A tenant that occupies premises in England or Wales for the purposes of carrying on a business will acquire security of tenure, meaning the tenant will be entitled to remain in occupation even after expiry of the fixed term and be entitled to seek a new lease from the landlord (unless the lease has been properly contracted out of the Landlord and Tenant Act 1954 ("Act")).
Importance of expiry of the lease
A lease will cease on the contractual term date if the tenant is not in occupation of the premises for business purposes, because the Act will no longer apply to that lease. Where the term of the lease has expired during the lockdown period or, is about to expire, it will be vitally important to establish whether the tenant in fact occupies the premises.
What constitutes occupation?
Occupation is not a legal term – it is some business activity by the tenant on the premises. This is different to possession, which is the legal right to occupy. It does not mean physical occupation every minute of the day.
Examples of where occupation has been found, include: a carpet layer fitting carpets, retention of shoes in the basement of a shop even where the tenant had ceased trading, a tenant holding a 'closing down sale' having sold nearly all of his stock and where a tenant had ceased business activity for a period of 12 days prior to expiry of the lease term.
What about seasonal traders?
Tenants who trade in seasonal business are typically found to be in occupation during the out-of-season period. If, however, during that period the tenant does something to break the continuity of the business user (for example by granting a sub-tenancy), even if the tenant plans to restart the business when back in-season, it will have no right to do so.
This gives us a steer as to how the courts could view the case of a seemingly absent tenant during the series of national and regional lockdowns. It is a question of fact in each case.
Isn't lockdown out of a tenant's control?
Where a tenant must vacate premises due to matters outside of its control (for example, destruction by fire), the tenant should continue to assert its right of occupation, for example, in communications with the landlord. Where a tenant does so, it will retain security of tenure.
For those businesses forced to close due to government legislation prohibiting trading, lockdown could be viewed as an event which is out of the tenant's control. Asserting a right of occupation should be sufficient.
But, for those businesses which voluntarily close due to poor trading conditions, the question of occupation throughout lockdown is one that landlords and tenants should be asking. An absent tenant wanting to go back into occupation to reignite a pre-lockdown business, may well find that it has no right to do so.
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