John McKee and Son Solicitors

Both landlords and developers appreciate the value of a blue-chip tenant but should be wary where tenants can qualify for statutory renewal rights due to being a business tenant. The Business Tenancies Order (NI) 1996 (‘the 1996 Order’) provides, in certain circumstances, a right of renewal of a tenancy for business tenants.

Does it apply to me?

The 1996 Order applies to any tenancy where the property is occupied by the tenant for the purposes of a business carried on by the tenant.

This extends to where the business is carried on by a company in which the tenant has a controlling interest, or, if the tenant is the company, where the business is carried on by a person with a controlling interest in that company.

Am I a Business?

‘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.

Does it apply to every Tenancy?

Several types of tenancies are excluded from the 1996 Order, including, most significantly, a tenancy for a term 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.)

How do I get this 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 1996 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 1996 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.

The Tenant’s initiative

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 will 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.  The amount of this compensation is calculated by applying a multiplier, which will depend on the length of the qualifying period of compensation to the Net Annual Value of the property.

The contents of this article are provided for information purposes only and do not constitute legal or other advice.

© Copyright John McKee & Son Solicitors, 2008. All rights reserved.