A lease renewal is the process whereby, at the end of a contractual lease term, a further term is negotiated between the landlord and tenant or their representatives.

Under Part Two of the Landlord and Tenant Act 1954, most commercial tenants have an automatic right to renew their lease whereby their landlord may only refuse this within a few predefined exceptional circumstances. It also enforces several notices which can be employed to regularise such proceedings, stipulating deadlines for responses from the other party which constrain their options should they be overlooked.

Further, under the principles of O’May v City of London Real Property Co. Ltd [1983], any departure from the terms of the current lease must be fair and reasonable such as those that are mutually agreeable between landlord and tenant or supported by changed market sentiment.

Consequently, their proper treatment is crucial in ensuring the suitability of the renewed lease for each party and, understandably, the process can elicit disagreement in the likely event their preferences for the renewed lease, or lack of, conflict.

Whilst it can be tempting for both landlords and tenants to ignore the fact that the contractual term has expired and leave the lease ‘holding over’, this doesn’t give either party any security as the landlord benefits from only a small ‘guaranteed’ term and the tenant could potentially be served a notice to leave the property within a very short time period.  In addition, a landlord could be missing out on receiving a higher rent (if the market has improved) and if a new term can be agreed then the property’s investment value will also improve.  Alternatively, from a tenant’s perspective it gives them more security in a building for their business and depending on market circumstances the ability to change lease terms, rents and/or incentives.  Consequently, it is important for both a landlord and tenant to take the right advice from professionals when approaching a lease renewal.

Rushton Hickman are experienced in representing either party within associated negotiations to successfully navigate such difficulties and achieve tangible results.

If you require any assistance in these matters, please contact Taylor Millington on 01283 387685 or taylormillington@rushtonhickman.com.