What to consider if extending a commercial lease
A commercial lease extension is a legally binding agreement that prolongs a tenant’s occupation of a commercial property past the original term. Whether you’re a business looking to stay in your current premises or a landlord considering an extension, understanding the process is crucial. Extending a commercial lease can provide stability and continuity for businesses, while helping landlords avoid void periods and maintain rental income. Whatever your decision, it should be made strategically and with a clear understanding of the process. Seeking professional assistance with the negotiation is a good idea and something the lease advisory team at Vickery Holman are well placed to help with.
Market Values
Current market conditions are important when considering whether to extend a lease. For example, if rental values are increasing in an area or property type, locking in a new rent early for an extension might help a tenant with affordability. Conversely, agreeing a longer term with a tenant in return for a reduced rent in some slower sectors is positive for a landlord looking to strengthen the investment value of their property.
Reversionary lease
Another option for occupiers wishing to remain in occupation of a building into the future is to agree a reversionary lease, which does not become live until after the current lease ends. Whilst the new rent can also be set in negotiations, reversionary leases often have a ‘day one rent review’ which allows the rent to be reviewed and adjusted upwards or downwards, depending on the market at the time. This often gives tenants the best of both worlds, the certainty of having the new term, without the risk of paying in excess of the market rent at that time. When landlords and tenants agree to continue occupation of a property, various options are available to formalize this arrangement.
Consulting with an experienced lease advisory surveyor can help you navigate these choices and ensure you secure the most favourable terms. Our Lease Advisory team can help you before you agree a lease as well as with lease renewals or extensions.
Related articles: https://www.vickeryholman.com/news/who-has-the-right-to-apply-for-a-lease-extension/
