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Problems with a short-term commercial property lease

15 January 2022 | Julian Pyrke

In the wake of Covid-19 many businesses have reassessed their office or premises and decided to co-share space or take up a short-term commercial property lease. Legal expert Julian Pyrke has previously shared his concerns about the risks of sharing business premises, and now has some words of wisdom for those facing problems with a short-term commercial property lease. 

Short-term commercial leases 

In these difficult times, we have seen a number of situations where our clients have come to us with short-term letting arrangements that have turned out to be anything other than what they were expecting. There are several ways that you can ensure your tenant does not obtain security of tenure (a right to remain at the property and obtaining the ability to renew its lease at the end of the term).  

Creating a protected business lease 

It is worth pointing out that in order to create a business lease that has the protection of the Landlord and Tenant Act 1954 part II, then the Tenant’s use of the property must be for business purposes, and the occupier/tenant must have exclusive possession. You will often hear of landlords who have allowed tenants into their business premises on short-term business lets and/or perhaps granted them a short-term licence or even under a Tenancy at Will. Whilst a licence or Tenancy at Will appears to be exempt from the provisions of the Landlord and Tenant Act 1954 Part II, it is not always the case that what appears to be a licence is actually a licence. All too often short-term licences turn into full-blown business leases that provide the tenant with the security of tenure.  

What is exclusive possession? 

Often the crucial determining point is whether or not the tenant has “exclusive possession” of the property. Exclusive possession usually refers to an area where the tenant can call its own and can exclude other occupiers. You will not be surprised to hear that there is a wealth of case law on when is exclusive possession not exclusive possession. For that reason alone, we tend to advise our clients to grant short-term commercial leases which are contracted out of the Landlord and Tenant Act 1954 Part II so that the nature of the tenant’s occupation is clear.  

Short-term arrangements 

If you are looking for a short-term flexible arrangement, nothing is stopping you from granting a short-term contracted out lease of say two years with a series of break clauses in favour of both the landlord and tenant or even a rolling break clause. A commercial lease needs to be for a term certain. It is not something that is granted and then normally discontinued.  

The importance of occupant rights  

In this internet age, we frequently find our clients have gone online and used documents that are simply unfit for purpose and can create unforeseen consequences. If you are considering selling your property, it is critical to review any occupant rights, as you may discover that some of your flexible arrangements are not as flexible as you would like.   

As mentioned previously there are many pitfalls involved in creating short-term lets and several considerations to take into account not least any superior landlords, mortgagees or other occupiers etc. 

Specialist commercial property legal advice 

If you are a property owner who is considering short-term lets and is looking for expert legal advice, our Commercial Property solicitors can advise on a wide range of issues. To discuss your situation, please contact Julian Pyrke by calling 0117 906 9400 or email hello@gl.law. Alternatively, please use our contact form.   

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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