By Neil Belcher, partner, Hughes Paddison 

One of the biggest and potentially most costly decisions a business can make is whether they should relocate from their existing premises. Getting this wrong from a legal perspective can be costly and could have a detrimental effect on the future trajectory of the business.

Break clauses

If you are a tenant, you may still have a number of years left under your lease. If you have negotiated a break clause, it is really important not to miss the break date if you are thinking of using this for a business move. It is relatively easy to miss the notice period in the break clause or fail to comply with its strict conditions.

We have come across a number of businesses which thought they had terminated the lease or had plenty of time to do so, but the termination was unsuccessful, and they were left with premises they did not need.

You should review your rights of termination at an early stage and take professional advice where appropriate to ensure that any break notice which you serve is effective.

Dilapidations

It is common for a tenant to be fully responsible for repairs to the property. There may be considerable dilapidations to pay the landlord for "wants of repair" at the end of the lease term or if you terminate pursuant to a break clause.

As a tenant, it is easy for disputes to arise in connection with the extent and level of these dilapidations. The potential costs may be considerable and may not have been fully considered as part of your move.

You should take advice early on the extent of your liability for dilapidations, and you may want to engage a surveyor to assess the likely costs. You will need to make sure that you have factored in the dilapidation costs as part of your budget for relocating

Statutory protection

If you operate as a business under a lease, your tenancy may be a protected tenancy under the Landlord & Tenant Act 1954. You may therefore have statutory rights to renew.

If you are considering staying in those premises and the tenancy is coming to an end, it may be prudent to serve a Section 26 Notice on the landlord, requesting a new tenancy. The reason for this is that, if the landlord fails to respond to your request or doesn't oppose a new tenancy within a two-month period, then, should you wish, you are guaranteed a new tenancy.

The terms of the new lease would need to be agreed which could still take time, but the landlord would not be able to oppose you having that new tenancy. This would then give you the protection for business planning that you could obtain a new lease of your existing premises, or you would have a fallback position if you were still exploring a move.

You therefore need to consider what rights you have under your current lease and whether you would have a protected tenancy if you moved to new premises.

In summary, if you are considering whether to stay or relocate, it is important that you assess your rights to terminate and/ or renew your existing lease and you understand your potential liabilities on termination. You also need to understand what different rights you will have in respect of any new lease.

Get in touch for a confidential chat or to have an initial discussion on any legal issues you may have with relocating your business. 

For more information, contact Neil Belcher, Hughes Paddison partner, email nb@highes-paddison.co.uk, call 01242 586352 or go to https://hughes-paddison.co.uk.