The lease renewal process can be complex with many potential pitfalls along the way.
Understanding the steps and having professional advice to guide you through the process can ensure you minimise costs, risks and also agree the best terms for you. Here we consider some FAQs when it comes to commercial lease renewals.
Q: When is the right time to instigate the lease renewal process?
A: We recommend clients begin reviewing their options at least 18 months prior to the expiry of their existing lease. Section 25 and 26 notices can be served on not more than twelve months, and not less than six months’ notice prior to the proposed termination date within the notice (the earliest date being the expiry of the current lease). It is important therefore to have a strategy in place to suit your operational objectives prior to serving notice.
If your lease is excluded from the security of tenure provisions of the ’54 Act, there is no right for a tenant to remain in place past the expiry of the existing lease and therefore should you wish to remain in occupation it is important to engage with your landlord with plenty of time prior to expiry.
Q: I have received a Section 25 notice from my landlord, what should I do next?
A: Where you have received a Section 25 notice it is vital you seek professional advice from a surveyor or a solicitor at the earliest opportunity. A Section 25 notice will either offer or oppose the grant of a new tenancy and therefore it is important you seek to protect your position. The nature of your landlord’s notice will determine your next steps; however a Section 25 notice sets in motion a prescriptive statutory process and it is important that you have suitable professional advice to guide you through the process and protect your interests.
Q: I have received a Section 26 notice from my tenant, what should I do next?
A: As with a Section 25 notice, should you receive a Section 26 notice from your tenant it is important to seek professional advice as soon as possible. If you are not opposed to the grant of the new lease then you are free and able to enter into negotiations; however, if you wish to oppose the grant of a new lease you have just two months to issue a counter notice and are only able to do so on the set grounds of Section 30 of the ’54 Act. A Section 26 instigates a formal statutory process and it is vital you have suitable professional advice to guide you through the process and protect your interests.
Q: We are approaching the end date within the Section 25 / Section 26 notice, what should we do?
A: Statutory deadlines are very important in the context of a renewal under the ’54 Act, particularly for tenants. Should the deadline in a formal notice be missed, you could lose your security of tenure and right to renew the lease. If a new lease is not agreed before this date the parties can agree an extension of the deadline in writing, if not then a tenant would need to serve or issue renewal proceedings under the ’54 Act to protect their position. Costs at this point would begin to increase exponentially, however.
As a landlord, there are less risks from missing the deadline in a Section 25 or 26 Notice, however the same cost exposure from renewal litigation is present for both parties. If the parties are close to agreeing terms, it may be that an extension to the statutory deadline is the best option for both parties to limit costs.
Q: How can Cluttons help with my lease renewal?
A: Cluttons have an experienced team of lease advisory surveyors with a detailed understanding of the latest legislation, case law and market activity to provide advice and clarity on how these may impact upon the renewal terms – this includes a detailed knowledge of the Landlord and Tenant 1954 Act and its requirements at renewal. We cover the whole of the UK and have experience dealing with all core asset classes, as well as alternative use class properties. We actively seek to avoid litigious disputes to avoid unnecessary costs and delays, but where there is no option, we have the required experience of County Court and PACT to achieve the right result for our clients.