The process of negotiating a lease renewal can be complex and daunting, as Amy Durkin, head of Lease Advisory at Vickery Holman explains.
So why is negotiating lease renewals complex? A lease renewal gives rise to the opportunity to negotiate all lease terms, so there can be multiple areas to consider and agree between parties. Terms that need to be negotiated could include the term length, presence of a break clause, rent review provisions, repairing obligations and assignment and subletting allowances.
Leases can be split into two categories, ‘inside’ or ‘outside’ of the 1954 landlord and tenant act. Inside the act means the tenant has security of tenure and they are entitled to a new lease on expiry. If they are outside of the act, there is no security of tenure and the landlord can decide not to renew a lease.
The main difference with a lease with security of tenure is the ability of the parties to serve notices and eventually have the lease terms decided by the court, if an agreement can’t be sought. These notices, the section 25 and section 26, have the effect of bringing the current tenancy to a close and encouraging the parties to negotiate new terms. Progressing to having the court decide on terms is rare, as there are additional costs to this and in most cases a compromise deal can be achieved between both parties.
The basis of negotiating renewal terms is looking at comparable evidence, considering the similarities and differences between the properties to gain an understanding of how the rent and terms at the subject property should fit within the evidence.
Sometimes there is also consideration of terms that either the landlord or tenant particularly want in the next lease. Perhaps they would like reduce the number of years before a break option, or make certain alterations to the property. Again, this is where instructing a surveyor well versed in negotiating can help to draw together the requirements of both parties, combined with an analysis of comparable evidence, to negotiate the best deal for the client, whilst maintaining a good landlord and tenant relationship.
We work with both landlords or tenants, to achieve the best terms of our clients. To find out how we can help you, please look at our Lease Advisory services.
