Pictured above: Mark Hodgson, Talbots Solicitors

Since June 2004 a simple procedure has been in place for landlords to grant leases of business premises without giving tenants security of tenure. The procedure merely requires a landlord to serve a notice, and the tenant to swear a declaration, in order for the lease to be contracted out of the statutory right to renew the lease when the term ends. 

Many of these leases are now coming to an end and it is important for both landlords and tenants of commercial premises to consider what happens next.

Mark Hodgson, Partner at Talbots Solicitors LLP, Stourbridge, advises "There are a number of potential traps for unwary landlords and tenants of excluded leases.

"Tenants of an excluded business have no right to stay in the property once the Term ends. They should commence negotiations with their Landlord at least three months before the end.  If they don't, they could either find themselves being locked out without notice, or they could face a notice from the landlord claiming double value, i.e. double the passing rent. This is allowable under a 200 year old piece of legislation called the Landlord and Tenant Act 1730".

Landlords are also potentially at risk, Mark further explains. "Landlords of premises which have been let on excluded leases may, inadvertently, give their tenants security if they do not take care. They should ensure that they (or their accounts department) put a 'rent-stop' in their calendar, so that they do not demand rent after the excluded lease has come to an end. If the landlord continues to accept payments of rent from the tenant after the excluded lease has ended, this may create a periodic lease. In this case the landlord would have to give the tenant at least six months' notice to quit and would have only limited grounds for entitlement to possession."

Both landlords and tenants of commercial premises should always take advice when their lease is nearing an end, particularly in a difficult market.