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- 4 May 2015
  • Commercial Law

The importance of giving proper notice when renewing a commercial lease

Many commercial leases are for a fixed term with rights of renewal for further terms.

Lessees must be aware of their obligations to give proper notification to the lessor to extend the lease strictly as provided for in the terms of the lease.

Firstly, when giving notice to seek a renewal of the lease, the Lessee must not be in breach of any of the terms of the lease. If there is a breach, the lessor has no obligation to agree to renew.

Secondly, where there is a right of renewal, the commercial lease will have a clause that sets out the requirements of the lessee to renew the lease.

The common requirement is for the lessee to serve written notification on the lessor within the agreed time frame which varies from lease to lease.

If the lessee does not serve written notification within this time frame, the lessor has no obligation to agree to renew the lease.

Failure to give written notification can be devastating if the lessor then refuses to renew the lease as the lessor may re-enter the premises at the end of the term of the lease.

This may have an extremely adverse impact particularly where many commercial leases have local goodwill such as licensed premises including hotels and retail bottle shops.

Some commercial leases have the reverse requirement. This means that unless the lessee serves written notification on the lessor that they do not wish to renew, then the lease will automatically be extended for a further term.

This can have substantial ramifications if the lessee wishes to terminate and vacate.

Accordingly in the event that written notification is required to be given by the lessee, it is critical to make sure that the lessee is not in default of any of its obligations and the written notification is served on the lessor within the time frame.

It is critical that the lessee has a full understanding of the terms of their lease. In particular the term relating to the renewal.

If you have any doubts, we strongly recommend that you contact a solicitor from the DBH Commercial team who will be able to provide advice on your obligations.