In order to build up the value in a business, it is important for tenants to be able to occupy premises for as long as they wish. However this is particularly important for dentists, especially if a practice has a location based PCT contract which can make it difficult for dentists to relocate their practice. This means if a dentist cannot stay in occupation of their property, they risk losing the value that they have built up in their business. When negotiating a lease of premises, this is something that dentists need to be aware of.
Statutory rights
Unless specifically excluded, a lease of business premises will usually have rights of security of tenure by way of statutory provisions contained in the Landlord and Tenant Act 1954 (the ‘54 Act). If these rights apply to a dental lease, it means that the dentist would generally have a right to stay in the property after the lease comes to an end. There are a number of conditions that must be complied with for these rights to apply. However most dental leases will satisfy these conditions.
If a dental lease does have statutory rights of renewal, the dentists will usually be entitled to a new lease, on similar terms to their original lease, except in relation to the rent and the length of the lease. These are points that will need to be agreed between the dentist and the landlord. If they cannot be agreed, they can be determined by a court.
In some circumstances, such as a major shopping/healthcare centre development, landlords may want to keep control of who occupies the properties as and when leases expire. Accordingly in order to stop the statutory rights of renewal applying, a landlord may exclude the ‘54 Act rights from the lease. The tenant will not have the right to remain once those rights are excluded and any lease extension will be subject to agreement with the landlord.
Limitations
Although the statutory rights of renewal will give some comfort to a dentist, they can be defeated by a landlord in certain circumstances. For example, if the dentist is in breach of the lease.
Statutory rights of renewal can also be opposed by a landlord if they want to redevelop the property, or if they want to take the property back to use it themselves. This latter situation can cause difficulties for a dentist, particularly if the dental practice is within a health centre, or if the landlord is a dentist themselves.
If the landlord does not want to grant a new lease of the property, because they want to take it back or they want to redevelop it, the dentist may be entitled to compensation. This may be of little comfort if the ultimate result is that the dentist is unable to relocate their business and the landlord is able to take on the running of the dental practice, without having to pay the true value of the business to the dentist.
How to renew
If a dentist has statutory renewal rights and wishes to renew their lease, they will need to serve a statutory notice and sometimes counter notice on the landlord. There are strict time periods for service of these notices. When to serve such a notice and who should serve them should be thought about carefully in consultation with lawyers. It may be that the early service of a tenant’s notice will result in a saving of rent payable.
Contractual rights
In order to protect the dentist’s practice further, particularly where there may be concerns with the identity of the landlord, the dentist should ask the landlord to include a contractual right of renewal in their lease as well as the rights under the ‘54 Act.
This would mean that the landlord will be obliged to grant a new lease to the dentist, if the dentist requires. The new lease would be on the same terms as the existing lease. This contractual right to renew can only apply once. However its inclusion could mean that the dentist could have a guaranteed right to have a lease of the property for at least twice the length of the initial lease.
Be aware
Dentists should make sure that they are aware of their rights to remain in occupation of the property. Renewing a business lease is not straight forward and there are many opportunities for a dentist to trip up and lose some or all if its bargaining power. Good tactics can save money and achieve a better commercial lease.