What Should a Landlord Do When a Commercial Lease is About to Expire?

Summary

• When a commercial lease expires, the landlord can either end the lease, negotiate a renewal, or allow the tenant to remain under new or continued terms. 
• If the tenant stays after expiry without a new agreement, the lease may continue on similar terms or become a periodic tenancy, depending on the lease and conduct of the parties. 
• The outcome depends on the lease terms, including any renewal rights, notice requirements, or break clauses agreed at the outset. 
• This guide explains what happens when a commercial lease expires for UK business tenants and landlords, outlining the available options and legal implications.
• It is prepared by LegalVision’s business lawyers, a commercial law firm that specialises in advising clients on commercial leasing matters.

Tips for Businesses

Review your lease well before expiry and check for renewal rights or notice requirements. Engage early with your landlord to negotiate terms or plan your exit. Avoid remaining in the premises without agreement, as this can create uncertainty around rent, obligations and termination rights.

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• What Happens When a Commercial Lease Expires?
• Key Takeaways
• Frequently Asked Questions

When a commercial lease expires, what a landlord must do depends on whether the lease is protected or contracted out of statutory renewal rights. If the lease is contracted out, the tenant’s right to occupy the property ends on the expiry date unless a new lease is agreed, and the landlord can require the tenant to leave. If the lease is protected, the tenancy will usually continue and the tenant may have a right to renew, unless the landlord formally opposes it on specific legal grounds.  This article explains what landlords should do when a commercial lease expires and the options available.

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 provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced leasing lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.

Frequently Asked Questions