Certainty In Uncertain Times At The End Of The Protected Business Tenancy

Even if England and Wales avoid a double dip recession the economic climate is such that the termination provisions of the Landlord and Tenant Act 1954 (the 1954 Act) and , the manner in which they interact cause a lengthy period of uncertainty for landlords at the end of the lease term.

The old regime

Before changes in 2004, the old regime under the 1954 Act promoted certainty in that whenever a landlord served a notice under Section 25 of the 1954 Act (the Section 25 Notice) the tenant was under an obligation to respond. Within two months of Section 25 Notice being served the tenant was required to let the landlord know whether or not it was willing to give up possession of the premises in question. This was the case regardless of whether in its Section 25 Notice the landlord was offering the tenant terms for a new tenancy, or notifying the tenant of its intended grounds of opposition to renewal.

A tenant was unable to withdraw a counter notice indicating a desire to give up possession, and if a tenant failed to serve a counter notice in time he lost his right to renew.

So, if a landlord had identified a potential new tenant for its premises but wanted certainty of the existing tenant's intentions it would serve its Section 25 Notice as a soon as it could and achieve a degree of certainty within two months. Even under the old regime there was nothing to stop the tenant from indicating a willingness to take a new business tenancy and subsequently deciding to vacate. Despite this, a landlord would at least know following the expiry of that two month window whether it could safely contract with a new tenant. A section 25 notice can be served up to 12 months before the end of the lease so the Landlord could know the future of the property with plenty of time and rent still in place under the existing lease

The current regime

Because of the abolition of the requirement to serve counter notices the current regime removes that certainty for landlords.

Once a landlord serves a Section 25 Notice (whether proposing new lease terms or citing a ground or grounds of opposition) the tenant has only to do one of the following by the statutory termination date specified in the Notice, if it desires a new business tenancy:

Enter into a new lease or binding agreement for lease; Agree in writing an extension to the statutory period; or Apply to Court for a new tenancy. If both parties clearly want a new tenancy then the uncertainty will usually disappear relatively swiftly. A tenant may however wish to hedge its bets. It may have designs on new premises but not yet be in a position to commit to them, or there is a risk that those premises may not in fact...