Commercial lease extension – how do tenants request an extension?

The next in our series of blogs looking at the process of lease extension of commercial properties, Richard Pulford, Associate Solicitor in the Dispute Resolution team, looks at the statutory extension process when the tenant serves notice. 

 

Tenants extending a commercial lease

Assuming that the tenant is protected under the Landlord and Tenant Act 1954 (“the Act”), they have a continued right to occupy the commercial property. Until one party serves notice, the lease will just continue. We have previously covered the landlord looking to serve notice but what if the tenant wants to do the same? Assuming the landlord has not already served a notice of their own, a tenant can serve a section 26 notice seeking to extend their tenancy. The timescales for this are much the same as they are with the landlord. Notice cannot be served before 12 months from the end of the fixed term, must give a minimum of 6 months notice and cannot expire any earlier than the end of the fixed term.

The Notice itself will set out the proposed new conditions of the tenancy including the new term and the new rent. The Landlord then has the opportunity to counter this notice opposing the granting of a new lease citing the relevant statutory grounds that they intend to rely on set out in section 30(1) of the Act. If the landlord does not oppose the granting of a new lease but wants to negotiate terms, they can do so during the notice period.

The key date that all tenants will need to be aware of is the end of the notice period. If you get to that stage with no agreement and no agreed extension, then the tenant will lose all of their protection under the Act. This will mean that either they can be immediately evicted, or they will have to continue the negotiations having lost all the leverage of negotiating under the Act and the right to a new lease that this affords. This would likely result in an increasingly bullish Landlord increasing their demands with little in the way of recourse. Either the tenant pays, or they are evicted. To avoid this happening, the tenant would need to issue court proceedings to protect their right to a new lease, and to ask the court to determine suitable lease terms, if necessary. This must happen before the expiry of the notice and so whilst tenants will want to leave as much time as possible to negotiate without incurring costs of court proceedings, they will not want to leave this too late risking the protection under the Act which is so important. 

If both parties are still negotiating the terms of the new lease as the deadline approaches (which is very common in practice), then the tenant can also ask the landlord to agree to extend the deadline, under section 29B of the Act. There is no prescribed form for this extension agreement; it just needs to be in writing.

 

Tenant outside of Landlord and Tenant Act 1954

If the lease is outside of the Act, refer back to our past blog on your options.

 

Tenant checks before serving notice

Considering the landlord does have the option to refuse a new lease, tenants are well advised to conduct their own due diligence before serving notice. The usual checks of who the landlord is (to ensure this remains as per the lease), and where and how notice needs to be served, will be required. In addition, tenants will need to consider that landlords can oppose the granting of a new lease if the tenant is in breach of their lease or has been consistently late with their rent. This is a high bar that the landlord would need to reach to use as an objection as once again reflected in the recent case of Gill (as trustee of the Gillcrest UK Pension Scheme) v Lees News Ltd. Despite this, it is probably an argument that the tenant would be well advised to avoid if they can by making sure they are unarguably in compliance with their agreement at the time of serving notice.

 

Commerical lease advice

If you are looking into the possibility of serving notice, early advice should be taken. Either to address the reasonableness and validity of opposition to the extension or if an extension is agreed, to ensure that the proposed new terms are suitable. At Boyes Turner, we can advise on all elements of the process. You can contact the dispute resolution team on [email protected]. Alternatively, read further on our residential property and property disputes services.