Extending or renewing a commercial lease

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We offer experienced, cost effective, practical advice for both Landlords and Tenants on all aspects of commercial lease renewals and the implications of the Landlord & Tenant Act 1954.

The Landlord and Tenant Act 1954 deals with security of tenure, which means that (subject to certain exceptions, getting the procedure right or opting out of the right-see below) as a tenant, you have an in principle right to renew a commercial lease on similar terms when it runs out.

When Does the Act Apply?

The Act applies to tenancies where the tenant is occupying the property. With regards to business tenancies, there is an extra condition that the tenant must occupy the property for the purpose of his/her business. It is important to check that the provisions of this Act have not been excluded in your tenancy agreement. If they have, then you will not have any of the rights granted by this Act.

The Act will not apply in circumstances where the lease is for less than 6 months. An exception applies where the lease makes an allowance for its extension or renewal, or where the tenant’s full duration of occupation is more than 12 months. Additionally, if the tenancy’s extension or establishment is connected with the tenant’s employment, the Act will not apply.

If the 1954 Act does apply, how can a Protected Tenancy be brought to an end?

If the landlord wants to end a tenancy, he/she may be able to do this by serving a section 25 notice using the Act. This would involve either the refusal of a new tenancy, or the offer of a new tenancy. The date to terminate must be between 6 and 12 months from the date the notice has been served. It is possible for the tenant to use section 26 of the Act in order to request a new tenancy. The start date for this new tenancy must also be between 6 and 12 months after the date the request was submitted. Failure to meet these strict timetables or getting the paperwork wrong or not serving the paperwork correctly can have disastrous consequences.

It is important to note that both a section 26 and a section 25 notice cannot be used to terminate the tenancy before the original expiration date, which would have been agreed upon in the lease.

Opting out of lease renewal

With many commercial leases, when the lease is first granted, the landlord will seek to negotiate that the tenant contracts out of the statutory renewal rights. There is a strict procedure for this, and whether to contract out or not is a decision which should be based on legal advice. If the original tenant contracted out, and successor (assignee) who has bought the lease will be stuck with the contracted out position.

We can help

If you are seeking a  lawyer, whether as a tenant seeking to renew an existing commercial lease, or negotiating a new one, or a landlord needing advise on the Landlord & Tenant Act 1954, please contact James Swede. James is highly experienced in all aspects of commercial property law.