Lease renewals
The process in England and Wales is covered by statute (principally the Landlord and Tenant Act 1954). For Scotland please see the relevant section.
Unless there is a break clause, the tenant is committed to the lease and to pay the rent for its duration.
A lease of business premises continues indefinitely after expiry (called holding over), until terminated by the landlord or tenant.
The tenant has the right to renew (called security of tenure) unless the landlord can prove one of seven grounds, the most important of which is that the landlord wants the premises back for its own occupation or intends to demolish and redevelop.
Limited compensation is payable to the tenant in certain circumstances if the landlord opposes a new lease.
Process of renewal:
- Landlord serves notice (giving not less than 6 nor more than 12 months notice) terminating the lease and either proposes new terms or states grounds for opposing new lease OR
- Tenant serves notice requesting new lease (again giving not less than 6 nor more than 12 months notice) and the landlord must then state whether he is prepared to grant one.
- To retain protection of the Act (security of tenure), the tenant must apply to Court for a new lease before the date set out in the notice for expiry of the old lease.
- The parties will seek to negotiate the terms of the new lease.
- In the event of failure to agree, it is the Court that determines the terms, including rent. It is also the Court that decides whether a new lease is granted or not if the landlord opposes the renewal.
A lease may be excluded from the security of tenure provisions of the Act by agreement between landlord and tenant. The tenant then has no automatic right to renew and may be required to leave on expiry.
The new lease will usually be on broadly the same terms as the old lease, but may be updated if appropriate.
An alternative to Court proceeding is PACT which generally is a cheaper option. In this case the dispute is settled by an Arbitrator or Independent Expert
