Legal Formalities Of A Lease

A new business eager to get off the ground, particularly in the lead up to Christmas, may also be too eager to get into their new premises to bother with the legal formalities of a lease before they go in. However, a Landlord who allows a new Tenant to occupy their premises in this way, and indeed a Tenant who agrees to occupy the premises, might later find they have an arrangement which probably wasn’t on their ‘Christmas wish list’.

The scenario is not altogether uncommon. The prospective Landlord and Tenant meet and discuss main terms and both are keen to proceed. The Tenant is eager to begin trading and the Landlord eager to begin receiving rent. The parties press ahead on the basis that the finer points of the lease will be dealt with later. Everything appears to be running smoothly with the landlord seemingly secure in the knowledge that if things don’t go according to plan it can recover the premises without a problem. Not necessarily so.

In the absence of a formal lease setting out all the terms, and where a landlord seeks to recover the premises, a Court will find itself considering evidence which might indicate the nature of the legal arrangement in place and, consequently, how and when the landlord can recover their premises.

In the main, the arrangement may be found to be one of the following:

Tenancy at Will

This is probably the best position for the Landlord and the worst for the Tenant as a far as security is concerned. A tenancy at will may be terminated by the Landlord at any time and at a moments notice. Such a tenancy is more likely to be found when negotiations are ongoing between the parties with a view to concluding the lease even if such negotiations are protracted.

Licence

This is similar to a tenancy at will in that the Tenant has no security or right to remain in the premises but, unlike a tenancy at will, reasonable notice to terminate the arrangement must be given to the Tenant. As to what is reasonable will depend on the facts of each case.

Periodic Tenancy

This is likely to be the worst position for the landlord and the best for the Tenant on the issue of security. A periodic tenancy can be created orally and can be yearly, monthly or for any other period. It continues from period to period indefinitely. Such an arrangement is likely to be recognised if the lease negotiations are left to drift or cease altogether and the parties simply continue to act as Landlord and Tenant. What’s more, the Tenant occupying the premises for the purposes of their business is afforded the protection of Part II of the Landlord and Tenant Act 1954. The effect of this is that even if the Tenant has been in occupation for a relatively short period of time, say less than six months, the Landlord is then restricted from recovering its premises otherwise than in accordance with the 1954 Act.

Whilst it is fair to say that a formal lease is not on anyone’s ‘Christmas wish list’, both commercial Landlords and Tenants would do well to add it to theirs.

Harris Charalambous
Associate Solicitor
PRINCE EVANS SOLICITORS LLP

hcharalambous@prince-evans.co.uk

020 8567 3477

Dispute Resolution Associate dealing with real property, commercial property and commercial landlord and tenant disputes.