Business owners always pay a lot of attention to details while choosing the business premises. They are careful about the location, the amenities, facilities and obviously, the cost. In the present economic scenario, it is extremely important for businesses to ensure that once the premises has been chosen, they have to make sure that they could occupy the premises for a reasonably long period of time. Even for the landlords, it is essential to maintain full occupancy so that the income stream is maintained. Here we would be discussing what factors to keep in mind when your business lease contract is almost coming to an end as per the agreement.
Some business property leases are actually protected by the well-known “Landlord and Tenant Act 1954 “the 1954 Act” and according to this act a business lease would be continuing automatically past its termination date until it is actually ended by either the tenant or the landlord by serving an official notice and then following the ‘security of tenure’ which is actually a set procedure in this case.
In such cases where this 1954 Act has been left out while signing the contract terms, the security of tenure is non-existent and the position of both the landlord and the tenure is pretty vulnerable provided the tenant’s occupancy is yet to be regularized. In such situations, the tenant may be confronted with situations like losing the premises with little or no notice whatsoever before the official termination of the business lease contract. The tenant would face a lot of unbudgeted and unforeseen costs relating to relocation to temporary accommodation and on many occasions, to more expensive premises.
In terms of the landlord, excluded leases would mean a definite uncertainty and unreliability over whether there would be consistent and uninterrupted rental income stream. It is best to avoid excluded leases if you wish to stay away from unnecessary complications.
Actions To Be Taken:
The tenant and the landlord should schedule a meeting about six to eight months in advance before the expiry of the lease contract to discuss each other’s future plans. They could organize any essential legal documentation well on time. This would help in formalizing arrangements post the lease termination. However, you must keep in mind that some tenants may show reluctance to committing to another term if their business situation seems to be pretty dicey and uncertain.
In a situation when the tenant is not in the mood for cooperating with the landlord yet continues to occupy the business premises beyond the lease termination, the landlord could express his desire to stay in the relationship by granting a fresh new business premises lease. The landlord could take the following steps:
- Consider sending an open letter to the tenant demanding possession. In many cases, the landlord could claim to double the present rental value if the tenant is not leaving the premises after lease term has expired already.
- Consider sending a discrete without prejudice letter that clearly indicates that the landlord is not at all interested in issuing court proceedings for possession for a specific period to ensure adequate time for negotiations regarding a fresh new lease agreement to take place.
- Ask for completing an interim informal occupancy agreement.
- Immediately ask for a rent stop so that rent is neither collected nor demanded inadvertently as that would strengthen the position of the tenant while negotiations are on.
- If all negotiations with the tenant regarding the fresh lease fail, the landlord has the power and right to terminate the tenancy with immediate effect. The landlord could write a letter to the previous tenant asking him to vacate the premises at once, as he is using the premises as a trespasser. The landlord could insist that he would be requiring vacant possession with immediate effect.
- The landlord could consider issuing court proceedings if the previous tenant is unwilling to give vacant possession. Furthermore, the landlord should consider including loss of rent claim or even the damages claim against the former tenant.
If you wish to stay away from unbudgeted expenses and also avoid uncertainties, it is best for tenants and landlords to cooperate with each other and most importantly, keep a note regarding the lease termination dates and start negotiations at the earliest possible at least, a few months in advance to allow adequate time to reach an agreement and complete necessary legal documentation for regularizing an agreement going forward. Always keep in mind that there are some federal and state laws, along with the agreed terms of the business lease contract that govern exactly how and under which specific circumstances a lease could be terminated.