An Introduction to Lease Renewals
A lease renewal is the perfect time to negotiate improved terms and conditions for your business. To achieve the best results in your negotiation, it’s advisable to be prepared with some market knowledge and know more about the key components and clauses within a commercial lease, which can have a significant impact (both positive and negative) on the business.
As the business owner, it is absolutely vital for you to fully understand the implications of the terms you are negotiating. Even small mistakes can have large and costly repercussions, and a lease is a legally binding contract. So, if you are not fully familiar with the implications of contracting out, service charge liabilities, repairing clauses, personal guarantees, deposits, alienation provisions and rent reviews, you can miss out on an improved lease.
A common worry about lease renewals is whether the landlord can refuse the renewal. If your lease is ‘contracted out’, then yes, a landlord can refuse to renew. However, if your lease is inside the Security of Tenure provisions of the Landlord and Tenant Act 1954 Part II, then the landlord can only refuse to renew your commercial lease upon 7 specific grounds, and they are:-
- Ground A: Breach of repairing covenant…
- Ground B: Persistent delay in paying rent…
- Ground C: Breaches of other obligations…
- Ground D: Alternative accommodation is available to the tenant…
- Ground E: Sub-tenant – possession required for letting or disposing of the whole of the property…
- Ground F: Landlord intends to demolish or reconstruct…
- Ground G: The landlord intends to occupy the premises…
Some of these grounds, namely (a), (b), (c) and (e) are subject to the court’s discretion and the remaining grounds (d), (f) and (g) are mandatory, meaning that if a landlord establishes the mandatory grounds, the court must refuse to renew the tenancy.
The other common worry is whether a landlord will increase the rent. In short, the landlord cannot choose to increase your rent unless there are provisions to do so within the lease. It is common within leases to have a rent review at the end of every third or fifth year. The rent is traditionally reviewed to market rent (or linked to RPI/CPI) and is open to negotiation.
Renewing your commercial lease doesn’t need to be a particularly lengthy process; it depends on whether you are handling it alone and how much you potentially want to change. Getting an expert involved at this stage, this will help speed up the process and ensure the lease terms are negotiated to your advantage.
With years of experience in commercial property consultancy, our team has successfully managed lease renewals for a diverse range of clients. We pride ourselves on our attention to detail.
Get in contact with our team today for expert guidance and representation through your lease renewal or view our packages HERE.
