What To Do When Your Office Lease Is Expiring

An office lease expiry is one of the most fundamental decision drivers for companies as it requires action to be taken.

While there are many external factors to be considered when an office lease expires, a tenant is left with two options; stay or go. Stay means remaining in your current office and renegotiating your lease and refurbishing your space. Go means relocating to a new property and fitting it out to your specification.

A lease expiry provides organisations with the opportunity to assess their options and revisit their property and workplace strategy. However, there are certain actions which need to be followed to fulfil contractual and legal commitments within a lease. It is important to understand what these commitments are, e.g serving notice or dilapidation works, but with the help of a legal team or fit out partner, it is easy to navigate this process. This article will guide you on how to prepare for your lease expiry, the steps involved and who you should be talking to.

Understanding your lease terms

Landlord and Tenant Act 1954

It is important to understand the details of your lease and how it affects your status as a tenant. Under the Landlord and Tenant Act 1954, provided your lease is protected by the Act, your lease will not end at the expiration of your contractual term. The Act means that the lease is still in effect until either the landlord or the tenants formally serve notice to terminate the lease agreement.

Security of Tenure

There should also be a security of tenure clause within your lease. This clause is there to protect the tenant by giving them the right for their lease to automatically renew with similar terms to their previous lease terms. It acts as a safeguard should you be in a position where you have not agreed on a new lease or found a new property to move to.

Section 25 and 26 Notices

When a tenant wants to renew their lease, they need to serve a Section 26 Notice. This is a proposal of the new lease terms but it must be served to the landlord within 6-12 months of the lease expiry – be sure to check your specified dates.

Once this has been submitted, the landlord has two options. They can accept the notice or reject the new terms by referencing the items they are opposed to. There must be at least one item given as the reason for the rejection of the proposed terms.

In the circumstances that a landlord has already served a Section 25 Notice, which advises the tenant of their intention to terminate the lease at the end of their contractual term, a tenant cannot serve a Section 26 Notice. This scenario may occur if a landlord intends to refurbish a certain floor or the entire property or wish to increase their rates.

Who needs to be involved?

Building your team is a key part of managing the process around your lease expiry. You will need strong support from agents, contractors and legal advisors throughout the process to stay informed and make sure you are fulfilling your commitments.

Landlord

Regardless of your decision to stay or go, your landlord will be reviewing their options for the building and your space. Whether it’s increasing the rent at the renewal stages or redeveloping the entire building, approach your landlord early (up to 24 months before lease expiry for large-scale projects) to find out their long-term goals. Keep an open dialogue with your landlord as fluctuating economic and market conditions will influence their overall objectives.

Commercial agent

Commercial agents have the knowledge and experience of the property rental market and desirable locations. Depending on the size of your organisation and current market conditions, you should begin this process 18 months before your lease expiration. Their expertise will help locate properties which are aligned with your objectives.

Your agent’s role doesn’t cease with securing the new property. A team of competent chartered surveyors should provide site surveys, condition schedules and confirm the legal requirements of the potential workplace meet the required standards and your own business needs. Your surveyors will work alongside you from 12 months in the process through to your move-in date.

Office design and fit out partner

No matter the size of the project, finding the right fit out partner to strategise and design your workplace is essential. If you’re renewing your lease, you will likely want to refresh your space with an office refurbishment. If you are moving to a new space, you will need someone to design the new office. An office design and fit out company will help you with both options and can advise you on the considerations for staying, renegotiating and relocating to a new space. Usually, you will partner with a fit out company from about 12 to 6 months before your lease expiry, although it may be longer depending on the scope of work.

Financial and legal advisors

Renting commercial property is a major financial decision so if you are unsure of the financial implications of your space or want to review your real estate costs, you should engage a financial team 24-18 months before your lease expires. Ask them to draw up a budget forecast and review your current real estate costs to ensure they are aligned with your overall business strategy and budget.

To ensure you don’t incur any extra costs while navigating your lease, it is recommended to seek legal advice. Commercial property transactions can be complicated and consulting with commercial property solicitors at the start of the process (18 months prior to lease expiration) could help save you money. They will advise on your lease obligations in terms of the notice period, rent review and dilapidations which may also provide you with the peace of mind that you’ve fulfilled your commitments.