Renewing your lease is not as simple as you think
If you have a right to extend your lease you should make sure you do not miss the deadline to extend. If you are even a day late the landlord does not have to provide you with the extension. This could jeopardise your business! If no extension is provided then you become a monthly tenant and the landlord can evict you by giving you only one month’s notice to leave the premises (depending on the lease terms).
Each lease is different and you should obtain legal advice to ensure you are aware of your rights and obligations.
The lease should set out the terms on how the renewal must be exercised. These terms must be strictly complied with. We recommend following the steps below to ensure you comply with your lease and obtain your lease renewal:
1. Time limits: Review the lease and identify the period in which you must exercise your option. The lease will normally state the start and end date for when you can exercise the option. For example, you must exercise your option between 3 and 6 months before the expiry date on the lease;
2. Changes to the Lease: Check if any changes have been made to the Lease since the commencement date. Normally this is done via a document called a Variation of Lease or Amendment. Sometimes point 1 can be varied so make sure you are aware of the correct start and end dates to ensure this time limit has not been altered. Many of the newer leases or varied leases do not allow you to exercise your option later than 6 or 9 months from the expiry date. We recommend checking your lease before signing it and noting down these dates so you do not miss deadlines;
3. Notice requirements: Identify in the lease the correct way to exercise the option. What this means is that you must strictly comply with the terms on how to give notice to the landlord. In the lease there should be a notice provision clause which states how a notice is validly served. For example,
“any notice must be in writing and signed by the party giving the notice and may be:
a. left at or sent by pre-paid post to the landlord’s registered office (if a corporation);
b. left at or sent by pre-paid post to the last known address of the landlord or as specified in the lease; or
c. sent by facsimile to the facsimile number of the landlord.”
Please be careful as many leases do not allow emails as a valid form of service.
4. Types of Letters: There are different types of letters you can send to renew your lease.
5. Standard extension Letter: In your letter to the landlord asking to renew the lease you should confirm that you want to exercise the option and if possible state the clause that allows for the option to be exercised;
6. Conditional renewal: If you only want to exercise the option with changes then you can put both matters in the same letter.
If the changes are not essential then you can send two letters, one standard renewal letter and a separate one seeking changes. This is the safest way so that the landlord does not have an argument that the option letter was conditional. You can then negotiate the changes separate to the renewal.
7.Extend deadline: You can always ask if the landlord will agree to extend the deadline. If it is agreed please make sure you get this agreement in writing.
8. Landlord’s confirmation: Always write at the bottom of your letter that you require the landlord to confirm acceptance of the option (and changes if any) before the deadline. This acts as a back up just in case you do not strictly comply with the above.
Exercising your option correctly is very important so that you do not miss out on an additional lease term. It is wise to obtain advise from a lawyer that specialises in leases to help save you money in the long run and to help protect your business.
Please ensure you make note of important dates in your lease so that you do not miss any deadlines.