If the tenant retains the right to renew the business tenancy under the Landlord and Tenant Act 1954 then the tenancy may continue as a statutory extension once the Lease ends and the terms of the previous Lease apply.
But if the tenant’s 1954 Act rights have been excluded by the parties complying with a prescribed contracting-out procedure before they become committed to the tenancy then there will be no statutory continuation and the Lease automatically ends.
It is essential in these circumstances particularly for a landlord not to allow the tenant to remain in occupation without a further written agreement otherwise uncertainty and disputes will arise as to the tenancy terms. The tenant will also want certainty as to the period for which continued occupation is secured. The status of the tenant’s occupation may amount to a short-term tenancy at will or tenancy on sufferance without any security or alternatively a periodic tenancy according to the period of rental payments may arise that could create a new protected tenancy.
Any other terms of the continuing tenancy will need to be implied according to the conduct of the parties. The landlord may have difficulties in enforcing repairs and other obligations on the tenant from the previous Lease and remedies for default that apply under a written Lease may be lost.
In the 2014 court case of Barclays Wealth Trustees (Jersey) Limited v Erimus Housing Limited the tenant had no business tenancy renewal rights when its Lease ended but was allowed to remain in occupation for a further three years while negotiations continued for a new tenancy. The uncertainty over the nature of the tenant’s rights resulted in a court case in which the judges disagreed but eventually decided a tenancy at will existed that could be ended immediately.
It is vital when a commercial Lease is about to end that the parties should ensure they document any continuing occupation in a further legally binding agreement to avoid costly disputes and uncertainty.