In these uncertain economic times, many landlords are jumping at the opportunity offered by tenants who agree to extend their leases. Often, this may take the form of a reversionary lease, a lease that is to come into effect on the expiry of the current lease at some point in the future, perhaps some years from now.
A tenant who appears to have a good covenant at the moment may turn out, for whatever reason, to be less so by the time the reversionary lease is due to come into force. If the current lease is forfeited or otherwise brought to an end, the reversionary lease would, in theory, still come into effect.
That is, unless you include specific drafting ensuring that the reversionary lease is terminable in the event that the existing lease is terminated. This pitfall could present great difficulties for future lettings, and with an awkward tenant, court proceedings could be required. Clearly, this type of scenario is one to avoid, and it can be easily done with a little bit of foresight.
For information and advice, please contact the team at Roger Hannah.