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A tenant of a business lease has a statutory right to a lease renewal at the end of the contractual term if it satisfies certain criteria under the Landlord & Tenant Act 1954 (“the Act”).
Briefly:
- There needs to be a tenancy which relates to the premises, and
- The premises need to be occupied for the purpose of a business carried on by the tenant.
Some tenancies are specifically excluded from the protection of the Act.
What happens at the end of the contractual term?
The tenancy will continue under the Act on the same terms as the contractual tenancy until it is terminated under the Act.
How can the tenancy be terminated under the Act?
There are different procedures for termination and renewal of a lease under the Act depending on who initiates them. The landlord initiates termination or renewal of a tenancy by serving a Section 25 notice and the tenant initiates renewal of a tenancy by serving a Section 26 request.
How does a landlord serve a Section 25 notice?
The landlord must serve a notice which must be:
- In the prescribed form, and
- Served on the tenant (or tenants) not more than 12 months and not less than 6 months before the termination date specified in the notice.
The landlord must elect to either agree to or oppose the grant of a new lease. If the landlord agrees to a new lease, it is required to set out its proposals for the terms of the new lease in the notice.
A landlord can only oppose the grant of a new lease on the following grounds:
- Premises are in disrepair
- Arrears of rent
- Other breaches of covenant
- Suitable alternative accommodation
- Tenancy was created by a sub-letting
- Landlord's intention to redevelop
- Landlord's intention to occupy
Does the tenant need to respond to the Section 25 notice?
No.
How does a tenant serve a Section 26 request?
A tenant can request a new tenancy by serving a request which is:
- In the prescribed form, and
- Served on the competent landlord not more than 12 months and not less than 6 months before the proposed commencement date specified in the request (which cannot be before the contractual expiry of the current lease).
Does the landlord need to respond to the Section 26 request?
Yes. If the landlord wishes to oppose the grant of a new tenancy, it must serve a counter notice within two months after the tenant’s request is served which must:
- Be in writing, and
- Specify the grounds on which the landlord is opposing the application for renewal.
Who is the competent landlord?
This may not be the tenant’s immediate landlord and it may be a superior landlord or the owner of the freehold.
When can you apply to court and what is the time limit for making the application where a Section 25 notice has been served?
You can apply to court once the Section 25 notice has been served. The application to the court must be made by the date specified as the termination date in the Section 25 notice.
Is this the same when a Section 26 request has been served?
No. You can apply to court after the landlord has served a counter notice or the deadline for doing so has expired. The application to the court must be made by the day before the commencement date specified in the Section 26 request.
What happens if the date is missed?
If no application is made within the prescribed time limit, the tenant will lose its right to a new lease.
The parties can extend the time limit to apply to the court by agreement in writing provided that this is done before the deadline expires. The extension must be to a specified date.
What will the court order?
The court will make an order to end the existing tenancy and either:
- Determine that the landlord has succeeded on its grounds of opposition, if any, or
- Direct the terms of the new tenancy.
If you need advice in relation to lease renewals, we can help. We will work with you to assess risks, costs and options to determine the best way of tackling the issues. For further information call Jill Lawton on 01689 887855 or e-mail her at jill.lawton@cwj.co.uk