Under Part II of the LTA 1954, and subject to certain exceptions, a tenant that occupies a premises for the purpose of their business will have Security of Tenure.  The tenancy will continue for so long as the tenant remains in occupation until the tenancy is determined in accordance with the LTA 1954.

The LTA 1954 is particularly important to tenants whose location of the premises is intrinsic to their business or for those tenants who may not find it easy to move their business when their lease finally comes to an end.

Security of Tenure means that a business tenant with a tenancy which does not exclude the LTA 1954 has a statutory right to a new lease at the end of the contractual term. The tenancy does not terminate automatically at the end of the contractual term. It continues under section 24(1) of the LTA 1954 on the same terms as the contractual tenancy until it is terminated in one of the ways specified by the LTA 1954.  This is commonly known as ‘Holding Over’.

If a landlord intends to oppose the lease renewal, then it must specify the ground of opposition under section 30(1) of the LTA 1954 that the landlord intends to rely on in opposition.

The majority of tenancy renewals will be by negotiation and agreement.  In the absence of agreement, following the statutory procedures under the LTA 1954 and an application to the court, it is the court that must decide that which will be included in the new tenancy upon which the landlord and tenant cannot agree.

The Security of Tenure under the LTA 1954 is a statutory protection to tenants to protect their goodwill and lease and to provide a mechanism for termination and renewal.

If a lease is granted outside of the LTA 1954, then it will terminate at the end of the contractual term and the tenant will not have any Security of Tenure to apply for a new lease. The tenant will have to leave their business premises or take another lease which may be on different terms than the one that has just expired.

Landlords and tenants may consider avoiding the LTA 1954 altogether, however for both parties, there are advantages in not excluding the LTA 1954 from a commercial lease. The landlord may achieve a higher rent if the tenancy is protected by the LTA 1954 and the tenant has the Security of Tenure and statutory protection detailed above.

Nevertheless, if a landlord wishes to exclude the LTA 1954 and the tenant agrees, then the parties must follow the procedure for contracting out as set out in the Regulatory Reform (Business Tenancy) (England and Wales) Order 2003.

It is always good advice to seek assistance when contemplating taking or granting a commercial lease and upon the statutory provisions applying to the LTA 1954 as to what is best in the circumstances for both landlord and tenant.