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The Landlord and Tenant Act 1954 protects tenants of commercial property with the automatic right to renew their lease upon expiry however this right can be excluded by the landlord at the outset of the lease.
If protected by the Act, either the Landlord or tenant can service notice on the other via a section 25 Notice (for the Landlord) or a Section 26 Notice (for the tenant) in the last 12 months of the lease term to initiate lease renewal or termination proceedings.
The commercial lease renewal process needs to be handled correctly to ensure your business isn’t negatively affected. Ensuring you have the right advice, strategy, timing and notices is key.
As a commercial tenant, you need to evaluate your business needs to decide if a lease renewal is wanted at the point of expiry or if you will use the expiry date as a chance to scale up or scale down your business premises. (See our acquisitions service for help in securing a new business premises).
It is important to check whether your lease falls inside or outside of the Act so you understand the position you will be in at the end of the lease term and can plan your strategic negotiations accordingly. Lease renewal dates present the perfect time to renegotiate rents which can be negotiated up or down depending on the open market rental value at the time of renewal.
If you’re a commercial tenant and want to initiate lease renewal proceedings, you need to prepare and issue a section 26 Notice with the help of a surveyor. The document will state the terms you require including length of new lease and expected rent etc. The landlord then has two months to respond and let you know if they agree to your request.
The lease renewal process can be triggered by either a landlord or a tenant but a surveyor can only act for one side of the negotiation at any one time. So if you’re landlord has already instructed us, we cannot work for you as the tenant too.
If the landlord initiates proceedings by serving a section 25 Notice, the document will state that the lease will end at the original contracted date and if they wish to offer you a new lease, the terms proposed for it.