Whether you're a landlord or tenant, handling lease renewals should be at the top of your priority list. Sweeney Miller Law's Litigation Partner, Charlie Lynn, gives his top tips for getting the most from the lease renewal process.
Often a commercial tenant may wish to renew their lease to continue to operate their business from the same premises. A landlord may accept the tenant’s request for a lease renewal; however, they do have the option to oppose the renewal pursuant to grounds contained within the Landlord and Tenant Act 1954 (“the Act”).
Understanding the Act
Most commercial leases fall under the protection of the Act, under which the tenancy can be renewed on the expiry of the contract, to avoid tenants being evicted with little to no notice. This is known as ‘security of tenure’.
Leases protected under the Act can be renewed under the existing terms unless the landlord can successfully refuse renewal by relying on certain statutory grounds contained within the Act.
Landlord’s notice
For a landlord to terminate the existing lease, they may serve a Section 25 notice in the prescribed form.
The landlord must specify one of the grounds to terminate the existing lease, or if they do not oppose the grant of a new lease, they may set out the proposed terms for the same.
It is crucial that the notice is served in accordance with the existing lease provisions, failing which the validity of the notice can be called into question.
Tenant’s notice
A tenant who is protected by the Act may request a new tenancy by serving a valid Section 26 request in the prescribed form.
When are court applications required?
It is essential that the lease is finalised before the expiry date put forward in the notice, otherwise a court application must be filed.
If matters proceed to court due to a dispute, the court will make an order to end the existing tenancy and either:
Determine that the landlord has succeeded on its grounds of opposition, if any, or
Direct the terms of the new lease.
Time is of the essence
The renewal/termination process should be contemplated between six and 12 months before the expiry date to allow both sides to start negotiations and, if these fail, start looking for alternative arrangements, such as new premises or a new tenant.
The longer you allow for your lease renewal strategy, the more breathing space you have for negotiations, any necessary property inspections, lease amendments, and the final document.
Ask the experts
Expert help at the start of the process is key to securing the best terms for the future.
While negotiations can take place informally directly between parties, getting early advice from an experienced litigation team removes the guesswork from the process and ensures that the right measures are in place for the future.
Commenting on lease renewals, Charlie said: “At Sweeney Miller Law, our Property Litigation team regularly helps both landlords and tenants as leases come to an end. We are also best placed to robustly assist with any litigation issues that arise when renewals become contested and dispute resolution becomes necessary, including assistance with any court applications.
Each lease is different, and we aim to ensure that our clients get the best possible outcome during the negotiations based on their circumstances and existing lease conditions. The team works with large established commercial clients, through to fledgling businesses that may have never dealt with a renewal before.”
If you are a landlord or tenant coming towards the end of your commercial lease term and want advice from a team of experienced and pragmatic commercial litigators, get in touch today, call 0345 900 5401, email enquiries@sweeneymiller.co.uk or visit sweeneymiller.co.uk