Are you getting ready to renew?

Legal

DOES your business plan provide for new premises this year? If so, do catch up with my last four articles in which I have covered rent, repairs, rent reviews and service charges. This time, let’s have a look at the length of the letting term you might want and your right to renew.

Much depends on the nature of your business. Are you long-established or new and growing fast? If long established, are you going to adapt the premises specially for the needs of your business – in which case you may want a medium term, say, 10 to 15 years, with a right to renew.

If you are unsure how your business will develop, you may want may want a break clause, perhaps after 12 months or with more flexibility e.g. a ‘rolling’ break if you are growing fast. A valuer or surveyor may tell you flexibility will cost more in terms of rent. As ever, it will be down to the location, type of premises and the laws of supply and demand.

It could work to your advantage (if you are not going to spend a lot of money with fitting out or alterations) to put in one or more break clauses. The advantage being that you do not have to find someone to take over your lease when you wish to relocate. Usually, you won’t have to pay a fee to break but you could be asked to pay say three months’ rent to cover a reasonable time for your landlord to re-let. 

How long can you stay for? If your lease is not excluded (I’ll explain this later), you can expect renewal, as a matter of law, on similar terms and conditions and to the market rent operating at that time. Your landlord could oppose renewal, e.g. if you have been persistently late paying your rent or there have been persistent breaches of the tenant covenants under your lease. Also, if your landlord can demonstrate it wants the premises for its own business use or wants to demolish and reconstruct, you may not be able to renew. You could get round this by having a contractual option to renew. 

What if your lease is excluded? This practice is now very widespread, especially for short-term lettings.  It means your landlord then has the flexibility of doing what it wants when the letting period ends. You can ask to renew and you should do so well before your lease ends. Your landlord may be happy to but if not, no reason need be given.

The statutory right to renew is a detailed issue in itself. Do take professional advice at the relevant time, preferably at least 12 months before your lease is due to expire.

My last article in this series will look at deposits and guarantees and (if space permits) alterations and changes of use.

Contact Borneo Martell Turner Coulston on 01604 622101 or visit www.bmtclaw.co.uk