Our lease renewal case study focuses on the negotiation process, the lease renewal negotiation and the savings it means for our client on industrial units in Portsmouth.
Process
Our client approached us in October 2019 regarding their industrial space and their lease was due to expire in June 2020. The landlord had served a Section 25 notice setting out their proposal for the new terms of the lease. Our client, is the tenant and he wanted someone to act on their behalf to negotiate the new terms, and were not willing to accept the proposed new rental from the landlord (landlord’s own agents).
It is important to consider the time frames, as a lease expiry may seem a long way off, but in fact you can negotiate a new lease up to a year before the end. The landlord can start the process by serving the Section 25 notice, not more than 12 months or not less than 6 months before the expiry date, setting out whether they are opposed to a new lease or if they are offering new terms. There are strict forms of service, and time limits to work to.
Following confirmation of instructions, we commenced negotiations with the other side, which involved looking at market evidence and rebutting those provided by the landlord’s agents, and after 6 months of negotiation, we settled on an agreeable new term, including length of lease, schedules of condition, break options and crucially the rental, which was lower than that originally proposed by the landlord.
Outcome
Over a 5 year term, we were able to save our client £35,000. This is a significant saving, and certainly we are pleased to be able to negotiate a saving of 85p per square foot of industrial space. It all adds up when you have a 8,000 square foot building for your business.
It took a further few months for the solicitors to finalise the new lease; almost a year after the commencement of instruction, we have successfully concluded the Lease Renewal and have a client with a security for the next 10 years, a known rental expenditure, and even a rent-free period upon renewal to cope with the covid-19 situation. It was lucky they had an amenable landlord too. It goes to show that lease renewals can take time, and as a professional advisor and chartered surveyor, we have the expertise and knowledge to get the best deal. The client can focus on their business and job, and not be tied up with doing the negotiations themselves.
