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Commercial Property Disputes

Safeguarding Your Property Rights

Property disputes can involve the land and any immovable property on it. Disputes can become emotionally charged – so it is vital to stay focused on the contested matters to stop them escalating into protracted and expensive legal rows.

Commercial Lease Renewals – A Tenant’s Right To Renew

Worries about lease renewal can hang over your business like the sword of Damocles. You’re busy trying to make a living. You must be sure you can renew your lease.

Fortunately for leaseholders, they have a statutory right to renew their lease. They are protected by security of tenure under the Landlord and Tenant Act 1954.

So usually the landlord will grant a new lease after negotiating with the tenant. But sometimes negotiations break down…

Has the landlord refused a new lease? We can help you to apply to the court to have a new tenancy granted. The court will decide the rent based on market values and expert evidence. It will also make rulings on the lease terms in a bid to provide a solution that is fair to both sides.

But not every business is covered by security of tenure. Exceptions include:

  • mining
  • farming
  • fixed-term tenancies of six months or less
  • land subject to a licence rather than a lease
  • sub-letting (where the leaseholders do not occupy the premises)
  • long leases (21 years+) extended under the Leasehold Reform Act 1967
  • service tenants who have been employed by the landlord
  • tenants who have contracted out of the 1954 Act and waived their right to security of tenure.

If you wish to renew your lease you must inform the landlord six to 12 months before the expiry date. Your landlord has two months to dispute the granting of a new lease. Their objections must be based on one or more of the following criteria:

  • the tenant has failed to meet their obligations (such as rent and repairs)
  • the landlord offers to provide other suitable premises
  • a sub-tenant occupying part of the building wishes to renew but the landlord wants to let the property in its entirety
  • the landlord wants to demolish, rebuild or occupy the premises.

Ending The Commercial Tenancy: Section 25 and Section 26 Notices

Under the 1954 Act, a landlord must serve a section 25 notice if they do not want to renew the lease. This applies to tenancies in England and Wales but not in Scotland.

The landlord must serve this notice six to 12 months before the last day of the lease (or any date after that). Once served, it can be withdrawn only if the landlord has transferred ownership of the property to another landlord.

Furthermore, the landlord cannot serve a section 25 notice if the tenant has already served a section 26 notice stating how they wish to end the tenancy.

Are you a landlord needing to evict residential tenants? Find out more here.

Dilapidations To Commercial Premises

Most commercial leases force the tenant to repair dilapidations (damages or defects). The landlord outlines the repairs needed and the tenant rectifies the damage. Or the landlord can have the work done and pass the cost on to the tenant.

But the costs can be very high – sometimes the equivalent of at least a year’s rent – so disputes are not uncommon. There are legal pitfalls for both the landlord and tenant:

  • the tenant must be sure the property is in good condition and they are not signing up to a lease that obliges them to repair damage which is not their fault
  • the landlord must be certain the tenant can pay – there’s no point presenting the tenant with a large dilapidations bill if there is no prospect of them ever being able to pay it.

It is important to have a detailed Schedule of Condition (with supporting photographs) prepared by a chartered surveyor. However, this is not a panacea: remember that some property defects – such as structural issues – may not be visible initially.

Be aware of any ‘yield up’ clause in the lease. This could require a tenant to leave the property in a condition specified in the lease – not in the condition they found it. This could force the tenant to pay for expensive improvements to the property.

Furthermore, a lease may require a tenant to restore a property and remove any works or modifications they have carried out.

Non-Payment Of Rent On A Commercial Lease

Rent arrears is the most common reason for a tenant being locked out by the landlord and having to forfeit their lease.

Some tenants have cashflow problems. Others deliberately withhold rent payments because they have grievances against the landlord. They mistakenly believe it will force the landlord to negotiate with them. We strongly advise against this – it will result in forfeiture of the lease.

Find out more here about recovering debts, credit control, repossessions and enforcing court judgments.

Forfeiting A Commercial Lease, Relief Against Forfeiture

Landlords can embark on forfeiture proceedings against a tenant who has defaulted only if there is a forfeiture clause in the lease. They can enforce it either by:

  • taking legal action in court
  • peaceable re-entry – a certified bailiff attends the premises with a locksmith to change the locks and put up notices informing the tenant that the lease has ended.

Once instigated, forfeiture cannot be rescinded. You cannot change your mind. You cannot allow the tenant back into the property without a new lease.

A tenant (or sub-tenant or mortgagee) can apply to the court for relief against forfeiture. If they succeed in their claim, the court can reinstate a lease or order relief on certain conditions (such as payment of monies).

Possession Proceedings – Evicting Squatters From Commercial Premises

Do not threaten force or use force when evicting squatters – this is a criminal offence. Instead you should take legal action through the County Court. You will need to:

  • apply for an Interim Possession Order (IPO)
  • then claim for possession – this measure is ordinarily used to repossess a property if you are owed money for rent or a mortgage and the tenant/mortgage holder will not pay (but it can also be used to evict squatters).

You can apply for an Interim Possession Order if it has been 28 days or less since you discovered them. If they have been there for more than 28 days you must claim for possession.

Any squatter served with an IPO can be jailed if they fail to leave your premises within 24 hours. If they return within 12 months they can also be jailed.

You cannot use an IPO if:

  • you are claiming for damages caused by the squatters – you must claim for possession
  • you are trying to evict a tenant or former tenant, sub-tenant or licensee.

You should call the police if the squatters are causing damage; stealing items; using gas, water or electricity without permission; dumping litter or rubbish; ignoring court orders or noise abatement notices.

Act swiftly before the squatters start to accrue any rights.

Breach of Restrictive Covenants

Commercial property restrictive covenants are usually added to title deeds or leases to prevent the business from having an adverse impact on neighbouring firms and residents.

But circumstances may change: the original reason for the covenant may no longer exist – making it obsolete. You can apply for the covenant to be modified or removed but is not always easy. It requires expert legal advice.

Are you a developer? Contact our commercial property team to get restrictive covenants lifted from land you wish to develop.

Breaching a covenant may involve breach of contract.

Get Expert Legal Advice

Commercial property disputes – especially when they involve leases – can be legally complex. It pays to get specialist advice from experienced solicitors.

Coles Miller’s large team of commercial solicitors deals with businesses of all sizes across the country. Phone 01202 338800 or email us for a callback.

Meet the team

Neil Andrews

Partner, Head of Commercial Department and Business Property Law

Eric Holt

Debt Recovery Manager

Patrick Herklots

Associate Solicitor

Charlie Edge

Trainee Solicitor

Eleanor Lewns

Solicitors Apprentice

Angela Bollam

Personal Assistant

Hazel Burry

Legal Secretary

Nikki Green

Legal Administrator

Tracey Ford

Legal Assistant

James Caine

Planning Consultant