Should I stay or should I go? -Business Premises

• Posted onMarch 27, 2017

The business premises from which businesses operate are integral, particularly for those that rely on their location to bring in customers/clients. It’s therefore important to consider what happens at the end of a lease term well in advance to avoid being left in a difficult position on expiry.

Leases within the Landlord and Tenant Act 1954

If a tenant enjoys the protection of the Act, the lease will continue automatically and the tenant can remain in occupation on the same terms. Should it then wish to leave, it may do so on giving at least 3 months’ notice. This can afford greater flexibility, however, the tenant may opt for greater security and trigger the statutory renewal process and seek a new lease with a fixed term and an open market rent.

To initiate the renewal process, a tenant must serve a notice on its landlord setting out the date for the commencement of the proposed new lease (which must be between 6 and 12 months from the date of the notice), and other proposed terms (e.g. term length, rent and break clauses). If the landlord’s happy to renew the lease, the parties then have the opportunity to negotiate terms. If the parties cannot agree, either party may apply to the Court to decide the terms. If an application isn’t made to Court before the last day of the lease, the lease will terminate. A landlord can also object if it can prove that any of the statutory grounds for doing so apply, eg. The landlord wishes to occupy the premises itself or demolish it for development.

Leases outside the Act

A tenant that doesn’t have the protection of the Act will have to leave at the end of its lease, unless it can agree terms for a new lease with its landlord, or the lease contains an express right to renew.

Lease renewals are often tactical and it’s advisable to consider renewal strategy at least 12 to 24 months before the term ends. If statutory notices are required, it‘s also important to seek advice at the earliest opportunity so that the strict time limits are adhered to and the position (of landlord or tenant) is protected.

Please get in touch with WSP Solicitors to discuss with a specialist in Business Premises and all other areas of Commercial Property.

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