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When you negotiate a new lease as a commercial tenant, there are many factors you need to consider. For example, the rental amount, property location and what repair and maintenance obligations the lease agreement specifies. However, one key point you need to consider is whether the commercial lease offers security of tenure. This article will explain why you should insist on a commercial lease with security of tenure.
What is Security of Tenure?
Security of tenure protects a commercial tenant when their commercial lease ends. It offers them the automatic legal right to renew the lease on the same terms as the current lease. The lease will automatically renew without you needing to take any action. If you wish to include new terms in the lease, you can request this with your landlord. Where you cannot agree on new terms, a court may decide what these might be.
Additionally, when a lease has security of tenure, a commercial landlord only has limited legal grounds to refuse automatic renewal of the lease. You may hear these referred to as statutory grounds. These include, for example, if they wish to:
- demolish their property;
- occupy the property themselves; or
- where you have consistently paid your rent late.
Why Have Security of Tenure?
There are various reasons why a commercial tenant should insist on having rights to automatic renewal in a commercial lease.
1. Peace of Mind With Security of Tenure
Security of tenure provides you with peace of mind. When your lease term ends, you are most likely to be able to stay in your commercial premises rather than worry about looking for a new commercial lease and business premises.
2. Business Success and Continuity
Security of tenure can also facilitate business success. This is because, once your lease ends, you can likely stay in the commercial property so your business can grow.
If you are customer-facing, your customers will also know where to find you since you establish a presence in one place. Often, where your business is in the retail industry, it can add to your business’ goodwill.
3. Consistent Terms
When your lease reaches its end term, and you enjoy the legal automatic right to renew your tenancy, this should be on the same terms as your current lease. This means that you have an idea of what your terms will be.
However, you can, of course, request new terms when you renew your lease. While your commercial landlord does not have to agree to these, a court may determine they should proceed.
4. Resource Efficiency
Security of tenure in a commercial lease means you have a statutory right to lease renewal at the end of the lease term. You can, therefore, save on resources by not spending time and money looking for and moving to a business premises.
Also, as you may have spent money on the current commercial property, such as a fit-out, you can enjoy this investment for longer. For example, if your business is in the manufacturing industry, insisting on security of tenure may be crucial as you will need to install machinery in your commercial premises.
This cheatsheet includes practical tips to understand key clauses and avoid disputes in leasing agreements.
Key Takeaways
As a commercial tenant, it is usually of interest to insist that your commercial lease has security of tenure. Security of tenure offers you the automatic right to renewal once you reach the lease term end date. A commercial landlord can refuse to renew but only has strictly limited legal grounds in which to do so. In this sense, security of tenure can provide your business with some stability. It can also help your business save resources in terms of the time and cost of looking for a new commercial premises.
If you need help understanding your commercial lease agreement, 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. So call us today on 0808 196 8584 or visit our membership page.
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