Commercial lease due to expire? Here’s what you need to know
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Ian Archer, director of Aitchison Raffety’s commercial agency, explains the ins and outs of lease renewals.
My lease is due to expire soon. Can I initiate a renewal or do I have to wait for my landlord to initiate?
A tenant has the right to serve notice on his landlord up to 12 months ahead of the lease expiry date. The Section 26 Notice, which would be served by your solicitor, would request the granting of a new lease.
In the current economic climate when rents in certain sectors are beginning to fall rather than rise it may be in the tenant's interest to serve notice at the earliest opportunity so that the agreed new rent, which is likely to be at a lower rent, will commence on the expiry date of the existing lease, rather than waiting for the landlord to serve notice on you.
It is in the landlord's interest in these difficult times to do nothing and hope that tenants forget to initiate proceedings themselves. Conversely, if market rents were increasing it would be in the tenant's interest to delay for as long as possible.
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An interim rent can also be applied for so that a lower rent could be paid almost immediately, even though the lease renewal has not been settled. You can apply to the Court to determine this interim rent at any time within three months of an Interim Rent Notice, although this cannot start before the end of the lease.
If you or your advisers do not take the initiative in serving notice your landlord is not obliged to take any action and you will be deemed to be 'holding over' on the existing lease terms and at the existing rent which could well be more than the current market rate.
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Open market rents for retail and office properties in some locations have shown a fall over the last three months and a good surveyor such as Aitchison Raffety, with experts in all of these types of buildings should be able to find enough comparable evidence to support your claim for a lower rent.
My lease is coming to an end and my landlord wants it back for his own use - what can I do and what rights do I have?
If your lease is protected by the Landlord & Tenant Act 1954, then the landlord has a right to ask you to leave the premises under certain circumstances, but you have the right to compensation as set out in the Landlord & Tenant Act 1927. The amount is limited to a multiple of the rateable value depending upon how long your business has been in the property.
The landlord may state that they want to use the property themselves but can only do so if they have owned the property for more than seven years. If they have not then they cannot force you to leave the property unless of course you have not been paying the rent on time.
They may also state they are redeveloping. However, they must show a clear intention to redevelop, which would include having a valid planning consent and also showing that they have the financial means to carry out a development.
If you have been in occupation for 14 years or less then the compensation is one times the rateable value. Over 14 years then the compensation is two times the rateable value.
For expert advice contact Ian Archer at Aitchison Raffety on 01727 843232.