Commercial Lease Notices FAQ - United Kingdom


Notice Basics
What are the commercial lease notices?

The commercial lease notices are the forms used to end or renew a commercial tenancy. Assuming that the parties have not contracted out of the Landlord and Tenant Act 1954, each party will need to use a specific form. Landlords must use a Section 25 form while tenants must use a Section 26 form.

What does it mean to "contract out" of the Landlord and Tenant Act 1954?

Contracting out of the Landlord and Tenant Act 1954 allows the landlord and tenant to agree that that the tenant will have no security of tenure. This means that when the lease has expired, the tenant will be unable to apply to the court for a new tenancy (under the Landlord and Tenant Act 1954 tenants with business leases for more than one year generally have security of tenure when the lease expires). If the landlord and tenant do not contract out of the Landlord and Tenant Act 1954, then special notices (Section 25 Notice or Section 26 Notice) will have to be filled by the landlord and/or tenant in order to extend the lease.

Can the tenant apply to the courts to renew the lease if the tenant has already agreed to contract out of the Landlord and Tenant Act 1954?

No, if the landlord and the tenant have already contracted out, then when the lease has expired, the tenant will be unable to apply to the court for a new tenancy.

Are there any types of businesses that do not have the right to renew their tenancy?

The following businesses do not have the right to renew their tenancy:

  • farm business tenants;
  • mining tenants;
  • ‘service tenants’ employed by the landlord;
  • tenants with fixed-term tenancies of six months or less (Note: These tenants do have security of tenure once they have occupied the premises for more than 12 months, either on their own or with their predecessor. A ‘periodic’ tenant, with for example a monthly or weekly tenancy but without a fixed term, does enjoy security of tenure.);
  • tenants who agree to ‘contract out’;
  • tenants using the premises for business without the landlord’s agreement;
  • where there is a licence rather than a lease;
  • tenants with long leases extended under the Leasehold Reform Act 1967 and, in certain cases, their sub-tenants; and
  • tenants who have sub-let the premises and who are not occupying them personally (although occupation by an agent or manager does give renewal rights).
Landlord Notice
Can a landlord end a business tenancy before the lease term expires?

The landlord may end a a business tenancy before the lease term expires under the following circumstances:

  • the tenant fails to pay rent;
  • the tenant does not fulfil its obligations under the lease agreement; or
  • the lease has a "break clause" allowing the landlord to end the term early.

The landlord is required to send a Section 25 form to end a tenancy.

How does the Section 25 form work?

The Section 25 Notice is a form that can be used by a landlord to either:

  1. end a tenancy with a proposal to start a new tenancy; or
  2. end a tenancy with reasons for refusing a new tenancy.

If the landlord wishes to end the tenancy, the landlord must send the Section 25 Notice stating the reasons for refusing the new tenancy to the tenant. The tenant then has two options. First, the tenant can do nothing in which case the tenancy will come to an end on the date specified on the Section 25 form. Second, the tenant can apply to the court to renew the tenancy in which case the landlord will have to come to court and provide reason(s) for why the landlord wishes to end the tenancy. The reasons must meet one or more of the specified grounds of s. 30(1) of the Landlord and Tenant Act 1954.

If the landlord wishes to renew the tenancy, the landlord must send the tenant a Section 25 Notice which ends the tenancy and provides the terms for a new tenancy. The tenant does not have to respond to the landlord's notice however, if the tenant wishes to stay, its in the tenant's best interests to negotiate an agreement so parties need not go to court.

When should the landlord send the Section 25 Notice to the tenant?

The landlord can send the form to the tenant no less than 6 months and no more than 1 year prior to the end of the tenancy. Neither party can ask for the tenancy to end prior to the end date specified in the lease.

Do I need to submit a notice if the tenant has already sent me a notice?

If the tenant has already commenced with a Section 26 Notice, the landlord cannot use the Section 25 form.

When can the parties apply to the court?

Either party may apply to the court as soon as the tenant has received the Section 25 form from the landlord. However, it is in the best interests if parties try to reach an agreement before going to court.

If a Section 25 form is used, when is the last day parties are allowed to apply to the court?

