Commercial tenancies and Covid-19
In the midst of the COVID-19 pandemic, the government has announced a range of measures aimed at supporting businesses to cope during this challenging time.
These include the option to defer VAT and income tax payments, statutory sick pay relief packages for SMEs and a 12-month business rates holiday for certain businesses.
Despite this, the situation for many businesses remains tenuous and we will be maintaining and updating our guidance as and when the situation develops.
Visit the gov.uk website for their own COVID-19 guidance and documentation for business.
Advice for landlords and tenants
Landlords and tenants in need of relief should first look very carefully at the support measures that have already been announced to make sure they're taking advantage of any help that's being offered.
If tenants have concerns about being able to make their rent payments, they should speak to their landlords as soon as possible.
While landlords are under no obligation to do so, they may be willing to agree to defer or reduce the rent owed until the current crisis subsides.
Extra protection for businesses with a ban on evictions for commercial tenants who miss rent payments
The legislation is currently at 'Bill' stage but could become law imminently – in which case, there will be a moratorium on evictions for three months for tenants that have been unable to pay rent as a result of the pandemic.
The gov.uk website has more details on this here.
In this guide, produced in collaboration with Wilkes' Mark Hodgson, you'll learn what the UK laws say about the terms agreed between commercial landlords and tenants.
Whether you're a commercial landlord or a tenant, the videos, notes and infographics within this guide should give you the information you need to be confident your commercial tenancy agreements are correct, fair and legally compliant.
And if you're looking for tailored advice just for your business, get in touch via our Speak to an Adviser feature and we'll connect you with an expert who can assist you.
What does it mean to be a commercial landlord?
Being a landlord is a business. And, like all business activities, while much of what landlords and tenants may agree between them is the product of negotiation and market dynamics, law also plays a key part.
The law that governs landlord and tenant relationships is well established and, in a number of cases, it's non-negotiable.
If you're a landlord providing premises to someone intending to run their business from that spot, or you're a business tenant about to agree terms with a landlord for those purposes, you should be aware of these laws.
Commercial leases are a significant commitment that can have a very material impact on a business and its prospects of success. If either a landlord or tenant becomes unhappy with the terms they've agreed, wants to end them or wants to change them, what's gone into the terms of that agreement may suddenly become critically important and potentially very contentious.
So, here's what you need to know up front...
7 key terms you should know as a commercial landlord
The UK's property laws applicable to business landlords and tenants are peppered with terms and phrases that have very defined legal meaning.
Take a quick look at our infographic below for a fast summary of some of the main ones you'll come across in this guide.
Why it's important to know about landlord and tenant law
The principal law governing business landlord and tenant relationships is called the Landlord and Tenant Act 1954
If you're agreeing a lease or an underlease to use a property for business reasons, this statute will automatically apply to the terms of your relationship with your tenant, unless the agreement to occupy is either:
• a tenancy at will; or
• a licence not giving exclusive possession; or
• a fixed-term tenancy for a term not exceeding 6 months (and where the same tenant hasn’t been in occupation for more than 12 months)
Automatic protection for tenants
The 1954 Act contains important protections for business tenants, such as the right to:
- lawfully remain on the premises on the same terms as their existing lease when it expires and
- ask the Court to grant them a new lease if terms cannot be agreed with the landlord (called 'security of tenure').
Commercial landlords may well want to exclude this protection so that they have greater control over what happens on their premises, when a lease term ends.
The 1954 Act protections can only be excluded using a very formal, prescribed procedure involving notices and declarations, designed to ensure that the tenant fully understands the rights that they are giving up.
Basically... the landlord has to produce a formal notice document and:
- give it to the tenant, and
- the tenant must then sign a formal declaration to confirm that they understand that the 1954 Act protections will not apply to the terms that they sign
- The lease must contain the appropriate wording confirming this agreement also
- If this process is followed correctly, then the protections set out in the legislation will not apply to the lease and at the end of the term, the tenant must leave the property
It's very common to exclude these terms in a commercial landlord and tenant relationship especially for a lease that's less than 5 years or where a landlord may only have a short-term need to let the premises. It's also very common in sub-leases.
Both landlord and tenant could, of course, subsequently decide that they do in fact want to renew a 'contracted-out' lease. They would then need to document this intention in the form of a new lease.
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