What Happens When a Commercial Lease Ends?

Insight

Landlord and Tenant Act 1954

When a commercial lease is nearing its end, both landlords and tenants need to be clear about what happens next. The steps taken at this stage can have a significant impact on whether the tenant can remain in occupation, on what terms, and whether either party is exposed to unnecessary risk or uncertainty. Careful handling is therefore essential to avoid disputes and unintended legal consequences.

When a commercial lease comes to an end, what happens next depends largely on whether the tenant has rights under the Landlord and Tenant Act 1954.

Where rights are protected: If the tenant retains security of tenure under the 1954 Act, the tenancy does not simply end. Instead, it continues as a statutory tenancy, meaning the terms of the expired lease carry on until either a new lease is agreed or the tenancy is formally brought to an end under the Act.
Where rights are excluded: If the parties have followed the formal contracting-out procedure before the lease was entered into, the 1954 Act will not apply. In that case, the lease will automatically end on expiry, with no statutory continuation.

If a landlord allows a tenant to remain in occupation after expiry without putting a new written agreement in place, uncertainty arises. The arrangement might be treated as a tenancy at will, a tenancy on sufferance, or even a periodic tenancy, depending on how rent is paid. This can have unintended consequences, including creating a new protected tenancy under the 1954 Act.

Without a written lease, other important terms, such as obligations to repair or remedies for non-compliance, may be lost.

This risk was highlighted in Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited (2014), where the tenant, who had no renewal rights, remained in occupation for three years after expiry while negotiations continued. The court ultimately decided the tenant was occupying under a tenancy at will, which the landlord could end immediately.

In practice: Both landlords and tenants should ensure any continued occupation is recorded in a formal, legally binding agreement. This avoids uncertainty, protects their position, and reduces the risk of disputes.

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What happens when a commercial lease tenancy agreement ends?

Landlord and Tenant Act 1954

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