As we’ve discussed in previous blogs, it’s often a landlord’s preference for a commercial lease to be contracted outside of the Landlord and Tenant Act 1954.
In practical terms, what this means is that the tenant is waiving its statutory right to security of tenure and is not entitled to be offered a renewal lease at the end of the lease term. You can find out more about contracting out of the Landlord and Tenant Act 1954 here.
This can make many tenants nervous, particularly if they are investing a lot of money in the property making substantial changes and undertaking significant works to make a property perfect for their business. They may also be concerned that being unable to renew the lease in the future and having to change premises may not only be a financial undertaking but that they may also lose goodwill and trade from existing customers who may assume that their business had ceased trading.
There is however a compromise here which may provide the tenant with the security they require whilst also allowing the landlord the control and flexibility that they prefer for the future. This can be done by agreeing to include a Right to Renew clause in the lease whilst also agreeing that the lease will be drafted outside of the Landlord and Tenant Act 1954.
What is a Right to Renew Clause?
Right to renew clauses can be drafted with more flexibility for the landlord than the standard security of tenure rights allow for; for example, time constraints can be placed on the tenant as to when they can request a renewal lease and obligations can also be placed on them which a lease within the 1954 Act would not allow for.
Meanwhile, the tenant would continue to have the security of knowing that, provided they comply with the terms of the clause, they would be able to renew their lease and continue their occupation of the property in the future.
Contact a Commercial Lease Specialist
If you are a landlord or a tenant negotiating the lease of a commercial premises, it’s important you seek assistance from a legal professional to advise and ensure that your lease complies with commercial property law while also meeting your commercial requirements and protecting your interests. Get in touch with our commercial property experts at Farleys today on 0845 287 0939, contact us by email, or use the online chat below.
