What is Section 24-28 Landlord and Tenant Act 1954?
Section 24-28 of the Landlord and Tenant Act 1954 provides statutory rights to tenants of business tenancies which satisfy the conditions set out in s23 of the Act (known as the ‘qualifying criteria’). Namely, the right to be automatically granted a renewed lease of the premises upon expiry of their tenancy, also known as ‘Security of Tenure’.
Security of Tenure means that when the term of years of their business tenancy comes to an end, the tenant does not need to vacate the premises as they would otherwise need to, and they will therefore not be trespassing by law for continuing to stay at the business premises after their original tenancy has expired.
Rather, where the act applies, the tenant takes on a statutory tenancy of the premises under the 1954 Act on expiry of their original tenancy, which can only be terminated by the landlord in one of the prescribed ways set out under statute. It follows that the tenant of a qualifying business tenancy, i.e. a tenancy which does fall within the 1954 Act, is therefore afforded considerable protection at the end of their business tenancy. It is very difficult for a landlord to evict such a tenant from the premises once the term of their original tenancy has expired.
What are the conditions under section 23 of the Act?
Subject to certain exceptions, s23 of the Landlord and Tenant Act 1954 applies to ‘tenancies’ relating to ‘premises’ that are ‘occupied by the Tenant’ and are so occupied by the Tenant for the purpose of carrying on a ‘business’ (s23(1)). Each of these conditions will need to be met for the occupation agreement to amount to qualifying business tenancy under the 1954 Act.
A lease, underlease, periodic tenancy, agreement for lease, and agreement for underlease, are all good examples of tenancies that may qualify under the Act. However, a Licence or a Tenancy at Will do not amount to tenancies and will therefore fall at this first hurdle.
It also worth noting that section 23(2) of the Act widely defines ‘business’ as ‘including a trade, profession or employment’ or ‘any activity carried on by a body of persons, whether corporate or incorporate’. Accordingly, the premises need not be used by the tenant for a strictly commercial purpose; the reference to ‘corporate or incorporate’ in the legislation provides that the tenant may operate a not-for-profit organisation from the premises and still be able to benefit from the Act’s protections.
Interestingly, where the qualifying criteria is satisfied and therefore the tenancy falls within the Act, the parties can bring the tenancy outside the scope of the 1954 Act by expressly disapplying section 24 to 28 of the Act from the occupation agreement at hand.
This can only be done through clear wording in the tenancy agreement, and by following the correct statutory procedure, i.e. the ‘contracting out procedure’. In general terms, this involves the Landlord serving a notice on the tenant to inform them that s24-28 of the Act will not apply to the tenant, and the tenant then swearing and serving a simple or statutory declaration on the Landlord agreeing to this, before entering into the tenancy agreement.
Protecting your position
Given the powerful implications of s24-28 LTA 1954, it is perhaps of no surprise that a contracting out term is such a significant point of contention between the landlord and tenant.
For the tenant, the prospect of being able to continue to occupy – and run their business from – the premises once their tenancy has expired, is evidently an attractive one, particularly if their business is thriving from the existing premises and relocating would risk disrupting the business. Conversely, the Landlord will want to contract out of the 1954 Act where they can, as security of tenure restricts the Landlord’s freedom to evict the tenant after the original tenancy has ended, by requiring them to follow a highly prescribed statutory procedure to do so.
How can Hanne & Co help?
Both the landlord and tenant of a business tenancy should seek specialist advice on this area of the law to ensure they have adequately protected their position before entering into their business tenancy. Our commercial property team are experienced in advising both commercial landlords and tenants. If you are in need of advice relating to a new lease you are being offered, or would like us to act for in relation to drafting a new lease/negotiating lease terms, either as landlord or tenant, please contact us today on 020 7228 0017.