Archive for October, 2019

What is a protected lease?

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Many business premises are rented on protected tenancies. This offers tenants security of tenure. It means that, in most cases, landlords are obliged to renew the lease when it expires on terms, which are not significantly less favourable than before. Find out what you need to know about protected leases for commercial premises.

Why are commercial leases protected?

If you are running a business, you need the security of knowing that you can continue trading from your premises, even if your lease is close to expiring. You may have been operating for some time from a location that suits you, your customers and suppliers and where you are known well. Having to pack up your business and move premises could be as detrimental to your company as it is inconvenient.

Fortunately, as a business owner, the law in England is one your side. Under the Landlord and Tenant Act 1954 Part II business leases are protected. This means that most commercial tenants have a statutory right to have their tenancies renewed on expiry.

If you are not able to come to agreeable terms with your landlord, the law gives you the right to apply to the courts to set the new lease terms including a fair market rent based on expert advice.

 

Can a landlord refuse to grant a new lease?

Under the 1954 Act, a landlord can only refuse to grant a new lease to a tenant, who wishes to remain in occupation, on certain grounds. The principal ones are:

· Where a tenant has failed to pay their rent or keep to other conditions of the lease.

· If a landlord wants the property back for his own use or to redevelop it.

· If the landlord offers to provide suitable alternative premises.

· If the property has been divided into smaller, sub-let units and the landlord wishes to let the property as a whole.

Usually, the terms of the new lease can be agreed between landlord and tenant without the need for court proceedings which can be costly.

 

Are there other exceptions?

The landlord and tenant can agree to contract out of a protected lease, if the tenant is willing to do so. In this case, there are certain formalities that need to be complied with.

This situation is most common where the lease relates to part of a building or where the landlord is unsure of his plans and wishes to ensure that he is able to regain possession of

the property without having to pay compensation or establish one of the grounds set out in the Act and avoid potential dispute.

 

What happens at the end of the lease term?

At the end of the term specified in the lease document, the lease continues until either the landlord or the tenant takes steps to end or renew It, which can be done once the lease has no more than12 months left to run. If neither party takes any action, the lease simply continues until either takes the appropriate steps. Whether the landlord or tenant wishes to take action will depend not only on individual circumstances but also strategically on whether rents for similar properties are increasing or decreasing, which makes advice from a surveyor experienced in commercial property so necessary.

 

How do I renew the lease on my business premises?

Once your lease has no more than 12 months left to run, you can serve what is known as a section 26 notice on your landlord, giving not more than 12 nor less than 6 months notice that you require a new lease. This is in a form prescribed by the legislation and includes details of the amount of rent and the length of the new lease you propose. Your landlord has two months to dispute the granting of the new lease, under one of the statutory grounds, or he may suggest alternative terms for a renewal of the lease. If agreement cannot be reached before the proposed renewal date, the matter has to be referred to the court.

 

What can a landlord do?

Once the lease has no more than 12 months left to run, a landlord can bring it to an end by serving a Section 25 notice under the Act using a prescribed form. This gives no more than 12 nor less than 6 months notice of either the fact that the landlord is willing to grant a new lease including his proposals for the length of the new term and the rent or that he is not willing to grant a new term and on which of the statutory grounds he relies. If the landlord opposes the grant of a new lease and the Tenant disputes this, or terms for a new lease cannot be agreed, an application will need to be made to the court.

If a landlord refuses to renew the lease on one of the grounds which is no fault of the tenant – to occupy the property themselves, for example rather than because of a failure to pay rent, then the tenant may be entitled to compensation.

 

How can I find out more?

Renewing a business lease is a complex area and anyone contemplating the process should get professional advice. One of the team of Chartered Surveyors in our Commercial Department would be happy to provide this. Please also contact us to discuss your requirements if you would like help finding commercial premises within the local and surrounding areas.

 

Contact Us

If you have any questions about a protected lease, we would be happy to answer them, please contact us today.

Is Help to Buy costing new homeowners more?

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The government’s Help to Buy scheme was launched in 2013 to boost housebuilding and help generation rent onto the housing ladder. However, new research shows that people using scheme may actually be paying a premium – and that they may have been able to get on the housing ladder without it.

Conveyancing firm Reallymoving analysed data from 40,000 first-time buyers over the year to September 2019. The researched showed that those using Help to Buy, paid on average 10% more than those who funded their purchases without the scheme. The figure in London was higher at almost 12%, however, in Yorkshire and the West Midlands it was more than 21%.

The study follows the release of figures from housebuilder, Barratt, which revealed that 40% of its business comes from Help to Buy customers.

New builds generally attract a premium price and can subsequently lose value, meaning that first-time buyers using the scheme are at risk of negative equity.

Critics also believe that the popularity of Help to Buy has led developers to inflate prices and that the scheme could have a negative impact on the overall housing market.

Reallymoving chief executive Rob Houghton said: “Most first-time buyers find it difficult to raise a deposit and as a consequence they are being cornered into the new-build sector, where homes already command higher prices, before paying an additional premium on top if they need to use a Help to Buy Equity Loan.

“In many cases they simply don’t have the deposit required to explore other options such as buying a second-hand home, which may offer considerably better value.”

How help to buy works

Opening a Help to Buy ISA means the government will add 25% to the amount saved, up to a maximum of £3,000 on savings of £12,000, if used as a deposit on a first home.

The deposit can be used to buy a property using a Help to Buy: Equity Loan, where the government lends 40% of the cost of a new-build home in London (or 20% elsewhere). The loan is interest free for five years. A Help to Buy: Shared Ownership scheme allows the purchaser to buy a share of the home (between 25% and 75%) and pay rent on the remainder.

Applications for a Help to Buy ISAs close on 30 November this year, and prospective homeowners have been encouraged to open an account now, to ensure they can take advantage of the scheme – including by Money Saving Expert founder, Martin Lewis.

Read more about this story in The Stylist.

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