Commercial Leases – To Renew or Not?

Commercial lease renewals under the Landlord and Tenant Act 1954 continue to be a frequent source of litigation for the Courts. 

As the commercial property market continues to come out of recession, there have been an increasing number of cases where landlords are refusing to renew commercial leases. 

Under the LTA 54, a commercial tenant within the Act has the right to renew the lease on basically the same terms as previous subject to agreement as to rent and modern updating. 

There are however specific grounds on which a Landlord can refuse to renew. 

An example of this was in the case of Mussellwhite v Yoseffi. The landlord opposed the renewal of a lease where the tenant had persistently refused the landlord access to inspect the property, had made rent payments late, and had failed to open the premises as a shop in contravention of the lease. 

The Court agreed that the landlord was entitled not to renew and terminated the tenant’s interest.  The tenant appealed and in July 2014 the Appeal Court ruled in favour of the landlord holding that lack of access and failure to use the premises as agreed were substantial breaches of the lease.

This case obviously underlines the importance of tenants ensuring that they do not breach lease terms especially if lease renewal is approaching. 

We are also seeing cases where commercial landlords are refusing to renew leases on the grounds that they wish to redevelop the land in question.  This is a particularly tricky area for commercial landlords because they typically need to obtain vacant possession of an entire site for redevelopment, and frequently there are a number of different occupants with varying levels of security.

If a landlord opposes a tenant’s lease renewal on the grounds of redevelopment there are significant evidential requirements to prove the intention.

Ambiguity in the landlord’s position over time can be detrimental to proving the required intention at trial, these cases all turn on their own facts.

We expect to see considerable activity over the next year in terms of landlords seeking to break leases and/or obtain significant rent increases with tenants opposing the same in most cases.

Pinney Talfourd Solicitors work closely with commercial agents and our clients (both landlords and tenants) to achieve their aims.  The earlier we are instructed in lease renewal situations the better we can assist our clients. 

Stephen Eccles deals with commercial lease renewals which are contentious whilst Julien Pritchard deals with all non-contentious elements.  Please feel free to contact either for more information.

This article was written by Stephen Eccles, Partner and Head of the Dispute Resolution Department at Pinney Talfourd Solicitors. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at February 2015.