15 Feb 23 by Chris Sexton
Lease renewals in the retail market;
aggressive stance taken by retail occupiers
Tenants with leases protected by the 1954 Landlord and Tenant Act have the right to a new lease when their current one expires. In the lead up to lease expiry, either the landlord or tenant can serve a notice on the other, stating they wish to have a new lease and suggesting new lease terms to be agreed. The earliest this notice can be served is 12 months prior to expiry. However we will often advise notices should be served closer to the expiry date at around 6-8 months, as finding comparable rental evidence around the time of lease expiry is very important to support the new rent and lease terms. So what’s happening with lease renewals in the retail market in the south west?
Retailers asking for unrealistic rent reductions
We have been seeing many large retailers taking an aggressive approach to lease renewals, serving these notices a full 12 months before expiry, wanting hugely reduced rents, shorter lease durations and often including extra terms such as covid clauses and large rent free periods. These notices are often being served without a surveyor’s input or any appraisal of market rent. This means the terms stated on the notices are often unrealistic, seeking to pressure landlords into agreeing to terms that may well be below the market level.
Receiving a Notice
Whilst the 1954 landlord and Tenant act gives the tenant security, it also protects the landlord’s rights to fair new lease terms. If you receive a notice, the important thing is not to panic and give things away, as with advice the outcome can be much better than you think. Many locations in the Southwest have not suffered as badly as the retailers would like to suggest and evidence is often available to resist their demands.
Our Lease Advisory team are very experienced at dealng with lease renewals and rent reviews, acting for either landlord or tenant to get the best, fairest deal we can for our client. Take a look at our Lease Advisory service.