Business Tenancies In Northern Ireland - Part 1Wed 18th Feb 2009
The Business Tenancies Order (NI) 1996 (‘the 1996 Order’), re-enacts, with some amendments, the Business Tenancies Act (NI) 1964. It provides, in certain circumstances, a right of renewal of a tenancy for business tenants.
Tenancies to Which the 1996 Order Applies
The 1996 Order applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant, and are so occupied for the purposes of a business carried on by the tenant.
This includes situations where the business is carried on by a company in which the tenant has a controlling interest, or, if the tenant is the company, situations where the business is carried on by a person with a controlling interest in that company.
‘Business’ is defined broadly, to include a trade, profession or employment, or any activity carried on by a body of persons whether corporate or unincorporated. It is not a requirement that the business be carried out for gain for reward.
Several types of tenancies are excluded from the 1996 Order, including, most significantly, a tenancy for a term certain not exceeding nine months (except where the tenant has been in occupation for a period which, together with any period during which any predecessor has carried on the same business as the tenant, exceeds 18 months.)
The Right to a New Tenancy
The general principle under the 1996 Order is that business tenancies continue automatically for an indefinite period, until terminated by one of the parties in accordance with the Order. A landlord may only terminate the tenancy by serving a ‘notice to determine’, which must state a ‘date of termination’ not less than 6 months and not more than 12 months after the date of service. It must also state whether the landlord is willing to grant a new tenancy, and, if so, the proposed terms of this tenancy. If the landlord is not willing to grant a new tenancy he must state under which of the grounds set out in the Order he is opposing the grant of a new tenancy. The grounds on which a landlord may oppose a new tenancy include:
o Where the tenant has failed to comply with obligations regarding repair and maintenance.
o Where the tenant has persistently delayed in paying rent.
o Where the tenant has substantially breached his obligations under the tenancy.
o Where the landlord has made a reasonable offer of alternative accommodation.
o Where the tenancy was created by the subletting of property held by the landlord under a superior tenancy, and on termination of the current tenancy the landlord intends to dispose of the property as a whole.
o Where the tenancy was created by the subletting of property held by the landlord under a superior tenancy, and the total rent obtainable through separate subletting of units is substantially less than the rent which could be obtained by the letting of the property as a whole.
o Where the landlord in tends to demolish or carry out substantial works on the property.
o Where the landlord intends to carry on a business at the property himself, or to reside in it.
o Where possession of the premises is necessary for a public authority to carry out its functions.
If a tenant makes an application to the Lands Tribunal for a new tenancy, and the landlord cannot successfully show any of these grounds, the Tribunal must grant a new tenancy.
In the absence of agreement regarding the terms of this new tenancy, the Lands Tribunal has powers to fix the term and rent, although there is a maximum term of 15 years, and the rent should be based on the open market rent. The Lands Tribunal may also include provisions standard in commercial leases, such as rent review clauses.
If the Tribunal dismisses an application for a new tenancy for grounds other than default by the tenant, or where the tenant decides not to apply for a new tenancy due to opposition by the landlord, the tenant is entitled to compensation for disturbance on quitting the premises. This amount is calculated by applying a multiplier of the Net Annual Value of the property, depending on the length of the qualifying period of occupation.