Tenants: Get Yourself In The Right Gear
…do you want a reversionary lease, or do you actually want to regear your lease?
In these strange and challenging times, many tenants are looking to change the terms of their lease, by, for example, agreeing to an extended lease in return for a lower rent, or asking for a break clause.
Renegotiating your lease terms, during the course of the lease, is known as re-gearing.
Tenants often come to us asking for a reversionary lease (not to be confused with a lease of the reversion).
A reversionary lease is a lease that starts at some point in the future (but not more than 21 years after its date of grant). Usually, the start date is when the existing lease expires.
However, depending on the start date of the existing lease and the particular circumstances of the tenant, it may be easier to have a new lease which takes effect from the date that it is completed. This new lease impliedly surrenders (ends) the existing lease.
The advantages of this are:
- The new terms for the whole of the lease term are contained in one document.
- Subject to the bargaining power of the parties, it provides an opportunity for the tenant to try and negotiate benefits to assist with current business needs such as a lower rent, asking for a rent-free period, or more favourable repairing obligations.
- There is no need to worry about tying in the assignment or under-lettings provisions between the documents.
- If there were any other variations to the existing lease, you don’t need a deed of variation of the existing lease.
Re-gearing can have positive outcomes for both landlord and tenants.
The flexibility of re-gearing means that both parties can reach a mutually beneficial outcome. However, it is important that legal advice is sought to ensure that the new terms are correctly documented.
For tenants, there can be Stamp Duty Land Tax liabilities owing, a need for the document to be registered at the Land Registry and also third-party consents maybe required.
Landlords need to be mindful of the usual 1954 pitfalls and also any guarantor and rent deposit deed issues.
If you are looking for expert guidance and advice regarding your lease then contact our Commercial Property team on 01903 229999 or use the form below to get in touch.