This section covers what happens when an agreement comes to an end, whether you are renewing the lease
or beginning the process of moving your tenants out of the premises.
Landlord and tenant responsibilities
A tenant’s notice period will be set out in their lease or licence. Once a tenant has given notice, ensure that both you and they are clear on what is required prior to their vacation of the premises.
Typical responsibilities are as follows:
|Issue schedule of dilapidations if applicable
|Ensure all repairs and decoration are carried out as detailed in the agreement (eg. repainting, recarpeting)
|Arrange inspection and inventory check
|Return deposit to tenant, minus any reasonable deductions
|Remove name from signage, change alarm codes
Set up post forwarding
The agreement will require your tenants to maintain the premises in a certain state of repair and decoration. If the condition of the premises falls short of that required in the agreement, you can serve a schedule of dilapidations
which summarises where the tenant is in breach of repairing obligations
. This schedule is drawn up by a building surveyor
who specialises in dilapidations. The schedule can be served during the term (an interim schedule) but is more common at the end of an agreement (a terminal schedule).
A terminal schedule is typically served in the last few months of an agreement, preferably six months before the expiring of the lease. Once the schedule has been served you would negotiate with the tenant as to whether they will carry out and pay for the necessary repairs, or whether you will organise and bill the tenant for works undertaken after they have moved out.
Tenants will sometimes appoint their own contractors to carry out dilapidations work but will often ask for recommendations or ask you to arrange the work for them. If this is the case then you would usually charge a management fee of 10% to 20%. You may wish to specify approved contractors only, for example if the work involves electrical or plumbing works, or to ensure that environmentally-friendly paint is used.
If a tenant is moving out of a shared space, eg. an open-plan office, then it is not usually practical, or desirable, for them to paint or re-carpet just their portion of the space. In this situation you may decide to get quotes for the work required and then have the tenant pay an agreed sum into a fund which will be used as their contribution to work carried out to the whole space at a later date.
Once a tenant has moved out this can be a good opportunity to do maintenance work that would be quite disruptive to do in a tenanted office. You should consider whether anything needs doing as soon as notice has been given, and plan the moving-in date of the new tenant accordingly.
Renewing a lease
If a tenant has security of tenure
then not less than 6 months, and not more than 12 months, before the end of the lease (or any time after the lease has ended), a landlord can serve a notice that brings the lease to an end and triggers negotiations for a new lease. This notice tells the tenant when the current lease will end, whether or not you intend to oppose a new lease and, if not, the terms of renewal – such as the rent on the new lease.
As mentioned previously, the service of notices
is a very complex area and there are probably more people caught out by failing to comply with notice requirements than any other single leasehold trap. It is therefore cost effective to get a solicitor to serve or respond to notices. Most importantly, any time limits for serving the notice will need to be strictly observed so give yourself plenty of time and don’t leave serving notices until the last minute.
When can I oppose renewal of the lease?
It may be possible for a landlord to oppose a tenant’s right to a new lease under the following circumstances:
- the tenant has failed to comply with repairing obligations
- the tenant is persistently late with rent payments
- the tenant has breached other obligations in the lease
- suitable alternative accommodation is available for the tenant
- if the tenant occupies only part of the building, and the landlord requires the whole property for a subsequent letting
- the landlord intends to demolish or redevelop part or all of the premises
- the landlord intends to occupy the premises for his own purposes
In reality, it should not be assumed that a renewal can be opposed. Substantial evidence will need to be provided, and even then a judge may take the view that non-renewal of a lease is too harsh a penalty. Take the advice of your solicitor if you wish to oppose the renewal of a lease. Landlords should also be aware that if they successfully oppose the renewal of the lease the tenant may be entitled to compensation from the landlord.
Code of practice
A revised code of practice has been launched to help promote fairness between landlords and tenants in commercial leases and is the result of pan-industry discussion between representatives of landlords, tenants and Government. The commercial lease code is voluntary, but the Government is taking a keen interest in ensuring the property industry complies with this Code. You can download the code (which is separated into two sections for landlords and tenants) by following this link.
The Department for Communities and Local Government provides some useful guidance for landlords in its publication: Renewing and ending business leases: a guide for tenants and landlords.