How We Can Help

Commercial landlord and tenant disputes can be dealt with in a variety of ways depending upon the dispute that has arisen and the relationship between the parties.

Some disputes will involve injunctive relief whereas other disputes may be better dealt with by some initial correspondence and a negotiated settlement.

We assess each matter on its own facts and will outline all of you on all your options and advise you on the best course of action depending upon the objective you want to achieve.

Myerson’s Property Litigation Litigation team are experts at commercial landlord disputes. We have a wide range of experience in these cases and can help you to understand your options and guide you through the process.

Commercial Landlord Disputes

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Commercial Landlord Disputes Expertise

Contested and Uncontested Commercial Renewal Lease Applications

A tenant of a commercial lease normally has a right, under the Landlord and Tenant Act 1954 (“the Act”), at the end of the contractual term, to be granted a new renewal lease on the same terms as the existing lease subject to reasonable modernisation.

To qualify for a new renewal lease, the premises must be occupied by the tenant for the purpose of its business. Where premises are only occupied under a licence (this usually applies where premises are shared with other occupiers) there is no right of renewal. There is also no right of renewal under the Act for agricultural tenancies, service tenancies, mining leases and tenancies for six months or less.

Commercial leases can exclude the right to a renewal lease under the Act to ensure that at the end of the contractual term the tenancy comes to an end. Therefore, it is important to ascertain at the outset whether the tenant qualifies.

If the tenant is entitled to a renewal lease and the tenant wants to start a lease renewal then they can serve a “section 26 notice” on the landlord proposing the terms for the renewal lease. Alternatively, the landlord can start the process by serving a “non-hostile section 25 notice” setting out the proposed terms.

If the tenant is entitled to a renewal lease but the landlord is opposed to granting a renewal lease then the landlord can either serve a counter-notice (within two months of the tenant serving the section 26 notice) or alternatively, serve a “hostile section 25 notice” setting out why the landlord objects to granting the tenant a new lease.

 A landlord can only rely on one of the statutory grounds contained in section 30(1) of the Act to object to granting a new renewal lease. There are a number of grounds that the landlord can rely upon. The most commonly relied upon grounds are where the tenant has been in serious breach of the lease, the landlord has plans to redevelop or where the landlord wants to occupy the premises themselves.

The section 25 notice or section 26 notice will contain a date on which the current tenancy will come to an end. If the landlord and tenant cannot agree on terms for the new lease or that the tenant will vacate then either party can apply to Court for the grant of a new lease or for the Court to determine whether the landlord is able to satisfy the criteria to oppose the renewal lease.

If an application is not made by the date specified in the notices (or that has been extended in writing before the date expires) then the tenant will lose their right to a renewal lease and will have no right to remain in occupation of the property.

If the landlord successfully objects to the lease renewal then compensation will be payable to the tenant if the opposition was solely on a non-fault ground. Compensation is calculated by reference to the rateable value of the property.

Commercial Lease Renewal FAQs

Can a commercial lease automatically renew?

If the lease has the protection of the Landlord and Tenant Act 1954 (“the Act”) because it has not been contracted out of the security of tenure provisions of the Act, then the tenant is entitled to a new renewal lease on the same terms as the existing lease subject to reasonable modernisation.

This means the tenancy will not automatically terminate at the end of the contractual term. It will simply continue, on the same terms, until it is terminated using one of the methods under the Act.

As the landlord, you can start the process to obtain a renewal lease by serving a section 25 notice on the tenant.

You may, for example, want to do this if the rent is likely to increase.

What if the lease is excluded from the Landlord and Tenant Act 1954?

If the lease is properly excluded then the tenant will not be entitled to a new renewal lease will not be able to serve a section 26 notice.

If the contractual term has come to an end but the tenant remains in occupation for the purpose of their business then they may, in certain circumstances, acquire security of tenure under the Act. You should diarise the end of the contractual term to ensure that this does not happen. Ideally, a new lease contracted out of the Act should be agreed upon and completed by the contractual expiry date or very shortly afterwards. A landlord can protect its position in the short term by sending the tenant a letter indicating that they are occupying as a “tenant at will” whilst negotiations for a new lease continue.

If the tenant does acquire security of tenure, they will not be able to serve a section 26 notice and initiate a lease renewal. However, it may be harder for the landlord to gain possession of the property as they would have to serve a section 25 notice relying on one of the statutory grounds opposing a lease renewal or alternatively, serve a section 25 notice offering to grant the tenant a new lease.

