Image of outside reflection on transparent glass.

Top Tips for Commercial Tenants – Lease Expiry

27 April 2017

If you are approaching lease expiry or if you have an impending break date in your lease – 5 top tips to help you consider strategy and next steps.

1. Strategy – consider your end of lease strategy early, 18 months prior to the lease end date or a break date is a decent window to begin to consider the needs of your business and how you are using your space.  Do you need more space/less space/different space? Can you repurpose the space you're in or do you need to find alternative premises? Start thinking about these questions early so that your end of lease strategy is established in good time prior to the end of your lease.

2. Break dates – in the event that your business needs have changed and you want to bring your lease to an end early, consider whether you have the option to break your lease before the end of the term.  Your lease will set out the break notice conditions which usually include a requirement to give the landlord 6 months' notice (and sometimes up to 12 months) that you intend to exercise your right to break the lease.  Prepare for this in good time and get the notice right.  Even small mistakes can make notices invalid.

3. Negotiate – even if you do not have a break right, you may still be able to negotiate a deal with your landlord.  The landlord may be willing to consider accepting an early surrender of the lease, or they may have alternative premises which may suit your needs better.  

4. Statutory Protection – Consider whether your lease is protected by the Landlord & Tenant Act 1954 which gives you security of tenure.  If so, you may not want to relinquish that protection too easily, especially if the landlord might be looking to redevelop the premises in the near future as, in certain circumstances, you may have the right to receive compensation.  This is a discreet area of law and it is advisable to obtain specialist advice if this applies to you.

5. Dilapidations – at the end of a lease term there will almost always be some element of dilapidations.  Consider the following:

Do you want to carry out the dilapidations works yourself in accordance with your lease obligations? 
Are you happy for the landlord to carry out the works once you have vacated? Whilst this removes the burden of carrying out the works during the term, it also gives you less control over the process and the landlord can seek to recover loss of rent for a reasonable period when the works are being carried out.  
What are the landlord's intentions for the property? There may be ways to cap your dilapidations liability in certain circumstances.

Most importantly, try to engage with your landlord and dilapidations professionals at an early stage to reach the best deal for you and your business.