It's Time to Renegotiate Your Lease

Posted: Tuesday, 14 October 2008 @ 09:29
It's Time to Renegotiate Your Lease

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The vast majority of tenants don't even consider trying to renegotiate their lease once it has been signed.  Those who do approach their landlord to change the terms of their lease, however, are frequently pleasantly surprised.

So why would you want to renegotiate your lease?

  • Financial difficulties - probably the most common reason, particularly in the current economic environment.  Landlord's will often consider temporary reductions in rent to help a tenant trade through a slowdown or agree a switch from quarterly to monthly rental payments to improve a tenant's cashflow.
  • Change of use - a tenant may wish to sell a lease on but needs to change the use permitted by the lease to achieve this.  A landlord may be happy to agree especially if the change in use increases the value of the premises.
  • Expansion - a tenant may be thriving and wish to move to larger premises.  A landlord may be prepared to agree a surrender of a lease if it owns larger premises into which the tenant can move.
  • Contraction - a landlord may be prepared to allow a tenant to give up part of the premises (with a consequent reduction in rent) as it may be easier for the landlord to find a tenant for the rest of the premises than risk the tenant going bust and having to relet a large set of premises.

Currently, there are several issues that make it likely that your landlord will at the very least give serious consideration to a request to renegotiate

  • EPCs - Energy Performance Certificates are now required for the vast majority of commercial premises every time they are let out or when a lease changes hands.  If a landlord's refusal to renegotiate puts the tenant out of business it will be forced to pay for an EPC before it can relet.  EPCs for commercial premises may cost several thousand pounds.
  • Business Rates - landlords now are liable for full business rates on empty premises after three months for retail premises and offices and six months for industrial premises and warehouses.  Keeping a tenant in the premises even on terms less favourable to the landlord may be better than allowing the premises to fall empty.
  • The market - it is currently more difficult for landlords to find tenants especially for larger premises.

Approaching your landlord to renegotiate may be a daunting prospect especially if you are a small business and your landlord is a large institution.  That's why Cousins Business Law offer a free lease review service which will include tips on how to approach a landlord to renegotiate.

Steven Petty, Commercial Property Lawyer

This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.

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