What are the benefits of commercial lease restructuring?

What is a lease restructuring?

Commercial lease restructuring happens when one of the parties wishes to change the terms under the existing lease. The landlord or tenant looking to amend the lease must know their objectives before approaching the other party to reach an agreement. 

Obtaining specialist legal advice from a commercial lease solicitor at an early stage can ensure that the rights and interests of the parties are protected. 

Once an agreement is reached, the agreed heads of terms will be passed to the parties' representatives to draw up a deed of variation.

What issues might be addressed in lease restructuring? 

The changes to the lease will depend on the specific circumstances affecting the landlord or the tenant. However, some common examples of what could be done in a lease restructure include:

• Introduction of break options. Depending on the type of break clause used, this can provide both parties with more flexibility should their situation change.
• Varying any existing alienation clauses.
• Amending errors in the original lease.
• Varying the demise.
• Capping or controlling any service charge. A cap on service charge might be introduced to ensure payments do not rise significantly in the future.
• Adjusting the frequency of rental payments, e.g. from weekly to monthly or monthly to quarterly.

What are the benefits of lease restructuring?

The lease restructuring process can be beneficial for everyone involved. Tenants are often cautious about asking their landlord to consider a lease restructure. Still, an honest discussion about the business's issues can result in an outcome that benefits everyone. 

For example, if a tenant struggles to pay the rent, it will cause additional issues for a landlord, who may have to pursue other avenues to recover the outstanding amounts. However, a lease restructuring could help easily resolve this problem without either party losing out. 

Some of the few examples of the advantages that lease restructuring has for both parties include:

Tenants

• Greater peace of mind for the tenant, knowing that they can remain in the premises for longer
• The opportunity to adjust break clauses, bringing them in line with future business plans
• More flexibility in terms of subletting the premises to others or making alterations
• The chance to change certain commercial lease clauses that no longer offer any benefit
• A reduction or cap on rent or the inclusion of rent-free periods

Landlords

• Improving investment value with commercial leases that are nearing their expiry date – especially advantageous if the landlord is considering selling the property.
• Greater security for the future with a longer-term lease term as there would be no requirement to find new tenants
• Increasing the property's capital worth through extending the lease term or renegotiating the break clause

Contact our commercial lease solicitors

Understanding commercial leases can be tricky, but if you're considering your options, assume the other party is open to a discussion.

Our commercial lease solicitors have extensive experience assisting landlords and tenants in restructuring leases for restaurants, retail premises, offices, and other property types.

We have offices in Brighton, Eastbourne, Hastings, London, Uckfield and Ulverston, and we work with landlords and tenants across the UK.