Lease renewal – the Landlord can’t just name the price

In its March Edition the Earlsdon Echo published a headline feature "crisis in Earlsdon Street", referring to tenants forced to close their businesses when, on Lease renewal, landlords were asking for substantial rent increases which the tenants regarded as unaffordable.

Whilst each situation depends on its own particular facts and circumstances, for the sake of all tenants in this situation, I would like to point out that when a Lease comes to an end, it isn't simply a question of the landlord insisting on a particular increase in rent.

The majority of Leases will enjoy the benefit of security of tenure under the Landlord and Tenant Act 1954, meaning that the tenant will have the basic right (other than in certain exceptional circumstances) to claim a new Lease on current open market terms. Whilst the key question is what "current open market terms" should mean, it really isn't just a case of what the landlord requires.

Provided that correct procedures are followed (and we will be able to guide you in this), the eventual outcome will usually be that the parties negotiate the terms of a new Lease, each instructing a Chartered Surveyor to negotiate the key issue of the rental level, by reference to what a fair open market rent should be for the particular premises in the particular area. If agreement cannot be reached, ultimately (but this is very rare indeed) the Court will be called upon to determine what the terms should be, and the Court will be guided by expert evidence.

Differing premises will have differing circumstances, and much will depend upon what an existing Lease says, but as a general principle it isn't just a case of the landlord demanding a particular percentage increase, that percentage increase has to be justified, and in many cases, the ultimate outcome may be either a nil or a very marginal increase in rent.

I hope this helps reassure tenants in this situation that they are not without legal protection, and I would recommend that early advice be sought.

For further information please contact either myself or any member of our Commercial Property Team.