Lease triggers – do you know your obligations and opportunities?

Any owner or occupier who has a building under lease should be mindful of not only their obligations, but also the opportunities that arise with their contracts. One of the key aspects is identifying upcoming lease events whether that be expiry or break option or rent review.

The identification of the trigger dates and the interpretation of the relevant clauses is not always straight forward. Correct procedures and tasks must be followed, for example:

Lease Expiry:

• Lease assessments – addressing questions like is a lease renewal a priority / do we need more space / do we need better space / does this premises fulfil our ESG requirements etc?
• Significant estate management decisions on the part of the owner.
• The service of notice in compliance with the parameters of Landlord and Tenant legislation, e.g. notice of intention to claim a new lease or to claim relief as a counter to a notice to quit.

Break Option:

• A break option will require a notice period – The notice will need to be served by a certain date, in the correct form and to the correct parties.
• Ensuring that the requisite covenants of the lease have been complied with.

Rent Review:

• Monitoring the rent review dates.
• As either owner or occupier you must assess the merits and/or risks in activating a rent review, e.g. (Occupier) if the property is under-rented why serve the notice. If it is over-rented then the occupier should serve the notice (if the lease allows for this).
• The service of notice in compliance with the terms of the Lease.

In each situation a negotiation is likely to ensue between the parties whose goals and aims may not necessarily be aligned and often are at odds. This is most evident in the case of rent reviews where an owner is seeking to maximise their rental income, while an occupier is seeking to minimise their rental liability.

Approaching the lease event with the best professional advice will be one of the key decisions that can swing the outcome in one’s favour, while also maintaining the ongoing relationship between owner and occupier.

Bannon’s Professional Services Team comprises some of the most experienced practitioners of commercial rent reviews in the country. We are versed in negotiations for all types of commercial property i.e. retail / office / industrial, as well as having extensive experience in third party proceedings both through Arbitration and acting as Expert Witness.

Talk to us today.

 

Author:               Ben Semple, Divisional Director, Bannon

Date:                  5th March 2024