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