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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25424
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I rent a retail property, the lease expires in May I have received

Resolved Question:

I rent a retail property, the lease expires in May I have received notice pursuant to section 25 of the Landlord and Tenant Act 1954 which includes proposals for a new tenancy which stipulates ending my tenancy on 7 October 2015 or new lease.
I took on the lease halfway through the previous business owners tenancy in my own name. I need to negotiate the rent as the business cannot afford the increase and would like the lease in the company name, and as the business is two floors I would possibly look at one floor only.
I would like to know what my options are and how I should approach this with minimal expense.
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

Could you tell me if the lease is contracted out of part II landlord and tenant act please - this is the part that gives you security of tenure beyond the end of your existing lease?

Customer:

I have gone through the lease - not exactly sure but do not think the lease is contracted out of part II landlord and tenant act.

Joshua :

Thank you. If it were contracted out there would be a clause specifying that part II is excluded. Also you would have had to sign a notice when you accepted the lease stating that you understood you were taking on an excluded lease and this meant you have no security of tenure beyond the term of the lease.

Joshua :

The procedures are radically different depending on whether the lease is contracted out or not from part II. Are you happy for me to proceed on the basis that your lease is not contracted out of part II and therefore has a right of renewal which is the basis of what you say above?

Customer:

Yes, that would be great. Thank you

Joshua :

Thanks. On the basis that you have part II protection you the landlord must give you not less than 6 months notice to end your tenancy or propose new terms and prbably obviously cannot end your tenancy earlier than your existing term in any event.

Joshua :

It is important that you note carefully the expiry date given in the notice and assuming it complies with the above requirements, ensure that you do not miss it if you have to go to court (more on this below) or you can lose your right to renew.

Joshua :

You should therefore have at least six months during which time you can either a) accept the landlords terms or b) negotiate with the landlord in respect of the terms proposed. Many landlords will expect neotiations and just like estate agents do, deliberately set the proposals higher than they are actually willing to accept to allow themselves room to negotiate though there is no hard and fast rule.

Joshua :

There is nothing stopping you openeing negotitations yourself if you wish and there is no prescribed procedure that you must follow. You can negotiate in person, on the phone by email and so on.

Joshua :

If you are able to reach agreement as to terms with the landlord then you, he or an agent should record your agreement in detail so you are happy it reflects your agreement (known as heads of terms) and then solicitors can be instructed to prepare a new lease or vary the existing lease to extend the term as you agree and you continue on

Joshua :

Some people prefer to appoint a local commercial property surveyor to negotiate on their behalf either from the start or if initial negotiations do not go well. You can find many such surveyors attached to local commercial property agencies that can assist if you want to retain one.

Joshua :

However you choose to proceed what is crucial is you do not allow the expiry date to come and go without either a) agreeing a terms for a new lease above or b) issuing an application to the county court to set the terms of your new lease (more on this below) or you can lose your right to renew.

Joshua :

Does all the above make sense so far?

Customer:

Yes, it is just as I thought. The crucial part is going to be the negotiations. The company cannot afford a large increase in rent, it made a loss for the first 4 years, small profit October 14 - £2.5K. If I decide to close the business and not renew would I still have until the 7 October 2015 to occupy the premises (this is the date stipulated in their notice) or could they hold me to the 5 May 2015 which is the expiry of the old lease.

Customer:

Business has picked up over the past 6 months so if I am going to close it would like to trade for as long as possible to recoup as much as possible!

Joshua :

Thanks. In terms of negotiations you can begin these yourself if you wish and you could simply approach them by setting out your hand or you may prefer to adopt a harder approach.

Joshua :

There is no right or wrong answer necessarily. Try to do your research on market rack rents for the area by speaking to agents or looking at similar commercial advertised property if possible.

Joshua :

You may prefer to appoint a surveyor to assist you with negotiations as they can produce reports on comparables and so on which can be very helpful. Obviously surveyors cost money but they can be effective in achieving lower rents. It is a cost an benefit decision.

Joshua :

Whichever approach you decide is best for you if you are not able to conclude terms you are happy with then you will need to issue an application in the county court before the expiry date (this is essential) using form N1 to ask that the court determines terms based on the evidence you and the landlord provide for your new lease. The court has the power to set the terms of the new lease in default of an agreement in these circumstances. You would normally reatin a solicitor to assist you with this application though it is possible to apply yourself using the below form:

Joshua :

http://hmctsformfinder.justice.gov.uk/HMCTS/GetForm.do?court_forms_id=338

Joshua :

Has the above answered your questions satisfactorily?

Customer:

Once I start negotiations, am I committed to go down the court road or can I close the business?

Joshua :

No not at all.

Joshua :

If you do not agree terms by the expiry date and you do not issue an application to the county court then your lease will expire and you will lose your right to renew. However it is your decision whether to issue an application to the court and only yours.

Joshua :

Where leaseholders often go wrong is missing the expiry date and then losing their right to renew which means that if they still wanted to renew the landlords hand is strengthened because he can ultimately refuse to grant a new lease. Other than this it is a question of keeping the situation under review with an eye on the calendar and bringing in help if and when needed on a cost and benefit basis.

Joshua :

Is there anything above I can clarify for you?

Customer:

HI, no I don't think so other than the business has been up for sale does this alter anything in regards ***** ***** lease - someone mentioned something about in pertuity?

Joshua :

Your attempting to sell the business will not impair your rights as above. It gives you another factor to juggle of course because there is the question of: do you cut your losses and just give up your lease and walk away or go for renewal and sell the business with the benefit of the lease. You seem to have already made a decision in this respect based on what you say above regarding trading conditions improving but apart from giving you this further factor to consider in your negotiations, your attempting to sell your business does not impact the above.

Joshua :

Leases are granted for a defined or periodic term rather than in perpetuity. However if you have a lease with part II protection as you do then you have a right to renew as we have discussed above, therefore you have a right to renew that term over an over again.

Joshua :

Has the above answered your questions satisfactorily?

Customer:

Hi yes, thank you very much for your help.

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