The last day to apply to court is the date the tenancy will expire in the Section 25 form. Parties can agree to extend this deadline, but they must do so in writing before the original deadline expires. They can then agree to further extensions, provided they do so before the current extension runs out. If an application is not made in time, the tenant loses the right to renew the tenancy.

Tenant Notice
How does a Section 26 form work?

The Section 26 Notice is a form that can be used by a tenant to request a new tenancy. The form sets out the tenant's proposed terms for a new tenancy. The form must be sent to the landlord. Upon receipt, the landlord has 2 months to decide whether he/she wishes to continue granting the tenancy. If the landlord opposes the tenancy, the landlord can apply to the court to end the tenancy stating one or more of the specific grounds for ending the tenancy under s. 30(1) of the Landlord and Tenant Act 1954.

When should the tenant send Section 26 Notice to the landlord?

The tenant can send the form to the landlord no less than 6 months and no more than 1 year prior to the end of the tenancy. Neither party can ask for the tenancy to end prior to the end date specified in the lease.

If the landlord opposes renewing the tenancy, the landlord must respond to the Section 26 Notice within 2 months of receiving the form.

Do I need to submit a Notice if the landlord has already sent me a notice?

If the landlord has already proceeded with a Section 25 form, the tenant cannot use the Section 26 form.

What should the tenant do to end a tenancy?

A tenant can bring the tenancy to an end by ensuring that he/she has moved out of the premises by the end of the fixed term end date specified in the lease. If the landlord allows the tenant to remain in occupation after the end date, the tenant will have to continue paying rent. In these circumstances, the tenant can only end the tenancy by providing the landlord with 3 months' notice.

When can the parties apply to the court?

The tenant must wait until the landlord has responded or until 2 months have passed before applying to court. The landlord can apply to court as soon as the landlord receives the Section 26 form. However, it is in the best interests if parties try to reach an agreement before going to court.

If a Section 26 form is used, when is the last day parties are allowed apply to the court?

The last day to apply to court is the date proposed for a new tenancy in the Section 26 form. Parties can agree to extend this, but they must do so in writing before the original deadline expires. They can then agree to further extensions, provided they do so before the current extension runs out. If an application is not made in time, the tenant loses the right to renew the tenancy.

Termination
What is the full text of Ground A?

Ground A provides:

where under the current tenancy the tenant has any obligations as respects the repair and maintenance of the holding, that the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, being a state resulting from the tenant's failure to comply with the said obligations[.]

What is the full text of Ground B?

Ground B provides:

that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due[.]

What is the full text of Ground C?

Ground C provides:

that the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the current tenancy, or for any other reason connected with the tenant's use or management of the holding[.]

What is the full text of Ground D?

Ground D provides:

the landlord has offered and is willing to provide or secure the provision of alternative accommodation for the tenant, that the terms on which the alternative accommodation is available are reasonable having regard to the terms of the current tenancy and to all other relevant circumstances, and that the accommodation and the time at which it will be available are suitable for the tenant's requirements (including the requirement to preserve goodwill) having regard to the nature and class of his business and to the situation and extent of, and facilities afforded by, the holding[.]

What is the full text of Ground E?

Ground E provides:

where the current tenancy was created by the sub-letting of part only of the property comprised in a superior tenancy and the landlord is the owner of an interest in reversion expectant on the termination of that superior tenancy, that the aggregate of the rents reasonably obtainable on separate lettings of the holding and the remainder of that property would be substantially less than the rent reasonably obtainable on a letting of that property as a whole, that on the termination of the current tenancy the landlord requires possession of the holding for the purpose of letting or otherwise disposing of the said property as a whole, and that in view thereof the tenant ought not to be granted a new tenancy[.]

What is the full text of Ground F?

Ground F provides:

on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding[.]

What is the full text of Ground G?

Ground G provides:

on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence[.]

What if neither party has submitted a notice?

Assuming that the landlord and tenant have not come to an agreement and a notice has not yet been served (or it has been served but it expires after the tenancy expiry date), then the Landlord and Tenant Act 1954 provides that the tenancy is continued until it is brought to an end either by a section 25, 26 or 27 notice, by court order, by the grant of a new tenancy, or by forfeiture or surrender.

 

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