If you are considering renewing a commercial lease, or are in the process of doing so, there are a number of points to consider and be aware of.
Energy Performance Certificates (EPCs) and lease terms
The law and guidance on a commercial lease renewal are contradictory. The safest approach is that the property must have a valid EPC in order to demonstrate that it complies with the Minimum Energy Efficiency Standards.
All commercial property must – at time of writing – have a rating of E or above to be let. The Government had in 2023 announced (and then scrapped) an increase to that minimum standard to C – but this seems likely to arise again in some form, which if so, will have far-reaching impacts on commercial properties with ratings that would then be sub-standard.
It will be important to consider what obligations are within the lease, to deal with any improvements that may be needed if there is need to improve its energy efficiency in the future.
Landlord and Tenant Act 1954
If the previous lease was within the Landlord and Tenant Act 1954 (LTA 1954), or not.
The LTA 1954 gives business tenants security of tenure. This broadly means Tenants have the right to request a new lease at the end of the term on the same terms as the previous lease and restricts the right of the Landlord to refuse this.
Other Lease Terms
This will depend on the drafting of the existing lease and any other terms that you have agreed.
These would include any changes to the existing terms, and with a particular concern towards any personal guarantees, break clauses, repair obligations and other important clauses.
Land Registry registration and Stamp Duty Land Tax
Land Registry registration is required for leases of over 7 years. Stamp Duty Land Tax (SDLT) may be payable on a lease renewal in the same way as a new lease
In addition to the possible registration of the lease at the Land Registry (requiring a certain format of lease and lease plan), if the previous lease was registered, the previous leasehold title will need to be closed at the Land Registry. The Tenant will need to deal with these, and the Landlord will need to provide evidence of any consents for these registrations that may be required.
SDLT is calculated using the rent and the length of lease, and we can assist with your calculation of this and deal with both this return and any Land Registry registrations required. The Tenant needs to deal with this and budget for it.
For further information on anything mentioned in this article, please contact Anthony Fripp on 01803 407625 or email anthonyfripp@wbw.co.uk.
WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
