November 22, 2021
When your lease expires, it can be an opportunity to renegotiate the terms before you sign a new version.
If your lease is protected by the Landlord and Tenant Act 1954, you will have security of tenure, or a statutory right to renew the lease. You will need to inform your landlord that you wish to renew and then enter into negotiations in respect of the terms of the new lease.
Commercial leases are notoriously complex and mistakes can be costly or even mean that a business cannot continue, writes Jaron Crooknorth, solicitor, partner and head of the Corporate and Commercial Department.
An experienced commercial lease solicitor will be able to ensure that you avoid the pitfalls and that the lease you end up with is tailored to your needs. We take a look at the lease provisions that your lawyer will be able to check and, where necessary, negotiate on your behalf.
Term of the lease
Commercial leases are generally granted for around 5-8 years. Where you have a good relationship with your landlord or where the market is favourable to tenants, you may be able to agree on the length of term that suits you.
If you are not entirely sure whether you will want to keep the premises for a whole lease term, your solicitor can ask for a break clause. This will give you the option of ending the lease early. The lease will be drawn up to include this right and will specify the process which will need to be followed to exercise it.
Negotiating a new lease will give you the opportunity to change the amount of rent you pay. The state of the commercial property market will generally govern whether the landlord is open to negotiation. Where the market is favourable to tenants your solicitor may be able to agree a reduction in rent. This can also be beneficial for the landlord as they will not have to find a new tenant, nor will they risk having their property standing empty for a period.
Service charge cap
Service charges cover regular items of expenditure such as buildings insurance, care of the common areas and maintenance. The landlord generally has the right to charge tenants for any substantial items of expenditure that arise, for example, the need for a new roof. To avoid unpleasant surprises, your solicitor may be able to agree a service charge cap, meaning the landlord will be unable to exceed that sum when levying a charge.
Subletting and assigning
Agreeing a lease that permits you to sub-let or assign can give you the ability to leave the premises, should you wish to do so in the future. Subletting allows you to find a new tenant to take over paying the rent, although you would remain ultimately responsible for the liabilities you have agreed to in the lease. In assigning the lease you would be able to find someone else to transfer the lease to.
A commercial solicitor will be able to ensure that the lease provisions for subletting or assigning are fair and workable, meaning you will have the chance to move on, should you ever wish to do so.
Jaron Crooknorth specialises in business sales and acquisitions, business services generally including commercial property and corporate agreements. He can advise you on the terms of a new lease and negotiate on your behalf to ensure that your rights and interests are protected as far as possible.