Surveyors Journal Summer 2020

Page 22

AN INSTANT DIFFERENCE

A

IT IS IMPORTANT TO UNDERSTAND THE DIFFERENCE BETWEEN RENEWING AND EXTENDING A LEASE.

commercial

lease

is

a

contractual agreement between

tenants do not know is that renewing a lease and

extent? Questions could be raised in relation to a

extending a lease are not the same thing

tenant’s overriding obligation to complete repairs

a landlord and tenant that sets

based on lease tenure. An argument could be put

out the terms under which a property is occupied

Lease renewal

forward that a tenant’s responsibility for repair

and used. It defines the rights and privileges

A lease that is renewed comes to an end for an

should only extend to the term that occurred

afforded to a tenant in conjunction with a landlord,

instant at the completion of the original term,

during the second lease, equivalent to a new term

and all other persons nominated or authorised.

prior to the renewal term beginning. In that

for a new tenant. This is particularly relevant

instant one term ends, and a new term begins.

where a five-year renewal is granted post an

Lease compliance

In other words, the renewal creates a new lease.

original 25-year term.

During the term of a lease most tenants are

Creating a new lease could have unintended

Careful consideration is required to lease

operation focused; however, it is very important to

consequences to covenants, conditions and

wording, and to both parties’ future

consider lease events and their timing (break

obligations within the original lease, most notably

intentions, prior to a landlord and

clause, term end, rent review). It could be even

the obligation on the tenant to repair and yield up.

tenant entering a lease renewal.

more pertinent to keep an eye on lease events

Based on the premise that a new lease is created

Prior to granting a new lease,

during the Covid-19 pandemic, particularly where

via a renewal, it can be deemed that any original

agreement could be reached

time is of the essence.

tenant alterations or fit-out constructed as part of

relating to a tenant’s existing

A commercial institutional lease may contain an

the previous lease become part of the original

obligation of repair or yielding up.

option for a tenant to continue occupation of a

building. Come term end of the new lease,

This agreement could be an

property beyond the initial term, along with

a tenant can argue that any previous fit-out is now

extended term, rental offset

separate rights of renewal under the 1980/1994

landlord ownership. This would create a position

against dilapidations or schedule

Landlord and Tenant Acts, unless a deed of

where there is no requirement on a tenant to

of dilapidations. Any agreement would be

renunciation was executed at the commencement

remove alterations or reinstate the demise back

appended or enshrined in a new lease with

of the lease. Where renewal options are contained

to its original prevailing condition (unless all the

appropriate wording, as required, concerning

within a lease, they are either an option to renew

parties have expressly agreed otherwise). A tenant

future material alterations, licence for work or

or an option to extend. What many landlords and

would still have an obligation of repair but to what

inflation as part of a settlement claim.

FEATURE Andrew Ramsey Director, Module

22

SURVEYORS JOURNAL Volume 10, Issue 2, Summer 2020


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