What is a section 25 notice?

A section 25 notice is a notice that is served on the tenant(s) to offer them a new lease.

It is a prescribed form and states the landlord’s proposed terms for the new lease.

The notice has to be served not more than 12 nor less than 6 months before the termination date specified in the notice.

The termination date cannot be before the contractual expiry date but the landlord can serve a section 25 notice before the end of the contractual term or after the contractual term has expired.

Can the landlord amend the section 25 notice once it has been served?

The landlord cannot unilaterally amend or withdraw the notice once it has been served on the tenant.

Are the landlord’s proposed terms for the new lease, that are included in the section 25 notice binding?

The landlord’s proposals are not binding, and the landlord can change their position during the negotiations. However, careful thought should be put into what proposals to make for tactical reasons.

Can the landlord serve a section 25 notice after the tenant has served a section 26 notice?

No, the landlord cannot serve a section 25 notice after the tenant has served a section 26 notice. Any section 25 notice served by the landlord after a section 26 notice has already been served will be invalid.

What happens if a new lease is not entered into by the termination date in the section 25 notice?

The effect of serving the section 25 notice is that the tenancy comes to an end on the termination date specified in the notice (“the Deadline”).

If the parties have not:

  • Entered into a new tenancy;
  • Extended the Deadline in writing; or
  • Made an application to Court

By the Deadline then the tenant will lose their right to a new lease on the same terms as the existing lease subject to reasonable modernisation.

Commercial Rent Arrears Recovery

If your tenant fails to pay the rent to you then we understand that you will want to act promptly to recover the arrears. We have contacts with local bailiffs who we can instruct to attend the property and recover the arrears of rent.

Dilapidations

We recognise that as a landlord it is important to protect your investment and ensure that it is kept in repair.

A Dilapidations claim crystallises at the end of the lease and we can advise you on your options and prepare and negotiate a settlement for you.  We can also advise you on remedies that you can use during the term to ensure that your investments are kept in repair and to maximise the amount you can recover from your tenant.

Break Notices

Leases can contain landlord or tenant break options. We have experience of preparing and serving the break notices as well as advising on the validity of the notices. Failure to effectively serve a break notice will mean that the lease will continue and can have significant consequences for the landlord or tenant.

You can read more about Break Notices here for how we can help you.

Forfeiture and Relief from Forfeiture

If your tenant is in breach of the terms of the lease then you may want to forfeit the lease. You need to ensure that you do this lawfully and have not waived your right to forfeit the lease as this would allow the tenant to bring a damages claim against you.

We regularly advise landlords on forfeiting a lease either by peaceable re-entry or by serving a section 146 notice and issuing Court proceedings. We also have experience of dealing with Relief from Forfeiture applications and can advise you on all your options should the tenant make this application.

Breaches of the lease

It is common for tenants to breach the terms of the lease and we regularly advise landlords of commercial properties on the multitude of options that are available to them to remedy the breach and ensure compliance with the terms of the lease going forwards.

Applications for Landlord’s Consent

The lease may state that the landlord’s consent is required, for example, to assign the lease to a third party. In this situation, the law places certain responsibilities on the landlord and legal advice should be sought on any applications that are made by the tenant.

We regularly deal with applications for consent and can guide you through the process, the responsibilities that the law places on you and the options available to you.

Tenant insolvency

If a tenant goes into insolvency then as a landlord, you will want to know what position it leaves you in. We regularly advise on all types of insolvency including liquidation and administration. We can also advise you on enforcement options under guarantees and if a guarantor requests an overriding lease.

Rent Reviews

We can advise you on the rent review procedures contained in your lease and the process that needs to take place to effect and record a rent review. Some rent reviews have triggers that involve serving notices. We can guide you through the process and correctly document any review that has taken place. We can also fight your corner if there is any dispute about the rent review.

Right of First Refusal

If you are considering making a disposal of your interest in a building that contains residential flats then by law you must offer it to the tenants before offering it on the open market. Failure to do so is a criminal offence.

We regularly advise landlords in relation to their obligations and can guide you through the process which will initially involve serving notices on the tenants.

Our Approach

At Myerson, we understand that you do not want to be embroiled in costly and lengthy litigation and aim to resolve disputes as quickly as possible. There are instances where you have no option other than to proceed through the Court process if immediate action is required to protect your investment.

