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The manner in which a lease renewal is addressed depends on whether or not the tenant has security of tenure, i.e., a right to renew their lease. In this context, there are two types of lease:
- A Lease which is granted inside of the Security of Tenure provisions of Part II of the Landlord & Tenant Act 1954.
- A Lease which is granted outside of the Security of Tenure provisions of Part II of the Landlord & Tenant Act 1954.
A Lease granted inside of the Security of Tenure provisions of Part II of the Landlord & Tenant Act 1954. (The Act)
A lease which is granted within the Act comes with two main advantages.
- An automatic right to renew at the end of the term subject to S30(1) of The Act which I will explain below.
- A right, in a number of cases, to receive compensation from the Landlord where a lease is not renewed.
This is known as security of tenure.
S30(1) of the L & T Act 1954
A landlord can refuse a tenant a new lease if any provisions of the above apply.
Below is an extract from of S30(1) of the Act
“Opposition by landlord to application for new tenancy.
- The grounds on which a landlord may oppose an application under [F2section 24(1) of this Act, or make an application under section 29(2) of this Act,] are such of the following grounds as may be stated in the landlord’s notice under section 25 of this Act or, as the case may be, under subsection (6) of section 26 thereof, that is to say:—
(a) 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;
(b) that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due;
(c) 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;
(d) that 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; (e) 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;
(f) that 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;
(g) subject as hereinafter provided, that 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.”
A Lease which is granted outside of the Security of Tenure provisions of Part II of the Landlord & Tenant Act 1954.
A lease which is granted outside of the Act does not contain the above and consequently, a tenant will have to vacate if terms for a new lease are not agreed.
There is little else to be said in relation to a lease granted outside of the Act so I will focus the remainder of this information sheet on a lease which has security of tenure.
When the contractual term of a lease which is inside the Act comes to an end, it still continues to run as a periodic tenancy. This is provided for under S24 of the Act.
It will continue until either the landlord serves a Notice under S25 of the Act A Section 25 Notice), or the tenant serves a s26 request for a new tenancy (A Section 26 Request).
S.25
This is a legal document which is most often prepared by the landlord’s Solicitor.
If you receive this Notice, the main information to look for are the terms the Landlord is offering. It will state the length of lease, the rent and other basic terms.
A S.25 Notice must provide no more than 12 months and no less than 6 months Notice.
A landlord who serves the S.25 Notice late (i.e., it will expire after the contractual term has ended), will not be able to charge his tenant an increased rent until the date set out in the Notice.
If a S.25 Notice is served incorrectly, it is invalid and in the majority of cases, a fresh Notice will need to be served and the clock will start from the date of the new Notice.
If you believe you have received an invalid Notice, you should seek legal advice. Do not assume that because there is an error in the Notice that it is invalid.
S.26 Request for a new tenancy
This is the same as the S.25 except that it is the tenant’s version.
If a landlord fails to serve a S.25 Notice, the tenant can serve this Notice on the landlord.
All of the above timescales and comments apply.
I would only advise a tenant to serve a S.26 Notice if there is evidence to support a lower rent.
What Next
After one of the Notices have been served, the landlord and the tenant or their respective representatives will enter into negotiations for a new lease.
Valuations will need to be carried out by both parties and terms will hopefully be agreed at which point the landlord and the tenant instruct their Solicitors.
The landlord’s Solicitor will prepare the lease and send it to the tenant’s Solicitor for approval.
There is plenty of legislation and case law covering the lease renewal process, but it has been my intention to keep this information sheet simple rather than overcomplicate it.
If you have a specific case which you would like us to consider, please call Jonathan Brickman or Paul Wogman on 020 8369 5640 and we will be happy to provide you with some brief advice and if you wish, a fee proposal to take on your case.
This information sheet contains a very basic summary of the general principles of a commercial lease renewal. It is not an all-encompassing guide and should not be relied upon as such.
Its intention is to inform the reader of the basic provisions and processes of a lease renewal.
