RENEWING A COMMERCIAL LEASE

The 1954 Act is a piece of legislation that ensures a landlord cannot evict a tenant when their business leases comes to an end. The 1954 Act gives the tenant the right to remain in the premises at the same rent and on the same terms after the lease has come to an end. The 1954 Act also gives the tenant the right to automatically renew the lease in certain circumstances. Some leases are however not protected by the 1954 Act. In some cases the parties will opt out or contract out of the security of tenure provisions found in the 1954 Act.

If the landlord wants to grant a new lease to the tenant they can serve what is known as a Section 25 Notice on the tenant (normally served 6 to 12 months before the lease expiration date). This notice will set out that the landlord is happy to renew the tenancy and on what terms.

Alternatively, if the tenant wants to renew their current lease they can serve what is known as a Section 26 Notice on the landlord. This notice sets out the tenant’s proposed lease terms and should be served 6 to 12 months prior to the lease expiration date.

Once both parties agree on a new lease in principle they will then need to negotiate the terms of the new lease. These terms can be whatever the parties agree. If they can’t agree then either party can refer the matter to court and ask that a judge decide.

As a rule of thumb the new lease will follow the terms of the old lease subject to possible rent increase. The new rent will generally be the open market rent at the time of the lease renewal. Surveyors can determine the new rent and agree other terms such as the term of the new lease and any break clauses.

If either the landlord or the tenant serve on the other the requisite notice to renew the lease and the other party does not agree to the other’s proposed terms either party can then apply to the court for determination (i.e. the court would determine the terms of the new lease based on available information such as comparative properties and rents).

Under the 1954 Act a landlord can only refuse to grant a new lease in the following circumstances:

• The tenant has breached their obligations, i.e. failed to keep the premises in good repair or has regularly been late in paying rent.
• The landlord offers to provide other, suitable premises.
• Where a sub tenant who is occupying part of the building wishes to renew their lease, but the landlord wants to rent the premises as a whole.
• The landlord wants to demolish or rebuild the premises.
• The landlord wishes to occupy the premises themselves.

At Birch Law our expert solicitors have experience acting for both landlords and tenants when it comes to renewing a commercial lease. We can assist with the service of the requisite notices, help with negotiating the terms of the new lease, or deal with court proceedings. For a free no obligation discussion with one of our team please contact us on 0161 669 4621 or by email at sbirchall@birchlaw.co.uk.