Lease Regears

A Lease Regear replaces one lease with a new one, on renegotiated terms. Rather than a lease renewal, which happens when a lease has expired or is just about to expire, a lease regear will normally be proposed when there is some time before the lease expires, e.g. 3 years before the expiry date. 

The Landlord or Tenant are free to propose terms for a new lease at any time, this may become more attractive as the commercial goals of either Landlord or Tenant change over time.

Mutual gain is at the heart of any lease re-gear or restructuring, with neither party obliged to conclude a transaction, therefore a considered approach is needed.

Advantages for a Landlord include :

• enhancing the capital value of the property. This can be achieved a number of ways, for example by the removal of tenant break options
• pre-emptive regearing of leases close to expiry may preserve investment value particularly in anticipation of a sale or financing
• securing occupier levels will mitigate costly service charge and rates voids

The advantages for a tenant include:

• the opportunity to revisit lease terms which were agreed in a more buoyant market
• capital payments, rent free periods or reduced rents may be offered in return for extended lease terms or the removal of break options
• the opportunity to renegotiate every aspect of the lease including terms on assignment, subletting, rent review clauses and break dates

Once the terms are agreed there are typically two ways to complete the process – either by the issue of a new lease of by varying the existing lease.