What Do I Do at the End of a Commercial Lease in the UK?

You may sign a commercial lease for property to run your business as a business owner. Your commercial lease will specify a set period for using the commercial property, which is the lease term. When this ends, you must decide whether to remain at or leave the property. Whether you have a protected or unprotected lease can determine your choices. This article will explain your options at the end of a commercial lease agreement in the UK.

What is a Commercial Lease?

A commercial lease is where you occupy a landlord’s commercial property for a specific business use as your commercial premises. A commercial lease agreement governs your commercial lease and is a written binding contract detailing both parties rights and responsibilities.

Remaining in the Property 

If you are happy with your business property, you can remain in the property once your commercial lease reaches the end of the lease term. Therefore, you will want to renew your lease.  

Protected Leases

If your commercial lease is protected, it has security of tenure, meaning that at the end of your lease term, the lease does not end, and you can renew it. Either you or your landlord can trigger this renewal process. You can do this by serving a Section 26 Notice, and your landlord by serving a Section 25 Notice. 

The notices can also state suggested new terms of your renewed commercial lease, which should be no less beneficial than your existing lease, and your rent should be at the current market level. If you disagree about the new lease terms, you can ask a court to decide. While waiting for the court decision, you have a legal right to stay on the property. If neither of you triggers the renewal process and you do not move out, your lease agreement will continue on the same terms as your current lease. 

However, although a protected lease gives a right to renewal, your landlord can oppose this using a Section 25 Notice. This means they wish to gain possession of the commercial property and can do so if they have reasonable legal grounds. If your landlord serves you with this notice, they must provide you with evidence to support it.  

Unprotected Leases

Unfortunately for commercial tenants, most commercial leases are unprotected. This means that you and your landlord ‘contract out’ of parts of property legislation, meaning you have no legal right to a lease renewal, and the tenancy will end at the end of the fixed term. Also, the notice procedures applicable to protected tenancies will not apply to your commercial lease.

You can tell if your commercial lease is unprotected because you will have the following:

• a specific clause stating this in your lease agreement; and
• a declaration signed by you saying you are aware of this.

Leaving the Property 

When your commercial lease ends, and it is an unprotected lease, as you will likely have no legal right to remain in the commercial premises, you will have to leave the property. 

If you have a protected commercial lease, whilst you have a legal right to renew the commercial lease, you may instead wish to leave the property at the lease term. In this case, you must serve your landlord with a Section 27 Notice three months before the end term or three months before you wish to move out if you wish to move out sooner. There is no set way to present this notice, but it must be in written format. If you choose this option, you are tied to the decision to move out, meaning you forfeit your right to renewal.

Key Takeaways

When you reach the end of your commercial lease, you can renew the lease or vacate the property. The choices and methods for doing so primarily depend on whether you have a protected or unprotected lease. The majority of commercial leases are, however, unprotected. If you wish to renew your commercial lease and have a protected lease, you have a legal right of renewal unless your landlord opposes this on one of the reasonable legal grounds. However, if your lease is unprotected, you have no legal right for renewal and no legal basis to remain in the property. In this case, you must negotiate a new lease with your landlord. If you have a protected lease and wish to vacate the property, you must give your landlord three months’ notice using a section 27 Notice.

If you need help understanding what to do at the end of your commercial lease in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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