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Understanding
Business Tenancies
by
Dr David Smith of Pain Smith Solicitors*
PainSmith
Solicitors Legal Advisor
22nd
June 2007
Many
agents and landlords fail to understand the key differences
between a commercial or business tenancy and a residential
tenancy. This matter is becoming increasingly important as
individuals work-life balance changes and more flexible working
practices a e adopted. Frustratingly, the law has failed to
keep pace with such changes in lifestyle and finds itself
lagging behind society in this area.
Tenancies
can either be commercial tenancies or residential tenancies;
there is no half-way house. Concepts such as live-work, while
they exist as planning categories, do not apply to landlord
and tenant law. The test for whether a tenancy is commercial
or residential in nature is based entirely on the tenant's
authorised use of the property.
If
a tenant is using a premises overwhelmingly for residential
use then the Courts will construe it as a residential tenancy.
Therefore a businessperson who works from home in the evenings
or a doctor who occasionally sees patients at home will both
be residential tenants. By contrast, a property with any significant
commercial use will be seen as a commercial tenancy even if
it also has a residential component. Therefore a tenant who
runs a business from home, or who works primarily from home
and sees clients there regularly will normally be viewed as
a commercial tenant. Particular care should be taken in regard
to self-employed persons in this context. Any self-employed
individual should have a business address and workplace entirely
separate from the rental property address otherwise the risk
of inadvertently creating a business tenancy will be high.
It should also be remembered a tenant who rents residential
premises for the purpose of running a business providing accommodation
will also be a commercial tenant. This is increasingly common
at the moment, particularly in London.
However
, this only applies to authorised usage. A tenant who uses
premises for commercial reasons without permission will not
be a commercial tenant. However, the fact that the tenancy
agreement excludes business use will not necessarily be sufficient
to protect the landlord. A landlord or agent who authorises
a tenant to use the premises for business purposes will be
consenting to that use and c eating a business tenancy, notwithstanding
any provision to the contrary in the actual written agreement.
If
a tenancy is a business or commercial tenancy it is held under
the terms of the Landlord & Tenant Act 1954 ("the '54 Act").
This is a very different piece of legislation to the legislation
that covers residential tenancies, such as the Housing Act
1988. One of the key provisions of the '54 Act is that it
provides indefinite security of tenure to most tenants. This
means that at the end of their tenancy a commercial tenant
can seek a new tenancy on similar terms to the previous one
and, if the landlord rejects this, can apply to the Court
for a new tenancy. While there are ways of avoiding this they
are complex and must be done before the start of the tenancy.
Landlords and agents would be very unwise to enter into any
form of commercial tenancy without taking legal advice and
clearly understanding their rights and obligations.
Commercial
tenancies escape much of the legislation that will normally
apply to residential tenancies. So, for example, the obligation
of the landlord to keep the property in repair as required
by section 11 of the Landlord & Tenant Act 1985 will not apply
and the landlord and tenant are free to come to whatever arrangement
they see fit regarding repairs to the property. In fact, it
is currently common for commercial tenants to take responsibility
for all repairs and decoration in the premises they rent.
However, while the Protection From Eviction Act 1977 will
not apply to a purely commercial tenancy it will apply where
the tenancy has a mixed commercial and residential component.
So, where the tenant is legitimately residing in the Premises
a landlord will still need to go to Court to regain possession
even if the property has been let on a commercial tenancy.
This
information has been supplied by*
PainSmith Solicitors who are a niche practice specialising
in Landlord and Tenant Law. Based in Medstead in Hampshire,
they are ideally situated to provide an efficient service
to clients nationwide as well as those based in Central London
and the Home Counties.
________________________________
*Safety
Glass and Defective Premises Act - The Information on
a Court of Appeal decision (7th February 2007) regarding the
Defective Premises Act 1972 For full article Click
Here
________________________________
*See
also Implementation of the Regulatory Reform (Fire Safety)
England & wales) Order 2005 Click
Here
________________________________
*See
also Commercial
Rent Arrears Recovery - April 2008
Click Here
________________________________
*See
also Duty of Landlords To Mitigate Loss Click
Here
________________________________
*See
also Going Smoke Free - England July
2007 Click
Here
________________________________
*See
also Energy Performance Certificates
in Let Property - 29
January 2008 Click
Here
________________________________
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