What is the Security of Tenure under the Landlord and Tenant Act 1954?
The Security of Tenure means that once the fixed term of a lease has expired, the Tenant has the right to renew their lease on the same terms as previously agreed. This is extremely beneficial for a Tenant as they have a security, to continue their lease – save for a few exemptions.
The Landlord is only able to oppose this renewal if one of the statutory rights apply from the Land and Tenant Act. This is not as beneficial for the landlord as if they cannot rely on a particular “statutory right” – and if the Tenant is not in breach of the lease – they wouldn’t be able to remove that, Tenant.
If the Lease does not contain security of tenure, you will be contracting out of the Act, which means you will be required to vacate the premises when your term is up, unless an entirely new lease can be agreed between the parties.
Essentially, most tenants will want to ensure they have security of Tenure, and most landlords will want to ensure that the lease is “contracted out” of the Act.
Understanding if your dental lease has Security of Tenure
Whether your dental lease has security of tenure or not, will likely depend on a few factors.
Firstly, the heads of terms, often heads of terms summarise the agreement which the parties wish to proceed with – and most heads of terms will likely be drafted to assume that security of tenure is granted. It is only if the landlord spots this assumption and expressly changes this position for the lease to contracted out.
Secondly, the incoming Tenant’s lender. If your tenant is taking on the lease because they are purchasing a practice – or if you are entering into a lease as part of a practice purchase – it make be likely that a lender is involved. A tenant’s lender will more than likely be taking a charge over the leasehold title and will more than likely want for the lease to benefit from security of tenure.
It is important to ensure that you, or the Tenant as the case may be, are aware from the outset whether the lease has security of tenure or not. If this is not known until further along the transaction, a Tenant’s lender may expect to have this security and if it cannot be given this could cause the purchase of the business to fall apart.
We would advise that you check very early on in a deal, whether it is just taking on a new lease or purchasing a business, that you know whether the lease has security of tenure or not, as this could seriously affect your ability to complete the deal.
The Pros and cons -Landlord and Tenant
Pros and cons of Security of Tenure if you are the Landlord.
|Allows you to build a good relationship with the Tenant and have guaranteed income for a long time.||If you wish to redevelop the property you do not have a flexible timescale and are limited as to who is within the property|
|Saves time and money of trying to find a new Tenant and less maintenance for you to carry out.||If your relationship with the Tenant breaks down, it will be very difficult to remove the Tenant and to have vacant possession.|
|If you have a Tenant for a long period of time, they are more likely to take care and pride in your property. This ultimately could save you money as less general wear and tear.||You are restricted from recovering possession of the premises, apart from where you can rely on one of the 7 statutory grounds. If you cannot rely on such a ground, the Tenant is entitled to continue their occupation on the original terms.|
Pros and cons of Security of Tenure if you are the Tenant.
|If the lease is inside the Act, you are given security that you will not be forced to relocate your business. You are able to expand and grow your business- particularly important for customer-facing businesses.||If your business expands and you have outgrown the premises before the end of the term, it can be hard to leave.|
|You avoid costs and disruption of relocation. Customers are able to easily find you if you have been in the same premises for a period of time.||If you are starting up a new business, this may not be best as you are tied into a rolling contract, which cannot be terminated unless in accordance with the Act.|
|Advantage for business continuity: you are able to develop the space to fit your business without the worry of wasting money and having to move in a few years.|
As a business owner It is important to ensure that you have a thorough understanding of your tenure agreement. Our commercial solicitors here at Rudlings Solicitors LLP would be more than happy to assist you with your franchise agreement and your new business venture moving forward.