Commercial Lease Renewal
Commercial lease renewal is a process in which the agreement between the landlord and tenant has to be renewed depending on the lease term. You are eligible for an automatic renewal of the lease on similar terms if it is protected by the Landlord and Tenant Act (LTA 1954). However, there are some exceptions to this as follows:
- The owner intends to redevelop or occupy the site
- Rent is outstanding for a period of time
- The tenant does not wish to continue with the lease
- The premise is in a very bad condition.
How Does the LTA 1954 Rules impact the lease renewal?
The LTA 1954 rules should be strictly followed in the renewal process. Either the Landlord needs to serve Section 25 Notice on the Tenant or the Tenant has to serve a Section 26 Notice on the Landlord to make sure this renewal is effected within the LTA 1954 provisions. These notices must be served within 6 to 12 months before the end of the lease term. The Notice specifies the lease termination date, the renewal has to be done by this date or else the tenancy and right to renewal stands terminated. However, both the parties can mutually decide on extending the period before this date in order to avoid the Court proceedings or lease termination. In case any of them do not wish to continue with the lease they have to issue Section 27 Notice at least 3 months in advance.
Can I alter or negotiate the Lease terms?
In most of the cases the existing lease terms are used for renewal. The process therefore becomes very simple and quick. Rent and lease term are the main factors which are negotiated, other than this all other terms are taken as is and are not negotiable. But if the existing lease is too old and referring to it becomes difficult then a new lease would be the best option.
Case: O’May v City of London Real Property Co Ltd (1983),
In this case the landlord proposed a new lease and asked for the repairing and service charge of the premise to be added to it, but the court refused the proposal. Therefore, if a party wishes to amend any terms, they have to make sure it is practical and does not have a hidden motive.