A commercial lease will generally set out how a tenancy can be ended, but where no written lease exists, then the process can be less certain. It is important not to breach the tenant’s rights, which could leave you open to a legal claim.

It is possible to create a commercial lease orally, with no written agreement, provided the lease is for no longer than three years and the rent is set at a market rate and not merely nominal. Unwritten leases are used as a quick way of putting a rent-paying tenant into a property without the delay involved in negotiating and agreeing to a formal written lease. Once the tenant is in occupation and paying rent, they will generally have acquired permissible legal interest.

Security of tenure

Generally where a tenant has been in occupation for more than a year under a business tenancy, whether written or unwritten, they will have security of tenure. This means that they have a statutory right to renew their lease. Without a written lease in place, they will also be entitled to compensation if the landlord takes possession of the property. A written lease can exclude this right.

Grounds for evicting a commercial tenant

Evicting a tenant when there is no clear written procedure can pose a problem, with the tenant having legal rights which must be observed. If the landlord enters the property unlawfully, then they may be guilty of trespass and potentially also causing damage.

There are seven grounds on which the landlord can take possession of a commercial premises at the end of the term of tenancy, as follows:

• The tenant has not met its obligations to repair and maintain the property;
• Rent has been persistently late;
• The tenant has breached other terms of the lease;
• The tenancy is a subletting;
• The landlord has offered other suitable premises;
• The landlord plans to redevelop the property;
• The landlord intends to occupy the property or part of the property.

Where one of these criteria is applicable, it is still important that the landlord follows the correct procedure in evicting the tenant, including observing the correct timescales when giving notice. It is advisable to seek legal advice to ensure that the process is carried out without mistakes that could inadvertently give the tenant the right to stay in the property or claim more compensation than would otherwise be payable.

Forfeiture of the lease and peaceable re-entry

If the lease is forfeited by the tenant, then following the correct notification process, a landlord can apply to the court for possession or, if the rent has not been paid, peaceably re-enter the property. It is recommended that legal advice is sought before taking this step to avoid the risk of committing trespass.

Where no one is present at the property, the landlord can re-enter and change the locks. A notice should be placed in the window advising the tenant of the forfeiture of the lease for non-payment of rent. These actions constitute clear notice to the tenant that the lease has been forfeited.

Avoiding the creation of an unwanted commercial lease

In most instances, it is preferable not to grant an unwritten commercial lease conferring tenancy rights on the occupier. As an alternative, a tenancy at will can be granted for a short period to allow occupation while a commercial lease is drawn up.

To protect your interests as a landlord, it is highly recommended that any occupation or tenancy has a solid legal foundation and you understand the implications of the commercial relationship you are entering into. Tenants have extensive legal rights, whether or not they have a written lease, and you could end up paying compensation or having to deal with difficult eviction proceedings if a lease is inadvertently created.

Contact our commercial lease solicitors

At Witan Solicitors we represent landlords and tenants across a range of sectors. We can advise you on the best option for your commercial property and draw up the right documentation to ensure your rights and interests are protected.

If you need advice in respect of a commercial lease or tenancy at will, talk to our special team of commercial property dispute solicitors in London, Birmingham and Northampton at info@witansolicitors.co.uk or fill in our contact form and we will be happy to help you.