Commercial lease renewals – twist or stick?
As part of ongoing business planning due to the Coronavirus pandemic many business owners are turning to their commercial leases to examine their options. For those businesses that are near or coming to the end of their commercial leases, Head of Commercial Property Julian Pyrke has some timely advice.
Landlord & Tenant Act
It is generally sensible if landlords and tenants are speaking to one another especially in these difficult times. It is an ongoing business relationship but from the tenant’s prospective it is a good idea to understand your position legally with regards to your Lease. A business Lease is either going to be contracted out of the Landlord & Tenant Act 1954 Part II or will be within the 1954 Act Part II.
Tenancy at Will
For those tenants whose Leases are contracted out the 1954 Act then your Lease will come to an end at the end of the contractual term and you will not be entitled to a new business Lease unless you specifically agree one with your landlord. If you are in this position, then you should be speaking to your landlord sooner rather than later to agree terms of a new Lease so that you have business certainty that you can remain in occupation of the premises. Once the contractual term expires you will be occupying the property more than likely under a Tenancy at Will which does not afford you any business certainty or rights to occupy. It is therefore important that this bridge is crossed sooner rather than later should you wish to remain in occupation once the contractual term comes to an end.
Section 25 Notice
For those tenants whose Leases sit within the 1954 Act then you have “security of tenure” and unless the landlord is able to show and prove some very specific grounds you will be entitled to a new Lease at the end of your contractual term. If you are a tenant in this situation then unless the landlord takes steps to terminate the Lease – by serving what is called a “Section 25 Notice” which gives you notice to determine the Lease and/or confirming that the Landlord will grant you a new Lease on specified terms then without the notice you need not do anything since once the contractual term expires then you will continue to occupy the property under a continuation tenancy (commonly referred to as holding over).
For tenants whose Leases are within the Act it is imperative that you ensure that you watch out for Section 25 Notices (they do refer themselves as that and follow a standard prescribed format so they are pretty easy to spot) that have been sent by your Landlord. If you as tenant do receive a Section 25 Notice from your landlord then action does need to be taken since failure to take action within the prescribed time limits can result in your losing the right to remain in occupation of the property, you lose the protection of security of tenure under the 1954 Act.
Section 26 Request
As a tenant which has security of tenure, you can also pre-empt the landlord’s request under the Section 25 Notice by serving a “Section 26 Request” thus testing your landlords resolve to grant you a new Lease. Section 25 Notices and Section 26 Requests are usually exclusive. There are time limits as to when both notices can be served.
Commercial Property Solicitors
We would suggest that your best course of action should your Lease be coming to an end is to speak to your landlord to agree a sensible course of action.
At Gregg Latchams, our specialist commercial property solicitors can help guide you through the Lease renewal process and set out the options available to you. To discuss your situation please call: