The Landlord & Tenant Act 1954 is still a very relevant piece of legislation today which affects all commercial leases in England & Wales. A commercial lease will not automatically end unless the correct procedures are followed to bring a lease to an end. The tenant of commercial premises will have security of tenure when the agreed term of his lease comes to an end,unless it has specifically been excluded from the lease. This means that, even though the fixed term of the lease has ended, tenants of business premises have:
- the right to remain in occupation at the end of the contractual term of a lease; and
- the right to apply to court for the grant of a new lease.
If a Landlord wishes to bring a lease to an end, this can be done through negotiations with the tenant. However, this may take time and a tenant may delay matters. If a Landlord wishes certainty, the Landlord can serve a Section 25 Notice on the tenant which will bring the lease to an end. This notice must state i) the date the existing lease will come to an end,which will be between 6 and 12 months’ time from the date of the Section 25 Notice; ii) whether the Landlord will oppose the granting of a lease renewal or not; iii) if a lease renewal is to be offered then the Section 25 Notice must state the proposed terms for a new lease, including the new rent and iv) if the Landlord is to oppose the granting of a lease renewal, one of the 7 grounds for opposition must be stated: –
- The Tenant has an obligation to repair the property and they have failed to do so.
- The Tenant has persistently delayed paying rent.
- The Tenant has substantially breached other obligations under the lease.
- The Landlord can offer suitable and reasonable alternative accommodation.
- Where the lease is only of part of the property, and the objection comes from the Landlord of the whole of the property on the basis they can obtain significantly more rent by letting out the whole of the property as one.
- The Landlord intends to demolish or reconstruct the property and must remove the Tenant to do so.
- The Landlord intends to occupy the property himself for carrying on a business or his residence.
If a Tenant wishes to bring an existing lease to an end and commence negotiation for a lease renewal, then he can enter into negotiations with the Landlord. If the Landlord is stalling matters (such as when the passing rent is above the market rent), then he can serve a Section 26 Notice. This must be served between 6 and 12 months from the date of the Section 26 Notice and cannot be prior to the expiry date.
If you are either a Landlord or a Tenant and you have a lease which is due to expire within the next 12 months, it would be advisable to seek professional help to ensure that you are following the correct procedure to bring the existing lease to an end. A chartered surveyor will then inspect and measure the premises, undertake a rental valuation and negotiate suitable terms,upon your instruction, with the other party. Overall, the lease renewal process is designed to balance flexibility in acommercial lease with a degree of security for both parties. The rules are there to protect and empower both tenants and landlords alike. However, to get the most out of them, it makes sense to get the aid of a chartered surveyorwho can navigate the finer points on your behalf, with the ultimate goal of negotiating a favourable agreement which meets your requirements.
To find out more about our lease renewal services, contact Richard Sellers, Chartered Surveyor and Registered Valuer today.