Commercial Lease Transactions
Could you negotiate a better rent?
If the lease on your premises is coming to the end of its term it is important that you take the right steps in order to achieve the results you want. The first thing to do is establish whether you are entitled to a new lease under the provisions of the Landlord and Tenant Act 1954.
Are you entitled to a new lease?
Normally, a business tenant in occupation of the property at the end of the term of the lease will be entitled to a new lease. However, it is possible for the landlord and tenant to agree at the outset of the lease to exclude this right to renew. Certain legal formalities would have to have been followed in order to exclude this right and you should check with your lawyer if this has happened. If your right to renew has been excluded then your lease will automatically terminate on the expiry date and you must vacate the property or enter into a new lease with your landlord prior to that date. If you do not comply with either of these options you will be a trespasser and the landlord will be able to evict you.
Landlord and Tenant Act 1954
- A formal notice is served by the tenant or landlord bringing the lease to an end
- A formal notice is served by the tenant or the landlord requesting or offering a new lease; or
- A new lease is entered in to by agreement
Where a tenant has the protection of the Landlord and Tenant Act 1954 the lease will not automatically expire at the end of the term but will continue to exist until either:
There are important formalities to be observed at this time, and if they are not strictly followed, your right to renew your lease could be lost. You are therefore urged to seek immediate legal advice should you receive a notice from your landlord or if you wish to serve a notice on your landlord.
Section 26 request
- the tenant has caused disrepair to the property
- the tenant is persistently delaying paying the rent
- there has been a substantial breach of covenant by the tenant under the lease
- the landlord can provide suitable alternative accommodation for the tenant
- the landlord intendeds to demolish or reconstruct the property
- the landlord intends to occupy the property himself
If you want to remain at the premises and the market rent in your area is falling then it is in your best interest to act swiftly. A tenant is able to serve a prescribed form of notice on the landlord to request a new lease (called a Section 26 request) between 6-12 months before the end of the current term of the lease. The landlord then has two months to confirm whether they object to the new lease. The landlord can only object if they can show one of the following grounds:
If the landlord cannot prove one or more of the above grounds then you will be entitled to a new lease at a rent equivalent to the open market rate which may be significantly lower than the rent you are currently paying. It is therefore in your best interest that you take the first steps to request a new lease as soon as possible.
Do not want to remain at the property?
Alternatively, if you do not want to remain at the property at the end of the lease, then you should vacate the property before the end of the term or you can serve a termination notice on the landlord giving at least three months' notice of your desire to vacate. You will remain liable to pay the rent until the expiry of this notice. Again, you should seek legal advice as the notice has to be in the correct form.