Agreement to Exclude Security of Tenure in a Business Lease

What does security of tenure mean?

Security of tenure refers to the tenant's right to remain in the property and to renew the lease at the conclusion of the contractual term. Business leases generally have security of tenure, unless the parties explicitly agree otherwise. Short business leases with a fixed term of 6 months or less will not generally benefit from a security of tenure.

What is an agreement to exclude security of tenure in a business lease?

An agreement to exclude security of tenure in a business lease provides the required notices and declarations to allow landlords to exclude security of tenure in a business (commercial) lease in England and Wales.

Is it mandatory to have an agreement to exclude security of tenure?

Yes. If the parties want to exclude and op-out security of tenure that applies to business leases, they must enter into a written agreement about this.

What are the prerequisites of an agreement to exclude security of tenure?

Before a tenant signs an agreement to exclude security of tenure, it is best practice for the terms of the lease to be agreed. The agreement to exclude security of tenure must be entered into prior to the date upon which a party will be contractually bound to take the lease. This will be prior to:

• the completion of a lease or renewal of a lease; or
• the exchange of an agreement for lease; or
• the tenant going into occupation of the property pending completion of the terms of a lease.

Who can enter into an agreement to exclude security of tenure?

The prospective tenant must be a prospective commercial/business tenant in England and Wales.

Who cannot enter into an agreement to exclude security of tenure?

A prospective residential tenant cannot enter into this type of agreement.

What must be done once the document is ready?

Once the landlord has prepared the document, it should be sent to the prospective tenant. The tenant must then make a declaration in the required form, and return this to the landlord.

How must an agreement to exclude security of tenure be executed?

The formalities of the agreement will depend upon the amount of notice provided:

• If the notice to exclude security of tenure is provided by the landlord at least 14 days prior to the tenancy commencing or becoming contractually bound to take the lease, the tenant is required to make a simple declaration. This means the tenant must place their signature on the agreement.
• If the notice to exclude security of tenure is provided by the landlord less than 14 days prior to the tenancy commencing or becoming contractually bound to take the lease, the agreement must be made as a statutory declaration.

Once the tenant has made the relevant declaration the agreement should be returned to the landlord.

A statutory declaration involves an individual making a legal declaration confirming that something is true. In order to make a statutory declaration, the tenant must declare the relevant wording in front of a solicitor or person empowered to administer oaths. The tenant does not actually have to sign the agreement in this instance, but the solicitor/commissioner for oaths will sign the declaration.

What are the costs involved in finalising an agreement to exclude security of tenure?

If the tenant is making a statutory declaration they will need to pay for a solicitor or other person empowered to administer oaths to assist with this. The agreement must be given as a statutory declaration by the tenant if the notice to exclude security of tenure was provided by the landlord less than 14 days prior to the tenancy commencing or them being contractually bound to take the lease.

 

What must an agreement to exclude security of tenure contain?

An agreement to exclude security of tenure should contain:

• The names and details of the parties
• a statutory notice - confirming that the tenant understands the rights that are being surrendered
• a simple declaration from the tenant - where the notice is sent by the landlord not less than 14 days prior to the lease completing
• a statutory declaration from the tenant - where the notice is sent by the landlord less than 14 days prior to the lease completing

What laws apply to an agreement to exclude security of tenure?

The following key legal provisions will apply to an agreement to exclude security of tenure:

• The Landlord and Tenant Act 1954
• The Statutory Declarations Act 1835
• The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.