Extending or renewing a commercial lease

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We offer experienced, cost effective, practical advice for both Landlords and Tenants on all aspects of commercial lease renewals and the implications of the Landlord & Tenant Act 1954.

The Landlord and Tenant Act 1954 deals with security of tenure, which means that (subject to certain exceptions, getting the procedure right or opting out of the right-see below) as a tenant, you have an in principle right to renew a commercial lease on similar terms when it runs out.

When Does the Act Apply?

The Act applies to tenancies where the tenant is occupying the property. With regards to business tenancies, there is an extra condition that the tenant must occupy the property for the purpose of his/her business. It is important to check that the provisions of this Act have not been excluded in your tenancy agreement. If they have, then you will not have any of the rights granted by this Act.

The Act will not apply in circumstances where the lease is for less than 6 months. An exception applies where the lease makes an allowance for its extension or renewal, or where the tenant’s full duration of occupation is more than 12 months. Additionally, if the tenancy’s extension or establishment is connected with the tenant’s employment, the Act will not apply.

If the 1954 Act does apply, how can a Protected Tenancy be brought to an end?

If the landlord wants to end a tenancy, he/she may be able to do this by serving a section 25 notice using the Act. This would involve either the refusal of a new tenancy, or the offer of a new tenancy. The date to terminate must be between 6 and 12 months from the date the notice has been served. It is possible for the tenant to use section 26 of the Act in order to request a new tenancy. The start date for this new tenancy must also be between 6 and 12 months after the date the request was submitted. Failure to meet these strict timetables or getting the paperwork wrong or not serving the paperwork correctly can have disastrous consequences.

It is important to note that both a section 26 and a section 25 notice cannot be used to terminate the tenancy before the original expiration date, which would have been agreed upon in the lease.

Opting out

With many commercial leases, when the lease is first granted, the landlord will seek to negotiate that the tenant contracts out of the statutory renewal rights. There is a strict procedure for this, and whether to contract out or not is a decision which should be based on legal advice. If the original tenant contracted out, and successor (assignee) who has bought the lease will be stuck with the contracted out position.

We can help

If you are seeking a  lawyer, whether as a tenant seeking to renew an existing commercial lease, or negotiating a new one, or a landlord needing advise on the Landlord & Tenant Act 1954, please contact James Swede. James is highly experienced in all aspects of commercial property law.

Receiving a Section 25 Notice from Landlord

If you are a tenant, and you have received a section 25 notice from your landlord, you will not be required to send a counter-notice. It is advisable however, that you speak to your landlord to reach an agreement regarding any future proceedings.

Receiving a Section 26 Notice from tenant

If you are a landlord, and you have been served with a section 26 notice, you have two main options available to you. If you plan on offering a new lease, then you do not have to send a counter-notice to the tenant. If, however, you have no intention of offering a new lease, you are required by law to serve your tenant with a counter-notice.

This must be done within a 2 month period from the date the tenant originally served the section 26 notice. This counter-notice must include the reasons why a new tenancy will not be offered.

No application can be made to the court if a section 26 notice has been served and the landlord has not yet served a counter-notice, or the 2 month period has not expired.

What is a section 27 notice?

Additionally, a tenant may be able to use a section 27 notice to give the landlord a notice of 3 months of his intention to vacate the property. This applies where the tenant has forfeited/surrendered the lease, or where the intention to vacate is for a date which is before or on the original termination date set out in the lease.

Court Proceedings

If either party wants to begin court proceedings they must ensure they do this before the expiration of “the statutory period”. For a section 25 notice this is normally the date of termination for the tenancy, which is laid out in the notice. For a section 26 notice, this is normally the date directly before the date set out in the notice as the date for the new tenancy.

If no application has been made to the court before “the statutory period” then the tenancy will be deemed to have ended.

Getting the technicalities wrong on the statutory renewal or opposition notices can have catastrophic consequences. If you would feel more comfortable with legal advice, we can help, so please do get in touch.

Similar terms

The legislation provides that if the tenant has the right to renew in principle and complies with the correct procedure, he, she or they are entitled to a renewal on similar terms.

This does not mean the same terms, and usually the dispute is over the rent. If the landlord simply tries to double the rent arbitrarily as a way of forcing the tenant out, this is a dangerous tactic, unlikely to work, and may end up in backfiring if the issue becomes a dispute.