Commercial Property Lease Renewal
Lease renewals can be one of the most technically complicated elements of modern commercial property.
The Landlord and Tenant Act legislation governs what happens at the end of most commercial leases (unless they are specifically excluded).
This is a complex area of law with many potential pitfalls.
At the time of renewal, the overall terms of the existing lease may be re-negotiated and amended, as well as the rental itself which can be altered in an upwards or downwards direction (unlike at the rent review stage where predominately rents can only stay the same or increase).
As such, it is vital to have professional representation from a Chartered Surveyor with specialist knowledge and experience of this technically complicated area.
You can find answers to more common questions about Lease Renewals in our FAQ below. Kingston’s specialist lease renewal Director is Paul Knighton, who has many years experience of acting on behalf of landlords and tenants, from small local companies to national and international corporations. For any lease renewal enquiries, please do not hesitate to get in touch.
Lease Renewals – FAQ:
Lease Renewals – Frequently Asked Questions:
What happens when the Term of my Lease comes to an end?
If you occupy under a Protected Business Tenancy, then generally speaking you will have renewal rights under the Landlord and Tenant Act 1954 – unless you have committed a breach of your lease terms or on certain limited and specific grounds only – the most common of which are redevelopment or owner-occupation by your Landlord. For these to apply, your Landlord must state and prove the ground and if proven you would be entitled to compensation.
What is a Section 25 Notice?
This is a Notice that a Landlord serves to bring to an end an existing tenancy and within which it must state whether or not he/she is prepared to grant a renewal tenancy. Read more
What is a Section 26 Notice?
This is a Notice or Request that a Tenant can serve to request that the Landlord grants a renewal tenancy. The Request must give at least six and no more than twelve months’ notice. Read more
The lease of my premises is contracted out of the 1954 Landlord and Tenant Act. What does this mean?
Contracting out of the Act essentially removes the protection given to normal business tenants by the Landlord and Tenant Act legislation. As such, if your lease is contracted out you have no right to renew at the end of the term. You may, however, still be able to negotiate renewal terms, but such terms would be purely a matter of negotiation and may be more onerous than would otherwise be the case.
I have a Business Tenancy within the Landlord and Tenant Act. What happens if neither party serves a Notice to terminate it?
Generally speaking, although a lease is for a stated fixed term, in fact as long as the tenant stays in occupation this will continue beyond the end date on the same terms until either party serves a Notice to bring it to an end. As such there can be tactical advantages in delaying a Notice or alternatively by serving a Notice first, dependent on whether rental levels are rising or falling.
Will my rent only go up on Lease Renewal?
No, unlike the majority of rent reviews in commercial leases, at a lease renewal/expiry the rental can go up or down and would generally be set at the current market level.
What happens when my Landlord serves a Section 25 Notice?
In order to protect you rights to renew your lease, you must not ignore the Notice, but should apply to the Court for a new tenancy, at the latest by the termination date which is stated in the Landlord’s Notice. Also, of course, this would be time to take professional advice as to what the renewal terms, and most importantly rental, should be upon renewal of your lease. The Landlord’s Section 25 Notice must give you a minimum of six months and a maximum of twelve months’ notice of expiry of your lease.
What happens if a Notice has been served to bring an end to a tenancy on the basis that a renewal lease will be granted, but that this expiry date has passed and terms have not been agreed?
Officially speaking under the terms of the legislation, the tenant is in a “holding over” position. As such there then follows an interim period during which an interim rent can be applied for and fixed by the Court. Therefore the earliest date when interim rent can apply is immediately following the expiry date given in the Section 25 or Section 26 Notice. Interim rents are usually set somewhere between the level of the old (existing) and new (current) rent. Therefore if the current market rental is likely to be more than the existing rent, it is the Landlord who will wish to apply for an interim rent. Conversely if the market rent is likely to be lower than the current market rent, then the Tenant will wish to apply.