If you find yourself in this situation then our experts have a wealth of experience and will be able to guide you through the process and fight your corner for you to protect your investment.

Myerson has a team of experts from across our contentious and non-contentious departments who work together to ensure that the approach to the dispute is the best for each client.

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Case Studies

Case Study 1

Client Intro:

Our client is a landlord of a significant portfolio of commercial properties.

Case Overview:

One of the properties is located in Northumberland and was leased to Marks & Spencer’s PLC (M&S). M&S assigned the lease to The Factory Shop Limited and M&S entered into a Deed of Guarantee and Indemnity in respect of that assignment.

The Factory Shop entered into a CVA and the CVA included provision for the surrender of the lease and compromised the company’s liability for terminal dilapidations.

The CVA cut down M&S’s secondary obligations in the guarantee meaning that M&S’s had no liability under the guarantee in respect of the terminal dilapidations but the CVA could not and did not cut down M&S’s primary obligations in the guarantee meaning that M&S remained liable for the dilapidations in full as if the CVA had not existed.

The lease was subsequently surrendered, and our client moved to address terminal dilapidations, carrying out repair works to the value of £130,000

Sean Hackett, a Partner in the Property Litigation team said “This was a complex matter where we argued that the indemnity was not compromised by the CVA.”

Case Study 2

Client Intro: Akzo Nobel, Imperial Chemical Industries and Dulux Decorator Centres

Our client has a multimillion-pound rental portfolio across England and Wales

Case Overview:

We regularly advise our client in relation to the management of their commercial property portfolio. This includes lease renewals, dilapidations claims, landlord/tenant covenants, rent reviews and break rights.

Laura Pile, a Partner in the Property Litigation team said this type of work demonstrates our capabilities in commercial portfolio management for blue chip corporations.

Case Study 3

Client Intro: Philip J Davies (Holdings) PLC

Our client is a commercial landlord and property developer.

Case Overview:

Philip J Davies (Holdings) PLC held the reversion to a long lease of an entire building that had been rented to Carillion. Carillion had underlet part of the building to a charity.

Carillion entered liquidation and the liquidators disclaimed the head lease, leaving the undertenant in occupation but its right to occupy affected by the disclaimer.

We advised our client regarding their options, given a possible re-letting of the entire premises to a school (which was the condition upon the charity vacating).

Avoiding the situation where the charity became a periodic tenant or seeking a vesting order, our client forfeited the charity’s under lease and granted them a license to occupy, which enabled the charity time to find alternative accommodation and enabled our client to secure vacant possession which enabled the reletting of the entire building to the school.

 

Case Study 4

Client Intro: Marnshaw Limited

Our client is a landlord of commercial property.

Case Overview:

Our client leased commercial premises to Andrew Page Limited (supplier of car parts).

The tenant entered administration. The administrators agreed to sell the assets of the tenant company to Euro Car Parts, a deal which was called in by the Competitions and Market Authority.

The administrators allowed an SPV of Euro Car Parts to enter into occupation of the premises without consent and began trading.

Our client had a new tenant ready to take a new lease of the premises in which the SPV was in occupation and trading. We invited the administrators to surrender the lease or in the alternative allow our client to bring forfeiture proceedings. They refused both.

Our client brought proceedings against the tenant in administration at which point the administrators agreed to surrender, thereby enabling our client to rent out the property to the new tenant.

Case Study 5

Client Intro: Monckton Properties Limited

Our client is a landlord of a number of commercial properties.

Case Overview:

Our client is the landlord of a commercial property in Knutsford Cheshire. The property was let to Tesla Motors Limited who purported to exercise a break option contained in the lease.

The tenant failed to adhere to the conditions of the break so our client issued proceedings for a declaration that the lease is subsisting and a monetary claim for sums due and owing to them. The matter was settled fairly early on in the litigation and it was a good result for our client.

Meet Our Specialists

Home-grown or recruited from national, regional or City firms. Our specialists are experts in their fields and respected by their peers.

Laura Pile

Laura Pile

Laura is a Partner and Head of our Property Litigation Team

Seán Hackett

Seán Hackett

Seán is a Partner in our Property Litigation Team

Karen Taylor

Karen Taylor

Karen is a Senior Associate in our Property Litigation Team

Jennifer Hartley

Jennifer Hartley

Jennifer is a Solicitor in our Property Litigation Team

Contact Us

You can contact a member of our team using the contact form below or by phoning us on

0161-941-4000