Commercial tenants should be aware of their renewal rights when their lease term comes to an end and act sooner rather than later to secure continued occupation of their property, advises Kathryn Johns, a commercial property solicitor at Phillips.
Any business tenancy (not a residential letting) has an automatic right of renewal at the end of the term, under the Landlord and Tenant Act 1954 if the tenant is in occupation, as well as the right to stay in occupation after the term has expired. Even if the relationship between landlord and tenant has broken down, a tenant can oblige a landlord under statutory provisions to renew their lease on similar terms as before.
The landlord may be obliged by a court to renew the lease on similar terms, taking into account any modernisation of the accepted terms in the marketplace, if agreement cannot be reached beforehand between the parties on a new draft lease. The annual rent and lease term may be different to the previous lease, to reflect the open market rent and usual length of occupation in the market for this particular property. If the parties cannot agree on these terms, the court may impose an annual rent (based on the open market) and a lease term.
Only in certain circumstances can this right of renewal be rejected, such as a landlord’s redevelopment plans for the site or because the landlord wants to occupy themselves.
It is open to both parties to agree that the tenant’s right to renew be excluded when the lease is initially granted, but the tenant (or someone authorised to do so on their behalf) will have to swear a statutory declaration to confirm they fully understand the implications of this.
The above is only a short summary of some aspects of the 1954 Act and its consequences, which can be complex. It is strongly recommended that specific legal advice be sought with regard to any proposed renewal, whether by a landlord or tenant, and the summary given above should not be used as a guide for any particular circumstance.