A new lease of life for businesses

  • Posted

At some point, most businesses will need to make decisions about their commercial premises as the end of their lease approaches and, if they are to make the most of their bargaining position, it's essential to fully understand whether or not they occupy under a protected tenancy, and the procedures which can be used by either side to bring the arrangement to an end, or to renew the lease. Rigid timescales are strictly imposed – rights can be lost and unnecessary costs incurred if they are missed even by one day.

When the originally agreed terms of a business lease comes to an end, but the tenant remains in occupation, the lease will often continue on the same term unless the landlord or the tenant takes steps to bring it to an end, or to renew it. But bear in mind that if the tenant intends to vacate, he must have done so before the end of the original term or will be liable for a further three months' rent.

If the tenancy is a protected one, the tenant may serve a notice on the landlord claiming a new one, or the landlord may want to bring the tenant to the negotiating table by serving a notice on the tenant bringing the tenancy to an end and indicating whether or not he would oppose an application by the tenant for a new one – he can only oppose the tenant's request on limited grounds, for example the landlord needs the premises for his own use or for redevelopment. If need be, the Court will decide whether the landlord has grounds for opposing renewal, and so, whether or not to order a new tenancy, and ultimately on what terms.

Our advice is to start discussions early, at least 12 months before the lease is due to expire. If you receive a Notice, don't ignore it or delay seeking advice.

Like any commercial negotiation, lease renewals should always be approached with caution. During negotiations all correspondence should be marked with 'without prejudice' to make sure the landlord or the tenant isn't irretrievably committed to agreeing an issue that it may wish to later change.

Of course, although it can be complicated and there are many pitfalls along the way, it doesn't have to be painful! Once either party involves the Court it can get expensive for both of them, so understanding your position and reaching mutual agreement is preferable all round and is, more often than not, achievable with the right valuation and legal expertise.

This article was first published in the Peterborough Telegraph in March 2014.