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As a commercial landlord, tenants occupy your commercial property to provide you with rental income. However, there are times when you may not want anyone inside your property, such as if you wish to occupy it. Alternatively, you may not be happy with your tenants for your current lease or want to change the lease rental amount. Therefore, there are some key considerations and steps to take if your lease reaches its contractual term. If you do not carry out specific actions when your commercial lease is about to expire, you could find yourself with an unwanted or even an unlawful tenant. This article will explain what you must do as a commercial landlord if your lease expires.
What Happens When a Commercial Lease Expires?
If your commercial lease is a contracted-out lease, it is an unprotected one. Accordingly, it will automatically expire upon reaching the lease term end date. Most commercial leases are contracted-out leases, and as the landlord, you will know what type of lease you have; your lease agreement will detail this.
When a contracted-out lease expires, your tenant no longer has the right to use your commercial property as their business premises. They can only stay if you agree to grant them a new commercial lease. However, there is no legal requirement that you consider this.
On the contrary, a protected lease does not expire when it reaches the least end-term or contractual date. Instead, it legally automatically renews unless you oppose this as the commercial landlord.
Landlord’s Actions
As a landlord, you must take specific actions before your lease reaches the contractual date. You should consider these around 18 months before your commercial lease expires.
Options for Landlord With a Protected Commercial Lease
A protected lease legally automatically renews when it expires and reaches the end-term date. As such, you need to think about whether you are happy to continue or wish to oppose it. If you are happy to renew, there is no action you need to take. Still, you should consider if you want to suggest new terms for the lease and what they may be.
However, if you wish to oppose the legal automatic renewal of your lease, you must gain possession of your property. You can only do this if you meet one of the seven legal criteria.
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Whichever option you decide on for your protected lease, you must make this clear before the lease expires. You should do this with a Section 25 Notice stating your preferred option and any suggested terms if relevant. You serve this on your tenant between 6 and 12 months before your contractual lease date arrives.
Options for Landlord With an Unprotected Commercial Lease
Although an unprotected or contracted-out lease naturally ends at the lease term end date, this does not mean that you have no action to take.
If you have no intention to enter into a new lease with your current tenant, there is nothing you need to do when your commercial lease is about to expire. You simply need to go through the usual formalities at the end of a lease, such as ensuring your tenant complies with their repair obligations. Of course, you must also look for a new tenant ready to occupy your property.
If you cannot agree on the exact terms of the new lease before the expiry date and your tenancy does hold over, you should put a tenancy at will in place. This protects you from the tenant claiming a periodic tenancy and, ultimately, security of tenure. Do not, however, assume a tenancy at will is in place. Instead, you should have an express tenancy at will, so have the tenancy in writing first.
Key Takeaways
If your commercial lease expires soon, you must take certain actions. You may want to ensure your lease continues where you are happy with the tenants. However, you may wish to change the terms for any future lease.
Alternatively, you may no longer want your tenants to occupy your commercial premises. If your lease is protected, you will oppose renewal, which can only happen when you have one of the seven legal grounds to do so. You will need to serve your tenant with a Section 25 Notice.
If you need help understanding what to do as a commercial landlord when your commercial lease expires, LegalVision’s 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. Call us today on 0808 196 8584 or visit our membership page.
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