Partner Gemma Stephenson, in our Commercial Property team, explains whether landlords or tenants should instruct a solicitor on a renewal lease.
It may be tempting not to instruct a solicitor and incur legal fees where a renewal lease is being granted or taken. However, there are a few things which should be considered before proceeding with this option, as set out below.
Landlords
- Where the lease is contracted out of the security of tenure provisions of the Landlord and Tenant Act 1954 the contracting out process followed when the original lease was granted needs repeating on each renewal. It is imperative that the procedure is followed correctly otherwise the tenant may inadvertently be granted a lease with security of tenure.
- Depending on the age of the lease being renewed, it is likely to require general updating to some extent as legislation and requirements change over time, for example:
- Minimum Energy Efficiency Standard (MEES) Regulations may need to be added. Within the next few years, it is likely that all commercial property will be required to have an Energy Performance Certificate at all times. Where properties are below the requisite standard (currently an E rating, but likely to increase), it will be unlawful to accept rent on existing leases (or grant a new lease). A landlord in those circumstances will need access to the property to enter and carry out works to improve the energy efficiency rating (where possible) and without the relevant provisions in the lease, the landlord would not be permitted to do so.
- The Use Classes Order was amended in 2020 and so newer leases will need to refer to the correct Use Class.
Tenants
- A renewal lease should be reviewed to ensure that the terms are as agreed. Generally the expectation would be that; otherwise than where agreed, it will be similar to the existing lease. A thorough review is particularly important where either the landlord has changed or their form of lease has changed, as the drafting may differ considerably. Even where a lease was acceptable several years ago, there have been market changes which mean that uninsured risk provisions and less stringent break clauses (both of which are beneficial to a tenant) are now commonplace, and we would seek to negotiate relevant updating.
- There are other considerations aside from the lease document itself, such as Stamp Duty Land Tax, where a form may need to be submitted to HMRC within 14 days of completion and any monies paid or a fine will be due. The lease will also likely need registering or the noting at the Land Registry.
- A solicitor will check the landlord’s title for anything which adversely impacts the property or the grant of the renewal lease and also ensure that any requirements are met, such as obtaining lender’s consent where the landlord has a mortgage.
As you will see from the above, there are many considerations to a renewal lease and even though it may seem like a simple process, it is worth getting it right to avoid unintended complications and costly issues further down the line.
If you need legal advice in relation to a lease, please do get in touch with our Commercial Property team.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
