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Is your business premises lease due to expire? If so, have you considered what might happen next?

Posted by Carly Cornell on 7th September 2020

If you find yourself in the final year of the term of your business lease, you may be wondering about the process for staying put or moving on to pastures new. In this blog, we provide a summary of what might be involved.

Staying put?

The first thing to consider is whether you have the security of tenure under the Landlord and Tenant Act 1954 as tenants that do are in a much stronger position if they want to stay in their business premises.

If you do have the security of tenure you normally have a right to remain in your business premises when your lease expires and a right to have a new lease.

If neither you nor your landlord takes any steps to renew your lease then you will continue to occupy under the terms of your current lease – this is known as “holding over”. Some tenants are happy to do this due to the flexibility it gives them by not being “tied in” to a new lease. However, other tenants may require greater certainty and so may prefer to have a new lease.

The formal process for entering into a new lease, from the tenant’s perspective, is to request one by serving what is known as a section 26 notice on the landlord. To be valid, the section 26 notice must comply with a number of statutory requirements such as being served on what is known as the ‘competent landlord’ and within specified time periods. It is important to note that the landlord can oppose your request for a new tenancy but for its opposition to be successful it must be able to rely on one or more of the statutory grounds for opposition (such as arrears of rent or landlord’s intention to redevelop).

Often, a landlord is happy to grant a new lease but the parties cannot agree on its terms – especially the level of rent. In such circumstances, either party can apply to the court for a new lease. The court application must be made within the prescribed time limits or you will lose your right to a new lease.

Considering pastures new?

If you have a business tenancy that has the security of tenure and you do not want the lease to continue after the end of the contractual term then you should leave the premises on or before the last day of the term.  For tenants that are holding over (i.e. still in occupation of the premises after the end of the contractual term), a minimum of three months’ notice must be given to the landlord to end the lease.

No security of tenure

If you do not have the security of tenure, then you do not have a right to remain in your business premises after the expiry of the lease term. For those who do not wish to remain then, this is not an issue, but if you do, you may want to consider approaching your landlord or your landlord’s agents to discuss the terms of a proposed new lease. If it transpires that your landlord won’t agree, so that you have to leave, it is important to consider what you need to do when handing back the premises (such as reinstating any alterations you have made or bringing the premises into a good state of repair) so that these can be properly dealt with when relocating your business.

Your circumstances may not fit into any of the scenarios discussed in this blog. Should you have any queries or concerns about how you occupy your business premises our expert advisers will be happy to discuss them with you.

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