Property solicitor, Iain Robinson, explains how commercial property tenants can reduce their rent by serving a simple legal notice.

Tenants of offices, shops, warehouses and other commercial premises could benefit from falling property values and reduce their rent by means of a little-used legal notice.

A commercial tenant who has finished the contractual term of its lease is often entitled to serve a notice requiring the landlord to grant a new lease. The new lease would be on very similar terms to the old lease but, importantly, would be at the current market rent. In today’s weak market, this could be markedly lower than the rent the tenant is currently paying.

Few tenants, especially sole traders and owner-managed businesses, ever use this procedure. But the recent downturn in property rental values has made doing so more worthwhile for those in a position to do so

As a tenant of commercial property you need to consider four main points;

• whether your lease is ‘contracted out’ or not,
• whether you are ‘holding over’ or not,
• what your current rent is and
• what the market rent of the property is.

A specialist commercial property lawyer can help you with the first two and a surveyor with the last.

Let us say a commercial tenant took out a five-year lease of a high street shop early in 2006. Demand and rent were high then and the tenant was, and still is, paying a great deal in rent. If he lawfully serves what is called a section 26 notice requiring a new lease, it can not only secure him a fresh lease of five years, but also force his landlord to charge the market rent. This could amount to a considerable saving. There are some grounds on which a landlord can refuse, and any savings are determined by the local market, so you should always take advice from a commercial property solicitor and a surveyor before serving a notice.

If you are past the end of your contractual term and think you might benefit from a section26 review, then give me a call on 0808 139 1606 or email me at [email protected]

NOTES TO EDITORS

1. The relevant legislation is Part 2 of the 1954 Landlord and Tenant Act
2. Slee Blackwell are specialist commercial property solicitors They have specialists available to advise on commercial, agricultural and residential property, as well as corporate and commercial matters.
3. Iain Robinson is a solicitor in the firm’s commercial property department. He deals with freehold and leasehold transactions and commercial landlord and tenant work. [email protected]