The End is the New Beginning – Lease Renewals

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It is no surprise that lease renewals are often an issue with the ever more popular short term leases taking over. When a lease comes to an end both the landlord and tenant have various routes that they may choose to take; bring the lease to an end, renew the lease on the same terms or negotiate renewal of the lease on different terms.

Under the Landlord and Tenant Act 1954 (“LTA 1954”) the tenant of a business lease has a statutory right to a new lease at the end of the term unless these provisions have been contracted out. It is often the case that short term leases are contracted out but tenants should be aware of the implications of sacrificing this protection which include but are not limited to the following;

  1. The tenant will have no right to remain in the property when the lease comes to an end;
  2. There is no guarantee that the landlord will grant a new lease;
  3. There is also no right to compensation from the landlord; and
  4. The tenant cannot ask the court to fix the rent or the terms of the lease if the landlord chooses to offer another lease.

Contracting out of these provisions is therefore more favourable to the landlord than the tenant and both parties should consider this carefully.

If the lease is protected and the LTA 1954 does apply the tenant has a statutory right to remain in occupation. If the tenant wishes to renew the lease, they must serve a Section 26 notice on the landlord. Similarly, if the landlord wishes to terminate the lease, they must serve a Section 25 notice on the tenant. The parties need to be tactical when thinking about whether they want to renew or end the lease and should serve their notice at the earliest possible opportunity, up to 12 months before the contractual expiry date, before the other party has served their notice. Any mistake in delivering a notice can prove to be costly and therefore it is highly advisable to speak to your solicitor in plenty of time before serving notice to ensure that the correct processes are followed.

When remaining in occupation of a business lease the tenant must also bear in mind the Stamp Duty Land Tax (“SDLT”) liabilities that may arise from the grant of a new lease or from the tenant having remained in occupation.

Whether the parties are ending a fixed term lease or renewing the existing lease, things can quickly become complicated if the correct procedures are not adhered to or the rights of each party are misunderstood. Should you require further information on how this may affect you, please contact our Commercial Property team on Freephone 0800 689 0831 or send any question through to Forbes Solicitors via our online Contact Form.

 

Trishna Modessa

About Trishna Modessa

Trishna is a paralegal in the Commercial Property department at Forbes Solicitors. Within her blogs Trishna deals with all aspects of commercial property including leases (from both landlord and tenant perspective), licences, acquisitions and disposals along with recent updates within the property sector.
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