I’m I obligated to lower the rent when negotiating a lease renewal?

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    I’m I obligated to lower the rent when negotiating a lease renewal?

    Hi everyone,

    I’m a small landlord and have a lease renewal

    The tenant is a big global company and has served a section 26

    They say that rent has fallen dramatically and demands a reduction otherwise they will issue court proceedings

    I have ask them to provide me with a valuation but have not received anything

    I’m I obligated to lower the rent in a lease renewal?

    Do you think they would take it to court? as the rent is low only four figures

    Thanks in advance

    #2
    On a lease renewal the rent is the market rent whether higher or lower than the current rent. The tenant may well issue proceedings if for no other reason than to force you to negotiate. Being a large company they will no doubt try to browbeat you into agreeing as low a rent as they can. Your best bet is to consult a commercial landlord and tenant specialist surveyor without delay.

    Comment


      #3
      Thanks Lawcruncher,

      They have been very difficult and as negotiations hasn’t got anywhere they want me to agree an extension of the section 26 end date.

      Is it sensible for me to agree the extension or leave it and wait for them to either issue court proceedings or agree on the lease.

      Comment


        #4
        If an extension is not agreed the tenant will have to apply to the court to protect its position.

        You have not said if you are represented by a surveyor. If you are, let the surveyor advise on tactics. If you are not, then instructing a surveyor has to be recommended. Apart from anything else the tenant may start to take you more seriously.

        Comment


          #5
          Thanks Lawcruncher,

          I am looking to appoint a surveyor.

          Do you know what will happen once the tenant has applied to the court?

          What the process is and how long it takes?

          Will I immediately get a letter with a court date?

          Can negotiations continue?

          Comment


            #6
            You really need to keep this away from court. At one time if the parties could not agree within a set time limit it had to go to court, but the proceedings were usually postponed until either party revived them which one party would do when an impasse had been reached. That was felt to be an unnecessary expense and a waste of court time. The current procedure allows the parties to agree in writing to an extension. On the whole that has to be advisable unless it is felt that one part is being unreasonable or is failing to negotiate. As I say, tactics are best discussed with a professional adviser as every case is different.

            Comment


              #7
              Thanks Lawcruncher,

              I think both parties don’t want to go to court.

              What is the difference if I agree the extension now or wait for them to apply to the courts then agree to extend it then?

              Comment


                #8
                What I’m trying to ask is the difference in terms of cost and delay between the two options.

                The unnecessary expense would be for the one (the tenant) that applied to the courts right? there wouldn’t be extra cost for me until it reaches court? and If they do start court proceedings will the rent stay the same while negotiations continue?

                Thanks in advance

                Comment


                  #9
                  I am not an expert on court prodeure and costs, but I think an extension before going to court has to be better in most cases.

                  Comment


                    #10
                    Negotiations for the renewal are generally conducted in parallel with the procedure for renewal.


                    The tenant's s26 notice specifies an end date for the existing lease (provided the specified end date is not before the existing contractual term expiry it can be any time thereafter, presupposing too notice given not more than 12 months or less than 6 months before the contractual term expiry). The s26 notice contains the tenant's proposals for the renewal. To protect its renewal rights, the tenant's application must be made before the end date specified in the s26 notice.

                    Once an application to court has been made, the court will take an active interest in the proceedings. Unless the parties agree to a stay (and the court confirms such), the case management proceedings consist of a sequence of steps for the parties to take in preparation for a substantive hearing (at which the rent etc would be considered and ordered).

                    The tenant's request for an extension to the end date is to minimise the costs for both parties, also to allow more time for negotiations. Often the request is for 3 month extensions and any number of extensions can be agreed. As the extension agreement is a simple letter, it is generally cheaper to agree than invoke the court's case management procedure.

                    At any during during the extension period, either party could make its application to court.

                    The delay is obviously a factor to bear in mind but since the object of the extension is to enable the parties to reach agreement and complete the lease without involving the litigation costs of a court application and ensuing case management proceedings it could be cheaper to agree.

                    The downside of an extension is that if the tenant decided not to renew then because court proceedings have not been started, no notice of discontinuance of proceedings is required; and hence no requirement for the tenant to pay the landlord's costs .

                    As for the rent of renewal, it is the market rent pursuant to s34 and s35 LTA54 and caselaw.

                    As for whether the tenant would make its application to court, if you won't agree the extension then it would, presupposing it wants to renew. Renewal procedure and tactics are a minefield for the inexperienced. As Lawcruncher has said, you would be well advised to obtain advice.



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