For many businesses, their premises are simply where day-to-day work happens, but when a lease is coming to an end, it can quickly become a source of uncertainty and concern.
When a lease approaches its end, it can create uncertainty about whether you’ll be able to stay or what rights you actually have. A commercial lease is a legal agreement that allows a business to occupy a property for an agreed period and under specific terms, and knowing where you stand when renewal time comes is crucial.
This blog explains the legal rights businesses may have when a lease expires, when landlords can refuse renewal, and the steps you can take to protect your position, plan ahead with confidence and the role of a commercial property solicitor.
Do businesses have the right to renew a commercial lease?
The key legislation governing commercial leases is the Landlord and Tenant Act 1954. This Act gives some business tenants what’s known as security of tenure, a valuable legal protection that means you have the right to remain in the property and apply for a new lease once your current one expires.
In practice, this means that unless certain conditions apply, your landlord cannot simply tell you to leave at the end of the lease term. They must either agree to grant you a new lease or rely on one of the Act’s limited grounds to refuse renewal.
However, not every lease benefits from this protection. Some leases are “contracted out” of the Act. If your lease was excluded, you would have signed a declaration before the lease began, confirming that you understood you would not have automatic renewal rights.
If your lease is contracted out of the 1954 Act, you will have no statutory right to a new lease. Your position will depend entirely on negotiation with your landlord.
When can a landlord refuse to renew?
Even where security of tenure applies, there are circumstances where a landlord can legally refuse to renew the lease, but they cannot do so arbitrarily. The Act sets out specific grounds, including:
- Tenant breach: If the tenant has breached the terms of the lease, for example, persistent late rent, failure to repair, or other covenant breaches.
- Redevelopment plans: If the landlord intends to demolish or substantially redevelop the premises and cannot reasonably do so while the tenant remains in occupation.
- Landlord occupation: If the landlord wants to occupy the property themselves, for example, to run their own business from the premises.
Landlords must serve formal notice and, if challenged, provide evidence for their refusal. They cannot simply decide not to renew without any clear justification or valid reasons.
Business tenant rights in the renewal process
If your landlord refuses to grant a new lease, you may still have important legal options available. Depending on the circumstances, these could include:
Apply to the court: If the lease is protected by the 1954 Act and the landlord’s grounds are disputed, you can apply to the court for the grant of a new lease.
Compensation: If the landlord successfully refuses renewal because of redevelopment or landlord occupation, you may be entitled to statutory compensation, usually based on the property’s rateable value.
Notice and deadlines: Strict procedural rules apply to both landlord and tenant. Notices must be served correctly, and timeframes must be observed. Missing these deadlines can undermine your legal position.
Strategic considerations for businesses
Seeking early legal advice is one of the most effective steps you can take when approaching a commercial lease renewal. An experienced solicitor can guide you through the process, ensure notices are correctly served, and help you negotiate terms that work for your business.
Renewing a commercial lease isn’t just about whether you can remain in the property; it’s also an opportunity to review your lease terms and secure better conditions.
- Start early: Begin discussions with your landlord well before the lease expiry date, ideally 12 – 18 months in advance.
- Review key terms: Consider the rent level, break clauses, repair obligations, and service charges. Renewal is a chance to renegotiate these terms.
- Check your lease status: Confirm whether your lease is protected under the 1954 Act or contracted out; this changes your rights significantly.
By involving a solicitor early, you can approach the renewal process with confidence, avoid costly mistakes, and ensure your business is protected for the future.
Common pitfalls to avoid
Lease renewals can be a legal minefield. Common mistakes business tenants make include:
- Assuming automatic renewal: Not every commercial lease renews by default, especially if the lease was excluded from the 1954 Act.
- Failing to check for exclusion: Many tenants are unaware their lease was contracted out until the end approaches.
- Missing critical deadlines: Lease renewal notices are time-sensitive. A missed date can have serious consequences for your rights.
How Merriman Solicitors can help
Dealing with a commercial lease renewal or a landlord’s refusal can feel daunting. The stakes are high, and the law is complex.
At Merriman Solicitors, our experienced commercial property team helps businesses navigate every stage of the lease renewal process. Whether you’re negotiating new terms, responding to a landlord’s notice, or disputing a refusal, we provide clear, strategic advice to protect your business premises and your future.If your lease is coming to an end, don’t wait until the last minute. Contact us today for expert guidance and practical support.
