Commercial lease renewal surveyors for landlords and tenants

Is my lease protected by the Landlord and Tenant Act 1954?

Most business leases in England and Wales are, but not all. The Act covers a tenancy of premises the tenant occupies for its business. It does not cover a lease that landlord and tenant agreed to "contract out" of the Act, which needs a formal warning notice from the landlord, or, in most cases, a lease for a fixed term of six months or less. The Act doesn't apply in Scotland or Northern Ireland.

Whether your lease is protected is a crucial first question, because it decides whether the tenant has the legal right to renew.

Landlord and Tenant Act 1954, sections 23 (opens in a new tab), 38A (opens in a new tab) and 43 (opens in a new tab)

What is a Section 25 notice?

It is the landlord's formal notice, in a set form, to end a protected lease and start the renewal. It names the date the tenancy ends, which must be 6 to 12 months after the notice is given and no earlier than the lease's own end date.

It must say whether the landlord opposes a new lease. If not, it sets out the landlord's proposals for the property, the rent and the other terms of the new lease. If so, it must give the grounds, and is often called a hostile Section 25 notice. Legal advice is needed to serve one.

Landlord and Tenant Act 1954, section 25 (opens in a new tab)

What is a Section 26 request?

It is the tenant's formal request for a new lease, often called a Section 26 notice. You can make one if your lease was granted for a fixed term of more than one year, as long as your landlord hasn't already served a Section 25 notice.

It names the date the new lease should start, 6 to 12 months ahead and no earlier than the end of your current lease, and sets out your proposals for the rent and terms. Your landlord then has two months to say whether they will oppose it, and on which grounds.

Landlord and Tenant Act 1954, section 26 (opens in a new tab)

What is the difference between a Section 25 and a Section 26 notice?

Who serves it. The landlord serves a Section 25 notice; the tenant makes a Section 26 request. Either one starts the renewal, sets the timetable and lets either side apply to the court for a new lease.

Only one can be used: once the landlord has given a Section 25 notice, the tenant can't make a Section 26 request, and once the tenant has made a request, the landlord can't give a Section 25 notice.

Landlord and Tenant Act 1954, sections 24 (opens in a new tab) and 26 (opens in a new tab)

When can a Section 25 notice be served?

Up to 12 months before the date it names, and no later than six months before it. Because that date can't be earlier than the date the lease would end anyway, the earliest a landlord can serve one is 12 months before the lease ends.

A notice can also be served after the end date, while a protected lease carries on under the Act. A tenant's Section 26 request runs to the same 6 to 12 months.

Landlord and Tenant Act 1954, sections 25 (opens in a new tab) and 26 (opens in a new tab)

How long is a Section 25 notice valid, and what happens when it runs out?

Until the date it names. By then, unless the new lease has been agreed in writing, the landlord or the tenant must apply to the court, or both must agree in writing to extend the deadline, which they can do more than once. For a Section 26 request, the deadline is the day before the new lease is due to start.

If none of these happens, the tenancy ends on that date and the tenant loses the right to a new lease under the Act. That is why it pays to talk to us as soon as a notice arrives.

Landlord and Tenant Act 1954, sections 28 (opens in a new tab), 29A (opens in a new tab) and 29B (opens in a new tab)

Can a landlord refuse to renew a commercial lease?

Only on the grounds set out in the Act, stated in the landlord's notice. They include the tenant's failure to repair, persistent late payment of rent or other substantial breaches; suitable alternative premises offered; the landlord intending to demolish or reconstruct; and the landlord intending to occupy the premises for its own business or as its home, which a landlord generally can't use if it bought its interest within five years of the tenancy ending.

If the landlord doesn't prove a ground, the court grants a new lease, and the negotiation is about the rent and terms.

Landlord and Tenant Act 1954, sections 30 (opens in a new tab) and 29 (opens in a new tab)

How is the rent set at a lease renewal?

By agreement, on the evidence of open market rents. If the two sides can't agree, the court sets it at what the property "might reasonably be expected to be let in the open market by a willing lessor", leaving out any effect of the tenant's own occupation, its goodwill and certain improvements the tenant has made.

That is why an in-depth knowledge of current market rents is crucial: recent open market lettings of similar premises nearby are the true test.

Landlord and Tenant Act 1954, section 34 (opens in a new tab)

Read: Open market rent, what does it mean?

Can the rent go down at a lease renewal?

Yes. Most rent reviews are upward only, but at a lease renewal the terms are renegotiated and rents can fall as well as rise. It is common practice at lease renewals for rents to reduce, and we often negotiate a new rent below the old one for the tenants we represent.

If a tenant can show the rent is above the open market rental value, it is easier and often more cost-effective for a landlord to agree a reduction than to pursue an inflated rent through the courts.

Read: How to ask for a rent reduction

What is interim rent?

It is the rent the tenant pays while the old lease carries on and the renewal is being settled. Either the landlord or the tenant can ask the court to set it once a Section 25 notice or Section 26 request has been served, and no later than six months after the old tenancy ends.

It is payable from the earliest date that the notice or request could have named.

Landlord and Tenant Act 1954, sections 24A (opens in a new tab) and 24B (opens in a new tab)