Repossession of Property With Commercial Premises

The rules which apply to the repossession of commercial premises may also apply to a rented property which is partly residential and partly used for a business – such as a shop or restaurant with a residential flat above it.

Different rules may apply to a commercial or mixed use property which is no longer used by the tenant for the purposes of a business. Although the word “business” is given a broad definition in this context, it does not cover all commercial premises. For example, these rules may not apply to some pubs or to property used for a farming or agricultural business.

Any tenant, or presumed tenant, of a commercial or mixed use property who is unsure of their position and is facing repossession should take independent legal advice.

Renewing a Commercial Tenancy

The ease with which a landlord of commercial or mixed use premises can repossess the property may depend on the reason why he wants it back. The law governing leases of commercial property give the tenant a relatively wide-ranging entitlement to stay in the property and to renew the lease.

If a tenant wishes to remain in the property after the lease expires, and the landlord does not agree to a new lease being recreated, the courts can assist in the creation of a new tenancy. This is very different to the situation with a purely residential property where the courts would be most unlikely to force a new tenancy on an unwilling landlord. A tenant who wants to renew a commercial tenancy should initially serve a written notice on their landlord stating that they wish to stay in the property after the original lease ends.

Ending a Commercial Tenancy

The repossession process for a commercial or mixed use property tends to be much longer than for a purely residential property. The process may be particularly lengthy in contested cases where the tenant does not wish to leave the property or where the parties cannot agree the terms of a new lease. In either case the dispute may ultimately have to be resolved by a court.

A landlord who wishes to end a commercial lease must serve the tenant with a written notice, which is likely to give at least six months’ warning of the intended repossession. As well as stating the date on which the lease is to end the notice should also indicate whether the landlord would object to the creation of a new tenancy.

The notice gives the tenant two months to reply and to state whether they will be applying to the court for a new tenancy. Any application must be made within a fixed period otherwise the right to apply for a new tenancy will be lost. In addition, if the tenant does not reply within two months of the landlord’s notice, the tenancy will automatically come to an end on the date given in the notice.

Applying to a Court for a New Tenancy

In a case where a tenant wishes to stay in the property after the landlord has served a termination notice they must start a legal claim for a new lease. There are several grounds on which the landlord may object to the granting of a new lease, including:

• The tenant is persistently late with paying the rent. The court may take into account the reasons for the failure to pay rent, the impact this has had on the landlord and the likelihood that the tenant will pay the rent in the future.
• The tenant has allowed the property to fall into a state of disrepair.
• The tenant has breached another term of the tenancy agreement.

Having considered the arguments of the landlord and the tenant, the court will decide whether a new lease should be granted. If a new lease is to be created, the court will help the parties to establish the terms to be included.

Repossession by the Landlord – Forfeiture of the Lease

In some cases a landlord may be entitled to forfeit the lease because of a breach by the tenant of one of its terms. For the landlord to be entitled to forfeit the lease, the lease must give the right to forfeit if that particular breach occurs.

In most cases of forfeiture the landlord will apply to the court for a possession order. This will give the tenant the opportunity to apply for relief from forfeiture. The court order will state what the tenant has to do to avoid the lease being forfeited. If the tenant does not apply for relief from forfeiture – or fails to comply with the requirements for relief – the landlord will be entitled to repossess the property.