As a business owner in the UK, you will have a commercial lease agreement to occupy your business premises and will need to renew the agreement prior to the lease end date. How the agreement is renewed will depend on what type of lease it is, and whether or not the landlord opposes the lease renewal.
There are limited legal grounds for a landlord to refuse a lease renewal which we’ll explain below, plus each lease renewal may include a negotiation of new terms. Here we explain how to go about renewing your commercial property lease and what to expect in any negotiation.
Protected or Unprotected Lease?
It is important to understand whether your lease is protected or unprotected as it will impact the renewal process. A protected lease gives you the legal right to renew the lease once it expires, and thus to continue operating in your business premises. The lease will be renewed automatically unless the landlord opposes it, citing any of the specific legal grounds that allow them to do so.
An unprotected lease does not automatically renew upon expiration and you have no legal right to renew it. To continue operating in the commercial premises, you will need to negotiate the terms once again with the landlord. It is strongly advised to enter such negotiations before the current lease ends.
Negotiating a New Commercial Property Lease
Lease negotiations will revolve around the rent amount to be paid as well as the timeframe of the lease. You may also want to include a break clause that allows you to end the lease early. The landlord may also have additional terms that they want to include.
Any changes to the terms should remain comparable with other rent prices and terms for similar businesses in similar premises in the local area.
Section 25 and Section 26 Notices
The Section 25 Notice is what the landlord will send you when your lease date is expiring. It will either confirm the automatic renewal of the lease if it is protected, or explain the legal grounds for opposing a renewal.
You can trigger the automatic commercial lease renewal yourself by sending the landlord a Section 26 Notice. It should be sent between 6 and 12 months prior to the lease end date, with the landlord allowed 2 months to respond.
Legal Grounds for Opposing Lease Renewal
There is a limited amount of legal grounds that a landlord can cite for refusing to renew your lease. These include any breach of the terms of the lease, such as persistently late rent payments, refusal to conduct repairs, or subletting without permission.
Other legal grounds include the landlord wanting to do something else with the property such as reconstruct it or use it for their own purposes. Your landlord may also refuse a lease renewal if they have another commercial premises to offer you that includes reasonable lease terms.
If you need to renew a commercial property lease, then contact Brecker Grossmith today to speak to an experienced team of chartered surveyors specialising in commercial property in London.
