Selling when Tenant has Option to Renew

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    Selling when Tenant has Option to Renew

    I have a flat in London with a Tenant of 3.5 years.
    The Tenant has Options to Renew at the end of each year for the next five years, provided they are not in breach.
    The Tenant is not in breach and I have already agreed to one year extension after the original term.
    I have the right to give notice (2 months) to terminate, but not earlier than 18 months from now.
    I would like to sell the flat to an individual who wishes to use it as main residence, not as investment property - ie i need the Tenant to move out to complete the sale.
    Will the Option to Renew still be valid for my Tenant or can I find a way to stop the renewal?

    Any thought appreciated.

    #2
    Is your tenant a company or a person?

    Comment


      #3
      Please quote EXACT wording of option to renew clauses.
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        The tenant is a person.

        The wording is as follows “the Tenant shall have the option to renew this Agreement on the same terms and conditions at an increased rental of 5% for a further period of one year from 1 April 2021. Notice of an intention to renew must be given in writing to the Landlord not later than 1 Feb 2021. This option to renew is subject to the Tenant not being at the time of the notice nor having been prior thereto in breach of any of the covenants in this Agreement”

        Comment


          #5
          That term simply gives the tenant the right to renew the agreement, but, on its own, it doesn't stop it being brought to an end by the landlord.

          The 18 month restriction sounds like the real problem.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6

            For the avoidance of doubt, Landlord's right to terminate is worded as follows: “If the Tenant exercises the Option to Renew clause above, the Landlord may at its option terminate the Tenancy in writing upon two months written notice. Such notice may not be given before 1 February 2021. The termination of the Tenancy may therefore not take place before 1 April 2021.”

            Comment


              #7
              In which case, I think you're stuck until April next year unless the tenant breaches the tenancy agreement.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Originally posted by LarryLandlord View Post
                The tenant is a person.

                The wording is as follows “the Tenant shall have the option to renew this Agreement on the same terms and conditions at an increased rental of 5% for a further period of one year from 1 April 2021. Notice of an intention to renew must be given in writing to the Landlord not later than 1 Feb 2021. This option to renew is subject to the Tenant not being at the time of the notice nor having been prior thereto in breach of any of the covenants in this Agreement”
                The above does not seem to agree with: "The Tenant has Options to Renew at the end of each year for the next five years, provided they are not in breach."

                Comment


                  #9
                  sorry - typo, the Landlord clause should be 2022 (not 2021)
                  the renewal options are sequential - i just included the first one to clairfy the text

                  Comment


                    #10
                    Where did you get that tenancy agreement? Why did you bind your hands in that way?

                    Comment


                      #11
                      I have been known to say on more than a few occasions that the golden rule when granting short term tenancies is to avoid complications. Options and rights to break are complications and in the case of options there is a very nasty trap for the unwary: unintentionally creating a perpetually renewable lease which the Law of Property Acy 1925 converts into a lease for 2000 (yes, that is two thousand) years. First you need to consider if your wording creates a such a lease and then, if it does, whether the right to break is of assitstance.

                      Using your wording as a base, an option to renew can take one of following three forms:

                      A: The Tenant shall have the option to renew this Agreement on the same terms and conditions at an increased rental of 5% for a further period of one year from 1 April 2021.

                      B: The Tenant shall have the option to renew this Agreement on the same terms and conditions (excluding the right to renew) at an increased rental of 5% for a further period of one year from 1 April 2021.

                      C. The Tenant shall have the option to renew this Agreement on the same terms and conditions (including the right to renew) at an increased rental of 5% for a further period of one year from 1 April 2021.

                      B prevents a perpetually renewable lease from arising, while C pretty much guarantees it. But what is the effect of A? Are the words "(including the right to renew)" implied? Doing a bit of Googling, the consensus is that the courts do their best not to find a perpetually renewable lease wherever they can and that an option following A does not create one; however, no case is quoted to support the opinion (though that does not mean that there is no such case).

                      Having a right to break and an option to renew in the same document is a bit contradictory. It is not though unknown and there was indeed a case on it back in 1923 when it was held that the right to break overrode the right to renew. That though only applies if the document does not provide to the contrary and the case being a 100 years old leaves an opportunity for a court today to come to a different decision.

                      Given the potential seriousness of the situation you need to get an expert opinion on what the legal position is and whether the service of a break notice will put things right. Any such notice should be professionally drawn and served.

                      Comment


                        #12
                        Originally posted by Lawcruncher View Post
                        Given the potential seriousness of the situation you need to get an expert opinion on what the legal position is and whether the service of a break notice will put things right. Any such notice should be professionally drawn and served.
                        The money may be better spent by offering it to the tenant to leave.

                        Comment


                          #13
                          Those are some.bizzare terms to have in place, as above it needs to be kept simple and not bind you in such un-needed clauses.

                          Im not even sure what purpose they serve other than to pressure the tenant into another 12 month term with an automatic 5% increase.

                          Ive always worked off 6 months initial term then periodic to save all sorts of hassle.

                          Comment


                            #14
                            Lawcruncher, you are right that i will need to get a lawyer involved if i am to force a break. However, what could be a possible basis for serving a break notice?

                            Comment


                              #15
                              That's what the solicitor will advise you on.
                              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                              Comment

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