Commercial Tenancies

 

 

Commercial Tenancies

 

  • The Landlord and Tenant Amendment Act 1980 (as amended) regulates the landlord and tenant relationship which confers certain “reliefs” on a tenant. These protect the tenant by giving them some form of relief where their business has been located in a certain area and they may be required to move.

 

  • In order to come under the Act the premises must be a “tenement” as defined in Section 5 of the Act which essentially means that it must be covered by buildings or part covered by buildings and any other area not covered should be subsidiary and ancillary to the buildings.

 

There are three types of equity:

Business equity

In certain circumstances a tenant may be entitled to a new long lease at the end of their existing five year continuous occupation.  Where an entitlement to business equity arises the tenant is entitled to a new 20 year tenancy or a lesser period if the tenant wishes.

 

Long possession equity

Long possession equity is where a tenant has been in possession of a property (including predecessors in title) for a period of twenty years or more.  A tenant who successfully claims relief for long possession equity is entitled to a new 35 year lease for a lesser period if the tenant chooses.

 

        Improvements equity

Improvements equity involves a tenant showing their entitlement to compensation for improvements they have made to the property where the value of the improvements is 50% or more of the letting value of the property at the time the tenant seeks to claim relief. A tenant who successfully claims relief for improvements equity is entitled to a new 35 year lease or a lesser period if the tenant chooses.

 

  • Where a tenant can show one or more of the above they will be entitled to claim a new tenancy from the end of their current tenancy. Terms should be agreed with the landlord but if they cannot be agreed the tenant is entitled to go to Court to have the terms of any new tenancy fixed by the Court.

 

  • With regards to the Court’s involvement the Court must set the rent for the new tenancy which will in effect be the market rent based on expert evidence presented to the Court. The Court cannot provide for rent review clauses but the act does allow both the landlord and tenant to apply for a review of rent at each five year period of the Lease.

 

Deeds of Renunciation

 

Since the amendments introduced in 1994 it is possible for the landlord and tenant to contract out of the reliefs.  This is where a Deed of Renunciation is signed by the Tenant having received independent legal advice.  It used to be the case that the Renunciation needed to be signed before the tenancy began but this is no longer the case and it may be done at any time.

 

Loss of Entitlement to New Tenancy

A tenant won’t have a right to a new tenancy in the following circumstances:

 

  1. Where the tenancy has been terminated for non-payment of rent
  2. Where the tenancy has been terminated for breach of a covenant by the tenant
  3. The tenant has terminated the tenancy
  4. The landlord has given notice to quit for good and sufficient reason
  5. The tenancy terminated (other by notice of quit) and the landlord refused to renew the tenancy for good and sufficient reason or would have good and sufficient reason not to renew if a request to renew has been made

 

  • It is prudent for a landlord to ensure that a Deed of Renunciation is always signed when entering into a new lease regardless of the term of that lease. Should the Landlord wish to develop the property in the future it is easier where the tenant has not accrued rights and does not need to be compensated in that circumstance.