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As a business owner, you may have a retail or commercial lease for your commercial business space. A lease agreement will detail your use of this space, including when your use of the business premises expires. As your company will rely on the property to run your business, you must understand what to do when your existing lease is about to expire. This article explains your options when your lease is about to expire. These depend primarily on whether you have a protected lease or not.
A Retail Lease
A retail or commercial lease concerns your occupation as a commercial tenant or lessee in your business property. You will occupy the premises for a specific purpose in return for monthly payments to your landlord or lessor.
Generally, a ‘protected’ commercial lease is where your lease agreement:
- has not been contracted out of the Landlord and Tenant Act 1954;
- is a tenancy (a licence or a tenancy at will do not qualify);
- is granted in respect of premises occupied for the purpose of a business that you carry out;
- is for longer than six months; and
- is not subject to a specific industry exclusion (for example, mining leases).
Where you have a commercial lease, you will have a commercial lease agreement that details the lease. This contract will describe, for example:
- what you can use the retail space for;
- the annual rental charge;
- general rights and responsibilities of you and your landlord; and
- the end date of the tenancy.
As a commercial tenant, you have some options open to you, which we explain below.
Can I Renew My Lease?
When your retail lease is about to expire, you may be able to renew it, depending on whether you have a protected or unprotected lease.
A ‘Protected Lease’
If you have a ‘protected lease’, you have a legal right to renew your tenancy. Your lease will continue automatically after the fixed term ends unless your landlord gives you a Section 25 Notice which opposes a renewal. The notice must meet specific legal requirements, and there are limited grounds on which it can lawfully be valid. If the Section 25 Notice does not meet the legal requirements, you may have rights to challenge this in court.
Additionally, you can request renewal of your retail lease when it is about to expire and before the landlord issues their notice. You can do this with a Section 26 Notice which must also meet specific legal requirements to be valid. Unless your lease was contracted out of sections 24 to 28 of the Landlord and Tenant Act 1954, it might very well be a protected tenancy that gives you access to these rights.
An Unprotected Lease
If your lease is not protected, it will finish at the end of the contractual term. You do not have a legal right to a renewal. Instead, you will need to negotiate to renew your lease.
Notably, your landlord’s actions can be relevant when your lease expires. For example, if you remain in the property and they accept your rent payments, this may give you legal rights to suggest the lease continues. In addition, it may mean your lease becomes a protected tenancy.
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Vacating the Property
Suppose your retail lease is about to expire and is a protected lease. If you no longer want to stay on the property, you can vacate the premises by issuing a Section 27 Notice. You can also vacate your commercial premises if your lease is not protected, but you do not need to do this with a Section 27 Notice.
A Section 27 Notice requires three months’ notice before the end of the term of your lease, in which case you then vacate at the end of the term. If you wish to vacate your commercial premises before the end of your lease term, you still give three months’ notice and then vacate at the end of that notice period.
However, if you provide a Section 27 Notice, you should note that:
- you cannot change your mind about this; and
- you give up your security of tenure, which is your automatic right to renew when the lease expires.
Key Takeaways
When your retail lease expires, you have two main options. You could vacate the premises or renew your commercial lease. If you wish to vacate, you can leave the premises at the expiry date. However, if your lease is protected, you must use a Section 27 Notice to vacate. If you wish to renew your lease and have a protected lease, it will automatically renew unless your landlord issues you with a Section 25 Notice. You may request to renew your lease when you have a protected lease before your landlord issues their notice and can do so using a Section 26 Notice. However, if you have an unprotected lease, it will not automatically renew when your commercial lease expires. Instead, if you wish to renew it, you will need to negotiate this with your landlord.
If you want to discuss your options when your retail lease expires, 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.
Frequently Asked Questions
A protected commercial lease is a lease that has not been contracted out of the Landlord and Tenant Act 1954. It is a tenancy that lasts longer than six months and concerns premises occupied for a business purpose.
If your protected lease is about to expire, it will not expire automatically, and you can request renewal using a Section 26 Notice. On the other hand, a non-protected lease will end, but you may be able to renew it with your landlord’s agreement.
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