Q. What is the difference between rights of renewal under the Landlord & Tenant Act 1954 and an option to renew my lease?

If your pharmacy lease has the protection of the 1954 Act then, subject to complying with certain requirements, you may have a right to renew your lease at the end of the term. However, the landlord might be able to oppose the renewal. An option to renew, if properly drafted, can protect the contractor from the landlord being able to take the pharmacy back and refuse a new lease.

Landlord’s right to oppose a lease renewal

The pharmacy landlord can object to the right to renew a lease on a number of grounds. Those likely to be of concern to a contractor are that the landlord wishes to redevelop the pharmacy or that he intends to occupy it himself. If your landlord is a doctor or pharmacist and can operate the pharmacy himself then you could lose your business. A contractual option to renew the lease would protect the contractor from this risk.

Right to compensation

If the lease is not renewed, a contractor may be entitled to statutory compensation equivalent to the rateable value of the property or even twice the rateable value if the pharmacy has operated there for 14 years or more. However, this sum may not be sufficient payment for the goodwill of the business.

Option to renew

A well-worded option to renew can incorporate all the necessary terms for a new lease, protect the goodwill value and also entitle the contractor to a right to a new lease even where there is no statutory protection.

 

The above is a general overview and we recommend that independent legal advice is sought for your specific concerns.

Debra Kent is head of the pharmacy property transactions team at Charles Russell Speechlys LLP.