30/11/20 – Lease renewals in the light of the COVID pandemic

With the trend for leases becoming shorter over the last few years, lease renewals are more common place these days. If you are dealing with a lease that is ‘inside the Act’ (Landlord and Tenant Act 1954), then there is normally an automatic right to renewal unless the landlord can gain possession under specified grounds, for example for redevelopment.

With this in mind, during these uncertain times, it is common for the parties, in particular the tenant, to want to vary the existing lease terms to reflect the current economic circumstances. Typical variations we are seeing the parties ask for during negotiations include:

  • Shorter lease terms
  • New break clauses
  • Turnover rents, in particular for retail, hospitality & leisure properties
  • A ‘pandemic clause’ to vary the rent during government mandated lockdowns

Normally, under the Act, the lease should reflect the existing terms, but can be updated for modernisation where the market has demonstrably changed. Where one party seeks to vary the lease significantly, and the other party does not agree, then ultimately they may have to persuade a court that what they are seeking is the current market practice.

There is a balance to be struck between landlords and tenants on these matters, and what can be agreed or proven at court will depend on the particular market we are dealing with, in terms of property class and location. For example retail is significantly different to industrial, and London is substantially different to the provinces at the present time.

For advice on these matters please contact robert.clifford@argroup.co.uk or francis.tomlinson@argroup.co.uk.