The steps to renew a commercial lease will largely depend on whether the lease is within the Landlord & Tenant Act 1954 (the “1954 Act”) (and therefore the tenant has security of tenure – i.e. a statutory right to renew its lease) or whether it has been contracted out of the 1954 Act, meaning the tenant does not have a statutory right to renew its lease.
Leases within the 1954 Act
If a lease is within the 1954 Act the tenant has a statutory right to renew its lease at the end of the contractual term. A tenancy will not therefore automatically terminate at the end of the contractual term. There are different procedures for renewal, depending on whether the landlord or the tenant initiates the renewal. The landlord can initiate renewal by serving what is known as a section 25 notice on the tenant. The tenant can initiate renewal by serving what is known as a section 26 request on the landlord. It is imperative that this notice is valid and is validly served on the competent party.
Leases renewals within the 1954 Act have strict statutory time frames that must be adhered to – to miss a statutory deadline could mean a tenant loses its statutory right to renew its lease or a landlord could lose its ability to oppose a section 26 request. It is therefore imperative that contractual end dates are diarised, and solicitors instructed well before the contractual end date.
Leases contracted out of the 1954 Act
Leases outside the 1954 Act will automatically terminate on the contractual end date, unless both landlord and tenant agree to renew the lease. It is completely at the other party’s discretion whether it accepts a renewal lease and/or the terms on which the lease is renewed. There is no statutory procedure to follow – it is all down to negotiations between the parties.
As with leases within the 1954 Act, termination dates should be diarised, and discussions held well before the contractual end date if either party wishes to renew the lease. If a tenant continues to occupy the property post termination, from a landlord’s perspective it is vital that the basis of their occupation is formally documented.