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There are types of business property and commercial leases where tenants have the right to renew their lease when it comes to an end. There are also circumstances where business lease renewal rights do not apply.

Who has the right to renew a lease?

Business tenants normally have the right to remain in their business premises and renew their commercial property leases when their tenancy agreement ends. Examples of commercial property where these rights may apply include:

• shops, warehouses, and factories
• offices containing businesses, professional people, and volunteer societies
• doctors' and dentists' surgeries
• premises for clubs, trade unions, institutions, and other bodies
• premises used partly for business, but where the tenant lives in the remaining areas

Who doesn't have the right to renew a lease?

However, some types of business occupiers do not have the right to renew a commercial property lease including:

• farm business tenants
• mining tenants
• 'service tenants' employed by the landlord

Also, business property lease renewal rights do not generally apply in the following circumstances:

• fixed-term tenancies of six months or less
• tenants who waive their right to renew at the start of their lease
• tenants using the premises for business without the landlord's agreement
• where there is a license rather than a lease
• where tenants have already extended long leases and, in certain cases, their sub-tenants
• tenants who have sub-let the premises and who are not occupying them personally

The landlord may also oppose the renewal of a business lease in certain defined cases - see the landlord's right to refuse a new tenancy.

Legal advice for commercial property leases

You may want to consult a legal professional on the issue of business leases. Choose a solicitor for your business.

Tenants of business premises may sometimes be able to end their tenancy before the termination date set out in their commercial property lease. If they can, this will be because the landlord, or the business lease, permits them to do so, as the legislation itself does not give rights to early termination.

Ending a business tenancy early

A tenant may be able to end their business tenancy early if:

• The landlord agrees to accept a surrender of the business lease.
• The commercial property lease includes a break clause which allows the tenant to end it early.
• The tenant can assign the business property lease to someone else. The landlord is entitled to ask for a guarantee from the tenant, in which case there will be a potential continuing liability to the landlord.
• The tenant is able to sublet. Subletting involves remaining as a tenant but granting a sublease to another tenant. The original tenant remains liable for paying the rent to the landlord even if they don't trade from the commercial premises.

Legal advice for ending a business tenancy early

Tenants wanting to end a business tenancy early are advised to consult a solicitor with specialised knowledge of commercial property matters. Choose a solicitor for your business.

Ending a fixed-term tenancy

A fixed-term tenancy is one which is due to end on a specific date set out in the commercial property lease. If neither party has taken action to end a fixed-term tenancy, then the tenant may choose to stay or leave at the end of the fixed term.

Tenants wishing to avoid paying rent continually must move out of the business premises by the end of the fixed term. If they decide to stay, they will have to continue paying rent. They can only then end this continuing obligation to pay rent by giving three months' notice to the landlord, at the expiry of which the tenancy will end, and vacate the property.

The tenant may normally remain in occupation of the business property until the expiry of the commercial lease and sometimes beyond.

When a landlord can end a business tenancy early

However, in some cases, a landlord might be able to end the commercial property lease early and take back the premises during the course of a tenancy. These circumstances are outlined below:

Failure to pay rent or meet lease obligations

Where the tenant has failed to pay the rent or carry out some other lease obligation, the commercial property lease will usually have a forfeiture clause enabling the landlord to end the lease. However, the court may reinstate the tenancy if the tenant successfully challenges the landlord's action. See commercial property leases: paying rent and rent reviews.

Break clause

The landlord has a right, set out in the commercial property lease, to exercise a break clause. The landlord will only have such a right if the tenant has agreed to waive tenancy renewal rights.

See .

Legal advice for ending a business tenancy early

Ending commercial property leases when you are a landlord is complex and legal issues are involved. It is therefore advisable to take professional legal advice. Choose a solicitor for your business.

Although business tenants generally have the right to renew the tenancy of their commercial property when it comes to an end, landlords can refuse to grant a new tenancy in some cases.

When can a landlord refuse to renew a tenancy?

The landlord can refuse to renew the business lease:

• If the tenant does not have the right to renew the business lease, see tenant's right to renew a commercial property lease.
• If the tenant is in breach of their obligations. See commercial property leases: paying rent and rent reviews.
• If the landlord is offering to provide other suitable property for the tenant.
• Where a sub-tenant occupying part of the business premises applies for a new lease, but the landlord wants to let or sell the property as a whole.
• Where the landlord wishes to demolish or reconstruct the business premises. However, the tenant could remain in occupation if they allow the landlord access to carry out reconstruction work or accept a new tenancy for part of the premises.
• Where the landlord wishes to use the premises themselves, for their business, or to live there.

Legal advice on business tenancies

You may want to consult a legal professional on the issue of commercial property leases. Choose a solicitor for your business.

At the outset, the amount of rent a business tenant pays will be agreed upon with the landlord. Normally, this must be paid in advance and is due on a quarterly basis.

Rent will be payable regardless of how the tenant's business is performing. If the tenant fails to pay their rent, the landlord will normally take action to recoup the debt, either sending in bailiffs to seize goods to the value of the unpaid debt or repossessing the property and terminating the tenancy.

Rent reviews

Many commercial property leases make provision for rent reviews, often at three-yearly or five-yearly intervals. If a tenant cannot reach an agreement with the landlord, most commercial leases will include arrangements, usually involving the appointment of an arbitrator or independent expert who will settle the rental matter. Read an .

Fixed rental increases

There are a few different approaches to rent reviews. These include fixed rental increases which give the tenant certainty by stating how much the rent will increase by at each rent review period.

Indexed rents

An alternative is to choose indexed rents. This means that the rent changes in line with a measurement outside the tenant's or the landlord's control, such as the Retail Price Index. Upward-only rent review clauses are common but tenants should be wary of these as the rent of the property will never fall, even when rental values in the same area decrease.

Break clauses

Agreeing break clauses with the landlord at certain intervals allows the tenant to assess whether they want to continue renting the business property, without having to wait until the tenancy agreement expires. See tenant's rights to end a commercial property lease.