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Commercial Lease Renewal Notices

BUSINESS OBJECTIVES ACHIEVED

If you are a commercial landlord or tenant, and the contractual term of your lease has expired, you should consider serving a statutory notice requesting or refusing a new lease - to protect your interests and to seek certainty for your business. These are often referred to as s.25 or s.26 notices.

Unless excluded, the Landlord and Tenant Act 1954 grants commercial tenants a right to request a new lease, on expiry of the old lease. There are limited grounds set out in the Act for a landlord to oppose a renewal lease. Where a landlord wishes to oppose a new lease, specialist advice is vital in deciding which ground(s) to use and how to use evidence effectively.

The rules on the correct forms to use, the correct method of service and the timing of the notices is complicated and strict. The minimum notice period is 6 months, so it is important to act fast, preferably before the contractual term of the lease expires.

We offer a fixed fee service to assess the what, when and how of the notice necessary. This will enable you to make the right decision as to how to proceed.

If the contractual term has expired or will expire in the next 12 months, now is the time to take advice.

We aim to provide you with initial advice within 2 working days of instruction at a fixed fee.

We also offer a fixed fee for drafting and serving the notice. Our commercial property team can then deal with the transaction.

Contact Laura Hallett Lea or Jordan Davies for more information and advice.

The Commercial Property team also offers fixed fee Lease Reports.

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FAQs

Does my commercial tenant have an automatic right to renew their lease?

Most leases, unless contracted out, fall within Part II of the Landlord and Tenant Act 1954, which provides business tenants a right to renewal. You should take legal advice as to whether document / occupation by the tenant is a lease, whether it is contracted and / or whether the circumstances permit you to refuse the tenant a renewal lease.

I have a business lease which is about to expire, does my landlord have to give me a renewal lease?

Most business tenants have a statutory right to renew, subject to the landlord objecting on certain grounds. The first step is to serve a notice requesting a new lease, which gives the landlord two months to serve a counter-notice citing grounds of refusals.

I have received a section 25 notice refusing me a new lease on ground F – redevelopment. What are my options?

The first step is to take legal advice as to the validity of the notice. There are strict rules in place regarding the content, timing and service of section 25 notices. If valid, you have the option of leaving the premises when the notice expires (with statutory compensation) or challenging the landlord's opposition through the courts. The first step to this is the gathering of evidence.

I don’t intend to renew my tenant’s business lease; do I need to pay compensation?

Only if you are relying on one or more of the compensations / non-fault grounds such as redevelopment and own occupation. If you are able to rely on a fault-based ground such as rent arrears, you can avoid this.

I received a section 26 request for a new lease more than two months ago. Can I now oppose the grant of a new lease?

No, provided that the section 26 request was validly served. You should take immediate advice as to the validity of the section 26 request. If valid, you must offer the tenant a new lease. There can, however be negotiations as to the terms of that lease. There is also usually a commercial deal to be done.

My business tenant and I are on amicable terms and have agreed Heads of Terms for a new lease which includes a rent increase. Why should I serve a notice?

Without the service of a section 25 notice or section 26 request, there is no interim rent period. This means that if there is a delay in the lease being granted (as there often is) the tenant will have no obligation to pay a higher rent in the interim period.

How do we calculate statutory compensation under the 1954 Act?

Where a tenant has been in occupation under 14 years, the amount is the rateable value of the property. If they have been in occupation over 14 years, the amount is twice the value. The rateable value isn't the same as the payable rates.

I have just bought a freehold retail premises. There is a tenant in the property whose lease has expired. Can I ask the tenant to leave so that I can trade there myself?

Probably not. The own occupation ground can only be relied upon where you have held the interest for at least 5 years. Your options are to find another relevant ground, offer the tenant a renewal lease or negotiate their exit on commercial terms.