Contested and Uncontested Commercial Lease Renewal Applications

If the lease has the protection of the Landlord and Tenant Act 1954 (“the Act”) because it has not been contracted out of the security of tenure provisions of the Act, then the tenant is entitled to a new renewal lease on the same terms as the existing lease subject to reasonable modernisation.

This means the tenancy will not automatically terminate at the end of the contractual term. It will simply continue, on the same terms, until it is terminated using one of the methods under the Act.

As the landlord, you can start the renewal process to obtain a renewal lease by serving a Section 25 Notice on the commercial tenants.

You may, for example, want to do this if the rent is likely to increase.

If the lease is properly excluded then the tenant will not be entitled to a new renewal lease will not be able to serve a Section 26 Notice.

If the contractual term has come to an end but the tenant remains in occupation for the purpose of their business then they may, in certain circumstances, acquire security of tenure under the Act. You should diarise the end of the contractual term to ensure that this does not happen. Ideally, a new lease contracted out of the Act should be agreed upon and completed by the contractual expiry date or very shortly afterwards. A landlord can protect its position in the short term by sending the tenant a letter indicating that they are occupying as a “tenant at will” whilst negotiations for a new lease term continue.

If the tenant does acquire security of tenure, they will not be able to serve a Section 26 Notice and initiate a lease renewal. However, it may be harder for the landlord to gain possession of the property as they would have to serve a Section 25 Notice relying on one of the statutory grounds opposing a lease renewal or alternatively, serve a Section 25 Notice offering to grant the tenant a new lease.

A Section 25 notice is a notice that is served on the tenant(s) to offer them a new lease.

It is a prescribed form and states the landlord’s proposed terms for the new lease.

The notice has to be served not more than 12 nor less than 6 months before the termination date specified in the notice.

The termination date cannot be before the contractual expiry date but the landlord can serve a Section 25 notice before the end of the contractual term or after the contractual term has expired.

The landlord cannot unilaterally amend or withdraw the notice once it has been served on the tenant.

The landlord’s proposals are not binding, and the landlord can change their position as they negotiate terms. However, careful thought should be put into what proposals to make for tactical reasons.

No, the landlord cannot serve a Section 25 Notice after the tenant has served a Section 26 Notice. Any Section 25 Notice served by the landlord after a Section 26 Notice has already been served will be invalid.

The effect of serving the Section 25 Notice is that the tenancy comes to an end on the termination date specified in the notice (“the Deadline”).

If the parties have not:

• Entered into a new tenancy;

• Extended the Deadline in writing; or

• Made an application to Court

By the Deadline then the tenant will lose their right to a new lease on the same terms as the existing lease subject to reasonable modernisation.

A Section 26 Notice is a notice served by a tenant on the landlord requesting a new business tenancy.

It is a prescribed form and states the tenant’s proposed terms for the new lease including a proposed commencement date.

The Section 26 Notice has to be served not more than 12 nor less than 6 months before the proposed commencement date specified in the notice. Therefore, you may want to consider serving a notice between 6 to 12 months before the contractual expiry of the term.

Yes, the commercial landlord can object. However, the landlord must serve a counter-notice within two months of the tenant’s Section 26 request being served.

If the landlord fails to serve a counter-notice within this period, then they cannot object to the grant of a new lease to the tenant.

The landlord must state in their counter-notice the statutory ground that they are relying upon to oppose the tenant’s request for a new business tenancy.

The grounds that the landlord can rely upon are set out in Section 30(1) of the Landlord and Tenant Act 1954 and are, simply speaking:

• The premises are in disrepair

• Arrears of rent

• Other breaches of covenant

• Suitable alternative accommodation

• The tenancy was created by a sub-letting

• Landlord’s intention to redevelop

• Landlord’s intention to occupy

Some of the grounds are discretionary, so the Court could decide to grant a new lease even if the landlord successfully makes out the ground of opposition.

Other grounds are mandatory so if the landlord successfully makes out the ground of opposition, the Court cannot order that a new lease be granted.

No, a Section 26 Notice cannot be served if the landlord has already served a Section 25 Notice.

It also cannot be served if the tenant has already given notice to terminate the tenancy or if the tenancy does not meet the criteria set out in the Landlord and Tenant Act 1954.