When a commercial lease on a property expires there are a few options that are available to both the tenant and the landlord. The 1954 ‘Landlord and Tenant Act’ is clear that the lease can be renewed automatically by the tenant with updated terms. This means that they can protect their commercial interests and their tenure. As a landlord, you can regain possession of the property under the following circumstances:
- You need the property vacant for personal possession.
- You need the property vacant for development.
- Your tenant has consistently not paid their rent.
- Your tenant has breached the terms of the lease.
- Your property has been divided into units and subletting would accrue a higher rental dividend than a single lease.
Many tenants have a protected lease, which entitles them to request a new lease on comparable terms to an existing lease. They are not obligated to vacate the premises. A protected lease can be issued if:
- A tenant occupies your property exclusively for business use.
- Your tenant is the sole occupier of your property.
If your tenant has a protected lease then it is very difficult to change the agreed rental sum without their agreement.
When Is The Best Time To Renew A Commercial Lease And What Is The Best Way To Do It?
You should begin thinking about commercial lease renewal about 18 months before the end of the contract. A Solicitor or Chartered Legal Executive who specialises in commercial property should be contacted and advice requested about your specific situation.
In many cases, a tenant with a secure tenure will request to renew the lease and you have 2 months to dispute their request. New terms can be negotiated, but an independent valuation needs to be undertaken to determine a new and fair rental fee. Your tenant retains the right to stay in your property under the terms of the existing lease whilst these negotiations are underway.
If your tenant doesn’t have secure tenure, they don’t have the right to occupation and you can ask them to leave the property upon the end of the lease.
It is possible to remove protection from a commercial lease by ‘contracting out’- there is a strict procedure for this, but once completed the tenant is obligated to vacate your property at the end of the term. Tenants also lose the right to automatically renew the lease. You can then choose to renew on new terms such as an increase in rent and it is then up to the tenant if they choose to accept your terms.
Commercial property law can be a minefield and can get expensive and complicated if handled badly. We would always recommend getting advice and assistance from a qualified legal professional.