Can I refuse a new business lease to a tenant if I want to occupy the property myself?

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05 December, 2019

The law

Unless a lease is contracted out, a business tenant has a right to a new lease upon expiry of their contractual term, subject to limited grounds.

Section 30 (1) (g) of the Landlord and Tenant Act 1954 contains an 'own occupation' ground. This allows a landlord to refuse the tenant a new lease if they can prove they want to occupy the property themselves.

Can any landlord refuse under the 'own occupation' ground?

No. The landlord must have owned the property for at least 5 years.

What do I have to prove?

You need to demonstrate (to court if necessary) that you have a firm and settled intention to occupy all or the majority of the property when the tenant leaves. In the case of intended residential use, you must prove an intention to occupy the whole of the property. As part of this evidence you will need to prove that you have the means to achieve the intended use.

How long do I have to occupy for?

The case law suggests that this should be 'for more than a short term'.

Who needs to intend to occupy?

In the case of a limited company, that company or a group company must intend to occupy. In the case of an individual, any company which that individual has a controlling interest will count. In the case of a trust, one or more of the beneficiaries will count.

What If I want to carry out works before I occupy?

Depending on the works, you should normally seek to rely upon ground F (redevelopment) either instead or in addition to ground G.

What evidence do I need?

If your plan to occupy would need planning permission (for example for change of use) then you should obtain that or provide evidence that it is very likely to be granted. You should get your paperwork in order for example business plans, finance agreement, signage quotes etc.

How do I start the process?

By service of a notice pursuant to section 25 of the 1954 Act, citing ground G (and /or any other grounds to refuse you can rely upon). If the tenant has already served a notice (known as a section 26 notice) requesting a new lease, you must serve a counter notice within 2 months.

Only grounds quoted in the notice can be relied upon if the matter reaches court.

Do I have to pay compensation?

Ground G is a compensation ground, as it is a non-fault-based ground. If a tenant leaves after serving a notice relying on ground G (or F) statutory compensation will be payable. The amount will be either once or twice (where the tenant has occupied over 14 years) the rateable value of the property.

For more information contact Laura Hallett Lea in our Business Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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