Re-gearing a lease can help occupiers reduce costs and provide better business flexibility.

A lease can be varied at any time, however rent reviews and break dates offer good opportunities for tenants to explore the possibilities of potential changes to the lease. If the tenant intends to stay in the premises beyond the current lease break/expiry date and the lease break or expiry is within the next three years or so, re-gearing the lease is a valuable exercise.

Tenants may be able to negotiate benefits with a lease re-gear, such as realigning break clauses to match their own business targets, or a capital payment, introducing a rent holiday or negotiating refurbished communal areas and services by the landlord. The lease re-gear can also include a review of lease clauses so that the tenant has greater flexibility to allow sub-letting, or reduce the amount of floor space occupied and at a lower rent.

Faced with the prospect of no tenant at all and the liability for empty property business rates, the landlord may decide that a reduction in the passing rent is a better option than vacant premises.

The re-gearing process

The process of re-gearing a lease is relatively simple. It usually involves the completion of a Deed of Variation, or a surrender of the existing lease and re-grant of a new one (however, the tenant will be liable to pay stamp duty land tax on the re-granted lease).

In the current economic climate, re-gearing is a positive way to help both the landlord and tenant achieve their goals. The flexibility of re-gearing means there are many ways to tailor the process to specific circumstances and both parties should be able to reach a mutually acceptable agreement quickly.