When fixed term of a commercial lease expires, there may be various options available to the landlord or the tenant however, these options will be determined by whether the existing lease is a protected tenancy.
What is a protected tenancy?
The law states that a tenant will automatically be entitled to a new lease, unless their existing tenancy was excluded from the protections afforded by statute.
If a tenancy has been excluded, the tenant will not automatically be entitled to a new lease but, that is not to say the landlord cannot grant a new lease to the existing tenant, it simply means the landlord may exercise their discretion.
What happens if the tenancy is protected?
If the tenant is automatically entitled to a new lease, the landlord must grant a new lease to the tenant on similar terms to the existing lease save for in respect of rent which will be at market rate.
If the tenancy is protected, can either party require the other to enter into a new lease?
Should one of the parties request a new lease and the other party fails to engage, the requesting party can serve a notice on the other which sets a deadline for lease negotiations. At the end of the notice period, if the tenant has failed to enter into a new lease, the landlord can request possession of the property. If the landlord has failed to negotiate terms for the new lease, the tenant will be granted a new lease based on the terms set out in their notice.
If the tenant is entitled – can the landlord get the property back?
There are several grounds upon which a landlord can oppose to the grant of a new lease and they are as follows:
1. The tenant failed to comply with the repairing obligations under the existing lease;
2. The tenant has persistently delayed payment of rent when it fell due;
3. The tenant has substantially breached other obligations under the lease;
4. The landlord is offering alternative accommodation for the tenant;
5. The tenancy was created by sub-letting only part of the property and the letting of the various parts creates a total rent less than that the landlord could achieve by letting the property as a whole;
6. The landlord wishes to substantially develop the property and such works could not be carried out without possession of the property; or
7. The landlord intends to occupy the property for themselves.
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We have a specialist property litigation team who can provide advice regarding the end of a fixed term commercial lease. If you have any questions or concerns, talk to us.
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