What is an uncontested lease renewal and how can it be resolved?

An uncontested lease renewal arises where there is a protected lease relating to commercial premises. The starting point is that the tenant is entitled to a new lease, but the parties do not agree the new lease terms. 

Daniel Long, a specialist at WHN on landlord and tenant disputes, explains for both parties what is involved in dealing with an uncontested lease renewal and the process behind getting it resolved.

An uncontested lease renewal is where both the commercial landlord and tenant are in agreement that the lease should be renewed but the parties do not agree the terms of the new lease.

The most common terms in dispute are the level of rent and length of term but any number of terms can be disputed.

Further information regarding negotiating the terms of a commercial lease can be found in our article: How can I make the most of a commercial lease renewal?

Over the last few years, since the COVID pandemic, our team has seen an emergence of disputes over whether a pandemic clause ought to be included in the new lease as well as disputes over the terms of the lease relating to energy efficiency due to changing legislation.

An uncontested lease renewal is distinct from an opposed renewal where the right to renewal is opposed and the landlord wishes to terminate without offering a new lease.

What is the process behind settling an uncontested lease renewal? 

Essentially, this is where all of the terms of the renewal lease have been agreed. Once agreed, the terms are documented by the parties’ commercial property teams and the lease will then complete.

If court proceedings have been issued, they will be discontinued after the lease has completed. Invariably, the parties will agree to bear their own legal costs.

Does it have to involve taking the matter to court and how can this be avoided?

Terms can be agreed without court involvement and often are. This will also keep costs down.

The court process however, can often be useful from a tactical perspective such as where the parties are significantly apart in negotiations or where there have been delays by one party or a lack of engagement. Issuing court proceedings will exert costs pressure on the other party and will often cause the other party to start engaging.

Parties can avoid court proceedings by engaging early and sensibly. It is always useful for the parties’ agents to be in contact from an early stage as the level of rent is usually the key term to be agreed.

The parties can agree to extend in writing the deadline for the tenant to apply to court for a new tenancy. There is no limit to how many times the deadline can be extended, and it is common to see multiple extensions agreed where parties continue to negotiate and make progress and there is a mutual desire to avoid the costs associated with court proceedings.

If the parties are unable to agree the terms of the renewal lease, the court, an arbitrator or expert can determine the terms guided by the parties’ legal submissions and expert evidence. In practice, this is rare, and terms will usually be agreed at some stage. Often, this will be without court proceedings being issued at all but sometimes the court process can be useful to focus the parties’ minds.

What legal support do I need to deal with this type of dispute?

At WHN, our property disputes team can provide general advice on the law and processes behind lease renewals and the terms of the renewal lease. We often serve the initial statutory notice that starts the process by setting a date when the current lease will terminate and proposing renewal terms.

We can then assist clients throughout the journey by advising on the merits of pursuing or resisting certain renewal terms and ensuring agreed terms are properly offered and accepted in writing. We may advise and assist in relation to settlement offers along the way and will agree extensions of the statutory deadline when instructed to do so.

Our legal specialists often take on more of a project management role and guide clients throughout the whole process. If court proceedings need to be issued or defended, we will go on the court record and deal with all steps involved in the litigation process including agreeing directions, exchanging draft leases, preparing/updating a schedule of disputed terms and potentially assisting the client with witness evidence and instructing an expert.

Sometimes we will deal with the process of staying the court proceedings to allow disputed terms to be referred to PACT (a specialist arbitration process) which is a more flexible, and often cheaper, alternative to court proceedings.

On the transactional side, our commercial property team will deal with documenting the renewal terms, sometimes drafting the renewal lease and dealing with completion and any registration formalities.

WHN’s property disputes team can act for both landlords and tenants and seek to achieve an outcome that is as positive and cost effective as possible.

See also further information on our dedicated service pages regarding lease renewal and security of tenure and lease disputes.

Daniel Long is a director at WHN Solicitors and heads up the firm’s commercial department and property disputes team.

He specialises in resolving disputes between landlords and tenants of commercial leases on matters including rent and service charge recovery, dilapidations, forfeiture, possession, insolvency-related matters, and lease renewal and termination.

For advice on dealing with uncontested lease renewal, please contact Daniel on 0161 761 8063 or email him at [email protected]