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How to Renew a Commercial Tenancy Agreement

How to Renew a Commercial Tenancy Agreement
11 December 2018

Under the Landlord and Tenant Act 1954, commercial tenants are broadly entitled to 'security of tenure'. This means you have the right to renew the tenancy when it comes to an end. Either the landlord or the tenant can request a new tenancy and there are different forms depending on who makes the request.

Section 26 notice requesting new commercial lease

If you, as the tenant, request a new tenancy then you must serve the landlord with a section 26 notice. The section 26 notice gives the landlord notice that the you want to renew the tenancy, the date when you want the new tenancy to begin and your proposals for the new tenancy. If the landlord agrees to renew the tenancy but the you can't agree on the terms then either party can ask the court to grant a new tenancy and the court will decide the terms.

The landlord can oppose the you request for a new tenancy on certain limited, grounds. Some grounds are to do with your conduct, such as failure to pay rent and others are to do with the landlord's requirements, such as redevelopment of the premises or where the landlord want the premises back for his own use.

Section 25 notice not opposing

If the landlord wants you to continue in the property he must serve the you with a section 25 notice: notice ending a business tenancy with proposals for a new one. Again, if you can't agree on all the terms of a new tenancy the court will decide.

Section 25 notice opposing

If the landlord wants to end the tenancy at the end of the term, he must send you a section 25 notice: notice ending a business tenancy and reasons for refusing a new one, specifying one or more of certain limited grounds.

The parties can send a Section 25 form or a Section 26 request at least six but not more than 12 months before the date the landlord wants the tenancy to end or you want the new one to begin. But the landlord cannot ask for the tenancy to end before the expiry date in the lease, nor can you ask for the new tenancy to begin until after the lease expiry date. You don't have to respond to a Section 25 form, but it would be sensible to get professional advice about the terms for the new tenancy, and to try to negotiate an agreement to avoid going to court.

The landlord must respond to your Section 26 request within two months of receiving it if he or she wants to oppose the grant of a new lease.

Contracted-out tenancies

Not all commercial leases allow you to renew your lease at the end of the fixed term. The parties can agree to 'contract out' of the Landlord and Tenant Act 1954 which means that it is entirely at the landlord's discretion whether or not to renew the lease. If you agreed to contract out then you would have signed a special declaration at the beginning of your tenancy and you will not have a statutory right to renew.

If there is no statutory right to renew the lease then you can't apply to the court to extend the tenancy beyond the end of the fixed term. A tenant with a 'fixed-term' tenancy (one that ends on a particular date) needs to move out of the premises by the end of the fixed term set out in the lease. A tenant allowed by the landlord to stay in the premises beyond that date would have to continue paying rent. The tenant would then have to give the landlord three months' notice to end this continuing obligation to pay rent.

Be Prepared

You need to be well-organised to successfully manage any issues you might face at the end of your commercial lease. You may have a statutory right to renew your lease but you'll need to check the terms of your lease agreement if you're not sure.

It's important to take into account what notices need to be served, by whom and the strict time limits that need to be observed. If you get it wrong you could lose your right to a new tenancy. On the other hand, if you plan ahead and understand the legal process of renewing a commercial lease you will be able to have an informed negotiation with your landlord. As ever, if in doubt seek legal advice.

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