Three Stages of Renewing a Business Lease
The following outlines the basic requirements for renewing business tenancies under the Landlord and Tenant Act 1954.
Failure to follow the correct procedure may lead to adverse consequences, so it is always advisable to take independent legal advice from the outset.
1. Starting The Process
The statutory rights under the existing lease must be terminated by giving not less than six months’ notice but not more than 12 months’ notice.
This is done by the landlord serving a section 25 notice or the tenant serving a section 26 request, setting out the proposed terms of the new lease. The notice and request must be in prescribed forms.
These time limits will apply even where the contractual lease term has expired and the tenant is holding over.
If they cannot easily be agreed, either party can make the application to court for the terms of a new lease to be determined. If a landlord’s s25 notice has been served, proceedings can be commenced immediately after service. If a tenant’s s26 request has been served, proceedings can start after 2 months from service of the notice. A party might want to issue proceedings early in order to put pressure on a party who is perceived to be dragging its feet.
2. No Extension
A tenant must issue proceedings by no later than the date specified in the s25 notice or the day before the s26 request (unless an extension is agreed by the parties in writing) in order to protect it’s automatic right to a new lease.
Proceedings are issued by lodging papers at court with a fee. Legal advice should be sought because, in addition to deciding the lease terms, the court can make an order as to the legal costs of the case.
Settlement should be considered at all stages to avoid the costs of litigation and the risk of an adverse costs order. Formal offers of settlement (known as Part 36 offers) can be made to influence the decision the court makes about costs if the matter does proceed all the way to trial.
Either party can apply for determination of the rent payable during the statutory continuation of the tenancy until the new lease is completed. The advice of a surveyor should be taken as to whether this is desirable in the current market.
Service of Proceedings and Response
Once proceedings have been issued, the claimant can delay serving them on the defendant for up to 4 months. However, the tenant can compel the landlord to service the proceedings. The defendant then has 14 days to file an acknowledgment of service setting out proposals for the new lease.Commercial Property
How Kerseys Can Help
If you have a business lease which is due for renew and would benefit from advice from a specialist legal advisor please contact Kimat Singh, Partner and Head of our Commercial team at Kerseys Solicitors, Ipswich 01473 213311 or Colchester 01206 584584 or alternatively email – [email protected]