Top tips – end of lease issues
Whether you are a landlord or a tenant of commercial premises, it is important to consider the issues arising at the end of the lease term.
Where a tenant has statutory security of tenure under the Landlord and Tenant Act 1954 (the Act), the parties should consider their preferred outcome and tactics at an early stage.Under the Act, either the landlord or (unless the landlord has already served notice) the tenant can serve notice not more than 12 nor less than 6 months before the expiry date specified in the notice. That expiry date cannot be earlier than the contractual expiry date of the lease.
If the landlord wants to oppose a new tenancy, it must set out its ground/s of opposition in the notice and establish its case at court if challenged by the tenant. A tenant does not have to serve a counter- notice, but must apply to court for a new tenancy before the expiry of the landlord's notice. Intention to re-develop is a common ground of opposition and, as one of the "no fault" grounds a tenant is entitled to compensation. To be successful under this ground, a landlord must have a firm and settled intention to carry out the works and a reasonable prospect of implementation; commonly shown by planning permission, a building contract and funding arrangements. The landlord must also show that it cannot reasonably carry out the work without obtaining possession of the premises. A tenant who is keen to remain might consider whether it can counter by suggesting a new lease of whole (with a landlord right to enter and carry out the works) or a new lease of part.
If the landlord has not already served a statutory notice, tactically a tenant can start the renewal process and the landlord would need to serve a counter-notice within two months if it wanted to oppose the new lease - referring to the same grounds as above.
If there is no agreement on terms for an unopposed renewal, the court has discretion to order a new term of up to 15 years and decide the new rent according to an 'open market' valuation formula.
If parties are discussing the terms of a renewal or a negotiated surrender, it is still essential to protect yourself by complying with the requirements and deadlines in the Act and at court.