Putting down roots: business leases & security of tenure
Jersey has introduced a law to protect residential tenants (Residential Tenancies (Jersey) Law, 2011) but what about businesses?
A lease is an agreement to buy the right to occupy land for a specified period. In Jersey, that means that the term of the lease is the period of the relationship between landlord and tenant and no longer. The tenant always has the anxiety of thinking what will happen at the end of the lease. Will he be able to renew the lease? Will he have to move; pay for a raft of repairs and to return the building to a state it was before he took the lease? These anxieties can undermine long term business decisions and planning because, of course, you may not wish to inject money into new premises if your investment will have a relatively short period to recoup the expenditure.
English business leases
In England, this anxiety was first tackled nearly 60 years ago by the Landlord and Tenant Act 1954. It was thought that if there was a business established in premises, they should not be automatically kicked out at the end of the lease. Businesses (subject to safeguards for landlords) ought to have the ability to put down roots in a premises and should not have the constant future threat of having to move out. The tenant was given the right to renew the lease with the landlord. The landlord had the protection that a new lease would be at the market rental and could insist on the return of the premises in certain circumstances for example if the building was due to be redeveloped or reclaimed for the landlord to live in.
How it works
The 1954 Act has a framework of notices to be served between landlord and tenant about each of the their intentions when the lease came to an end – whether the landlord would like the building back and whether the tenant would like to remain. There was a tight timetable for replies and failure to meet those deadlines lead to the loss of right and disappointment for one of the parties. Those rules have been abandoned in favour of a longer period for negotiations to take place linked to a requirement for improved information to be exchanged. The aim is for the parties to reach an agreement without the intervention of the Court.
What happens if there is a dispute?
When the 1954 Act was brought into force it was only the tenant who could apply to the Court for help. Applications can now be made to the Court by either party. In the event of delay by a tenant to follow through with an agreement to renew a lease, the landlord can apply to the Court to force the terms of a lease renewal to be defined. In the case of a tenant application, the English Court can award compensation to a disappointed tenant and it has the power to award a lease extension of up to 15 years.
Application to Jersey
Having a system akin to the English one may be considered by many as a step too far – particularly in a small island. Land is scarce and I am sure that landowners would be more than reluctant to agree to provisions which reduces their control of the building beyond the term of a lease. That said, the 1954 act was put in place to encourage business stability and balancing the interests of private landowners with businesses / employers.