Reading time: 5 minutes

Any lease that you currently hold will be underpinned by a commercial lease agreement. The agreement is in place to ensure that each party upholds their rights and obligations during the lease’s lifetime. A commercial lease agreement also gives both parties remedies in case either breaches the agreement. This may be pre-determined in the contract, or it may be enforceable in court. When you negotiate a lease with your landlord, it will be for a set amount of time. Most commercial leases are long term and could be up to 18 years. After this time has elapsed, you may want to renew your lease with your landlord. This article will outline how this process works and whether your landlord can refuse to renew your commercial lease.

What is a Right of Renewal?

The right of renewal is an option for a tenant to renew the lease for a certain period. Depending on the type of agreement you have, your right of renewal may have certain conditions that you have to meet before you can activate it. 

When Can I Exercise the Right of Renewal?

As a tenant, you have to meet certain conditions before you can exercise a right of renewal. The most widely used commercial lease agreement is the Auckland District Law Society Deed of Lease. This deed of lease requires tenants to write to their landlord three months before the lease ends to inform them that they want to renew it. If they do not give three months notice, then the time for a renewal of the lease may have elapsed.

You can also imply a right of renewal. This means the conduct and communication between yourself and your landlord implies that the lease will be renewed. It is always harder to prove something is implied if the matter were to go to court, so it is always best to renew a commercial lease through a signed agreement. 

When Can My Landlord Refuse to Renew My Commercial Lease?

There are certain situations where your landlord may be able to refuse to renew your lease. If this happens, it is essential to carefully review the terms of your lease and consult a lawyer. 

Breach of Lease

If you have breached your lease, then your landlord is entitled to refuse to renew your lease. An example of a breach could be causing damage to the property or not paying your rent on time. If you have breached your lease but still want to renew it, you should speak with your landlord. If you can guarantee that you can uphold your lease obligations, they may be willing to extend it. 

Renewal Clause Not in Terms of the Lease

Your landlord is also able to refuse a renewal of your lease if it is not in terms of the original lease agreement. Your landlord may have only intended for the lease to be for a certain period and thus did not include a renewal clause. If this is the case, then you will not be able to renew your lease. However, if you talk to your landlord, you may be able to convince them to change their minds, especially if you are willing to increase your rental payments. 

What Happens if My Landlord Refuses to Renew My Lease?

If you have met the conditions in your agreement for a lease renewal, then your landlord must renew it. If your landlord refuses to do this, then you can take legal action. A court will side with you, and you will be able to either renew the lease or get compensation due to your landlord not following the terms of the agreement. 

Key Takeaways 

Lease agreements are used so parties can get legal remedies if either of them were to breach a provision of the agreement. Before a lease term expires, there will usually be an option to renew the lease. This option could renew the lease for a shorter, longer or the same amount of time. If you have met all the conditions for the right to renew your lease, then your landlord must renew it. However, if you have breached any lease agreement provision, they are not required to renew it. They are also not required to renew the lease if there is not renewal term in the agreement.

If you have met the conditions, but your landlord still refuses to renew the commercial lease, you will get a remedy in court. If you need any legal assistance with the commercial lease agreement, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Is a right of renewal always implied?

No, if there is no proviso for a right to renew your lease, your landlord is not required to do so.

Can my lease still be renewed if I breach the lease and pay compensation?

Your landlord might be willing to give you a second chance, but this depends on if the landlord can trust you not to breach the lease again.

Can the court force my landlord to renew a lease?

If your landlord has wrongfully refused to renew your lease, then the court can force your landlord to uphold the terms of your agreement.

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards