you may be able to demonstrate you have been granted a secure tenancy or lease. In these circumstances, the Landlord may not be able to remove you from the Premises on the expiry of the tenancy and you may be entitled to a new periodic tenancy. You would need to show that you had exclusive possession of the premises, not just a right to use it with other occupants.

If you believe the above may apply to you, we recommend that you speak to someone in our Commercial Real Estate team before proceeding any further so you can be sure of your position and your rights. Call us on 01256 32055 or email: mail@clarkeandson.co.uk.

So tenants, be aware of your rights in signing up to short-term tenancies.

Jack Armitstead

Commercial Real Estate Executive

Leave a Reply