Running a business can be a lot, so much to do, so little time etc, etc. However, when the time comes round to renewing your lease – it pays to press pause and check a few things. Before you renew you want to be clear exactly what you are signing up for. Our commercial real estate team works with both business owners and landlords on all kinds of commercial leases.
From how long you are agreeing, any rent changes to your rights and responsibilities, here are the essential things to check;
What Is a Commercial Lease?
A commercial lease is a property that is occupied for business purposes. This can include anything from bars, cafes to retail shops. They differ from residential leases in many ways due to their purpose. Most commercial leases are subject to the Landlord and Tenant Act 1954. This gives certain rights to leaseholders and sets out clear procedures that must be followed. Furthermore, there are specific rules and processes when it comes to renewing or extending a lease. Hence, it is important to fully understand the terms before signing.
1) How Long Is The Lease?
Commercial leases tend to run a lot longer than rental tenancies due to business needs. As a business owner you likely want the security that you have the premises for a fair duration before investing and making it fit for purpose.
- When you renew a business lease you want to ensure the length covers your commercial real estate requirements.
- For your security ensure it has a break clause and any early termination fees should you need to use it.
Some of the wording around these clauses can be technical and it is wise to get a commercial solicitor to help you out.
2) Check You Are Protected
It is likely you are, still worth checking is your lease covered by the Landlord & Tenant Act. One key protection you are provided in this law is the right to renew a commercial lease via a s26 notice. A landlord may serve a s25 notice on you first to start the renewal discussions. Bear in mind there are grounds in which a landlord can refuse. However, if you find yourself in this situation, a commercial solicitor can advise you on your rights. The rights of refusal are limited and it may be possible to challenge a refusal depending on the circumstances.
3) What Are Your Obligations?
If you have already been renting from the landlord for a number of months or years you might have an idea of your obligations under the lease. For example, repairs and updates, ensure there is an equal balance of responsibilities, avoiding nasty surprises. If you would rather a landlord take on certain responsibilities the renewal is an opportunity to discuss and negotiate who covers what.
4) How Much Are You Paying?
It is likely that a commercial lease will go up in value and the landlord will increase the rent to reflect this. However, you want to ensure the number is fair and the renewal gives you a chance to negotiate and agree on a fair rent. Ultimately as a business owner you have a lot of costs and want the figure to be sustainable. Your agent can help you agree to an amount that keeps you both happy and in business.
5) Are There Any Service Charges And Business Lease Rates?
On top of your rent there may be additional costs to your lease such as service charges and business lease rates. Make sure your solicitor thoroughly checks any costs you will be liable for before signing. Having a strong idea of your cash flow in terms of outgoings and profit is important and can help you in your renewal.
Also read: A Simple Guide To Taking On A Commercial Lease
How Do You Renew Your Commercial Lease?
To request a new lease you can serve a s26 notice to the landlord. This can be served not less than six months before you want the tenancy to begin. In the s26 you can put forward your proposals which will be subject to negotiation. The landlord must reply to the notice within two months of receipt if they wish to refuse the new lease. Only if the lease is protected by the provisions of the Landlord & Tenant Act 1954 will you have the right to an automatic renewal. It may be the case you have opted out of this security which means the lease will automatically end on the contractual date. If you are unsure about your rights of renewal, speaking to a commercial lawyer as early as possible puts you in the strongest position.
How Can Waterstone Legal Help With Your Renewal?
Commercial leases can be complicated. It is easy to make a mistake or misinterpret a clause which can end up being costly. A commercial solicitor can guide you through the clauses making sure you understand everything. This gives you the opportunity to discuss and negotiate anything you are not happy with. They can also help you prepare any notices and ensure they are served correctly and within the right time frames. Ultimately, a solicitor helps take the headache of your renewal so you can carry on with taking care of business.
Would You Like To Discuss Your Commercial Lease Renewal With One Of Our Team?
