Whatever your business entails a commercial lease is an essential prerequisite to making it successful. It is important that you understand the commercial lease renewal process before your lease needs to be renewed.
Protected vs. non-protected leases
The Landlord and Tenant Act 1954 gives the majority of commercial leases the benefit of security of tenure. The Act allows business leases to be renewed automatically by the tenant. The terms of the renewed lease need to be similar, however, they can be updated.
A commercial lease with the benefit of security of tenure can only be reclaimed by the landlord in circumstances including:
- On numerous occasion the tenant has failed to pay rent or has been in breach of covenants;
- The landlord needs the property for personal occupation or development;
- The property was divided and let in several units and would earn a higher lease if it is let as one.
If your lease is protected by the Landlord and Tenant Act 1954 then your landlord cannot impose a new rent rate. If the landlord and the tenant are in a dispute about the amount of rent that should be paid, the tenant can apply to the court for an assessment of the correct and current market value.
When you signed your commercial lease, you may have contracted out the Act. This removes the protection and security of tenure. In this circumstance there is no automatic right to renewal. It is up to the landlord’s discretion whether they allow you to renew your agreement and they can propose new terms and inflate the rent.
What should you do when your commercial lease is about to expire?
It’s a good idea to start thinking about your lease renewal approximately 18-24 months before your expiriry date. Whether you have a protected or unprotected lease, your commercial lease is one of the most important assets for your business. The renewal process for commercial leases can seems complicated, however, if you begin the process in advance and receive the appropriate legal advise it will be relatively stress free.
You should initiate contact with your landlord around 8-12 months before your lease expiry date. Once you have made the request for renewal to your landlord, if you have security of tenure then landlord then has 2 months to dispute the grant of a new lease on based on one of the gounds above. During the negotiatinos for new terms, the tenant has right to remain in the property,.
The renewal process does not have to be a stressful process. Our commercial lease experts can guide you through the process and offer you full support and advise throughout the process.