The lease extension process can be challenging, with plenty of scope for error that can allow a challenge from a freeholder unwilling to cooperate with the request. The team at Salisbury Law have handled hundreds of lease extensions, helping lease holders to extend their lease and secure the long-term value of their property.

How our team can help:

• Help you to decide whether the formal or informal route is the best option.
  ‍
• Prepare all the information required for the lease extension application.
  ‍
• Serve the Notice, which will trigger the formal statutory procedures.
  ‍
• Respond to requests for information from your freeholder –including in any Counter-Notice.
  ‍
• Handle the conveyancing of the new lease.
  ‍

Who’s Protected

1.  Tenant
2.  Those occupying for business purposes
3.  Not excluded

Most business tenant’s leases are protected by the Landlord and Tenant Act 1954. The main exclusion is the tenant contracting out of the Act by signing a declaration before  the lease being granted. This will be referred to in the lease.

What does it mean?  
Statutory Continuation
At the end of the fixed term, the business lease will continue at the same term and rent until the tenant gives 3 months’ notice to quit or the procedure below is commenced. 

Interim Rent
Either Landlord or Tenant may apply to the Court to set aninterim rent pending the renewal / termination of the lease.
‍
Right to a New Lease
The Tenant has the right to a new lease, subject toLandlord’s rights of oppositionThe process is commenced by either the landlord or tenantserving notice.

Serving Notices 
The Landlord or Tenant can start the process of lease renewal / termination by serving a notice. The notice must specify a nominal termination date for the existing lease after the contractual term in 6 to 12months’ time. It is vital for the correct notice to be used and time limits adhered to.

Opposing New Lease 
Landlord’s Notices 25
Landlord sets out ground(s) for not granting a new lease.
‍
1.  Failure to Repair
2.  Persistent Delay in Paying Rent
3.  Substantial Breach of Other Obligation 
4.  Alternative Accommodation
5.  Subletting of Part
6.  Demolition /Reconstruction. Landlord has a firm intention to demolish / reconstruct / carry out substantial works to the premises.
7.  Landlord to occupy for Business Purposes. Landlord must have owned the property for 5 years.

Not Opposing New Lease
Landlord’s Notice s25
Landlord provides proposals for new rent, length, and other items. Negotiations commence between the parties’ surveyors as to the terms of renewal. There is no requirement for the tenant to serve a counter notice.

Seeking New Lease
Tenant’s Notice s26
The tenant provides proposals for new rent, length, other items.

Landlord’s Counter Notice
‍If opposed to a new lease, the Landlord can serve notice, within 2 months, opposing a new lease and setting out grounds(s) for termination (as per ‘Opposing New Lease’ above).

If there is no opposition to a new lease, the landlord does not need to serve counter notice and may proceed to negotiate the terms.

Negotiations and Next Steps
‍Initial negotiations are usually conducted by the parties’ surveyors with the renewal rent typically the principal area for disagreement. By the Termination Date in the notice one of the following steps must be taken or the Tenant will lose their right to a new lease:

Extension to Negotiations
The parties can agree to extend the period for negotiations provided this is in writing before the termination date. It is not unusual for the parties to leave negotiations to the last minute or forthere to be multiple extensions agreed.

Applying to Court
‍Most parties sensibly seek to avoid taking the matter to court, but if the terms of the new lease cannot be agreed or the tenant seeks to challenge the landlord’s ground for terminating the lease, an application must be made to the court prior to the termination date (or any agreed extension). The court will set a timetable for exchange of evidence clarifying what remains indispute supported by reports from the parties’ surveyors. Court proceedings can substantially delay the grant of a new lease and it is common for an application for an interim rent to be made at the same time. Costs remain at the court’s discretion and are usually awarded to the winning party.

Renewal Lease or Termination

No Renewal Lease
‍Ifthe tenant does not challenge an opposed renewal or the landlord is successfulat court in establishing a ground of opposition, no renewal lease will begranted and the tenant must vacate.
‍
Compensation for Tenant
Ifthe landlord successfully obtains possession on grounds of either: subletting,demolition/reconstruction or occupation for business purposes, the tenant will be entitled to compensation from the landlord equal to the rateable value ofthe property.

Wherethe tenant has been in occupation for 14 years this increases to double therateable value.Anyagreement to exclude compensation, often included in the lease itself, will beineffective where the tenant has been in occupation for 5 years. 

New Lease Granted
Most lease renewals are dealt with by agreement without the involvement of the court. The terms of the renewal lease are nonetheless guided by the order a court would likely make.

If agreement is not reached, the new lease will commence 3 months after the conclusion of court proceedings.

Rent: set at an open market rent

Property included: the landlord has the choice to re-let the premises as per the existing lease or offer those parts the tenant occupies for business purposes. The tenant will likely lose renewal rights in respect of sublet property.
‍
Duration: whatever is reasonable, up to 15 years, taking into account amongst other things the length of existing lease and any continuation tenancy, the landlord’s plans for the property and past relationship between parties.

Other Terms: as per the existing lease, subject to the parties agreeing new terms or reasonable inclusion of new terms.