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Commercial Tenants Sqaundering New Lease Protection and Rent Reduction- 23/09/2010
Many commercial property tenants are losing the opportunity to reduce the rent that they are paying at the end of their lease period, because they are unaware of the correct legal procedure to follow, according to a leading Wolverhampton commercial property lawyer.
David Grove, Partner in the Wolverhampton Commercial Property Department of West Midlands law firm FBC Manby Bowdler LLP, says that occupiers are losing money and creating uncertainty for their business by failing to demand a new lease from their landlord at least six months before their current lease runs out.
“Rents on many commercial properties in Wolverhampton are lower than they were four to five years ago, when a number of leases were signed,” says Mr Grove.
“As long as the original lease was regulated by the Landlord & Tenant Act 1954, then the tenant’s right to renew the lease under the same terms is, except in certain limited circumstances, protected by law, at the market rent, determined by a court if necessary.
“What some tenants do not understand is that on a lease renewal the market rent can go down as well as up. They may believe that to achieve a lower rent, they will have to move premises, with all the associated costs and business interruption,” explains Mr Grove.
To start the lease renewal process the tenant has to issue a Section 26 request to the landlord, on between six and 12 months notice, telling the landlord it wishes to remain in its current premises and proposing a new rent and any other changes to the lease terms.
“The timings of notice and counter-notice, and how and where to serve them, are regulated very strictly, and it is vital that tenants seek advice both from a solicitor and commercial property agent,” says Mr Grove.
“Having received the Section 26 request the landlord can refuse to grant a new lease only in limited circumstances, including if it wishes to develop the property or occupy it itself. But if a new lease is refused on these grounds, which is rare, then at least the tenant has a number of months to search for new premises, and the tenant is likely to be entitled to compensation in these circumstances .
“While some tenants are becoming increasingly aware of the power of serving a section 26 notice, which puts them in control, many continue to wait too close to the end of their tenancy period and, as a result lose their legal right to protection.
“We advise all our commercial tenants to consider their future premises needs at least eighteen months before the end of their present lease to ensure that they can achieve the best possible outcome for their business,” concludes Mr Grove.
With 38 partners, FBC Manby Bowdler is one of the largest law firms in the West Midlands. The firm has offices in Wolverhampton, Willenhall, Telford, Shrewsbury and Bridgnorth