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What happens at the end of a commercial property lease?

If your business leases its offices or industrial space from a landlord, then you need to know what happens when your lease comes to an end.

The steps following the end of the lease will depend on the wishes and needs of both your business and the landlord, but the lease will either be terminated upon expiration or renewed.

In either situation, it is important that you know your rights and obligations to ensure the best outcome for your business.

Termination

“Many business owners choose to end their commercial leases upon expiry of the contract,” said Carl Jones, Head of Commercial, “particularly if they need more or less space, or wish to move to a different location.”

When this happens, you will no longer have the right of access to the property, nor will you have responsibilities towards its maintenance and proper use – beyond the obligations outlined in your lease agreement.

These will typically include:

  • Vacating the premises – You’ll need to remove all possessions and leave the property in the condition agreed upon in the lease, which often involves some degree of repair or renovation referred to as ‘dilapidations’.
  • Dilapidations – This refers to the condition that you must leave the property in, as specified by the lease.

There may be negotiations or disputes over the state of the property and the extent of repairs required, or any other issues such as unpaid rent.

You should seek advice if you think you are being asked to pay for a repair unreasonably.

Renewal

Carl continued: “Your other option, if available, is to renew your lease.

“You can do this by either:
(1) negotiating with the landlord informally for new terms in a new lease; or
(2) exercising a formal right to renew which is generally under the provisions of the Landlord and Tenant Act 1954 and the service by the landlord of a “notice to quit” or by the tenant of a “notice requesting new tenancy”.

“You will remain in the property while a new lease is negotiated, known as ‘holding over’, during which period the original lease applies.

“Whichever option you choose, make sure that it is the right decision for your business and leave plenty of time to deal with the formalities so that you meet all your obligations under your initial agreement.

“We can advise you on next steps when negotiating a new lease or when being unduly pursued for costs or other compensation.”

Our Commercial Property team are here to help keep your business on track. Contact us today to find out how.

Carl Jones

Managing Director

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.