Commercial Lease Renewals

Under the Landlord and Tenant Act 1954 (LTA 1954), subject to certain exceptions, a business tenant has security of tenure which offers two key protections:

  • The tenancy will not terminate automatically after the lease comes to an end. It will continue on the same terms as the contractual tenancy until it is terminated in one of the ways specified in the LTA 1954;
  • The tenant has a statutory right to an entirely new lease that replaces the existing lease (commonly referred to as a lease renewal).

Some leases are not protected by the LTA 1954, for example, if the lease includes a clause to contract out of the security of tenure provisions of the LTA 1954.

Who can initiate a commercial lease renewal?

Either the landlord or the tenant can initiate the lease renewal procedure before the end of the contractual term or after the end of the contractual term if the tenancy is continuing under the LTA 1954.

The landlord can initiate the lease renewal procedure by serving a section 25 notice. The section 25 notice will end the tenancy between six and 12 months from the date of the notice and will indicate whether:

  • The landlord proposes a new tenancy; or
  • The landlord is opposed to a lease renewal.

The tenant can request a new business tenancy by serving a section 26 request. Service of a section 26 request will not oblige the tenant to take the lease. It is simply the trigger to initiate the renewal process. 

The LTA 1954 sets out strict format requirements and time limits. If they are not complied with, the right to renew the lease (or oppose its renewal) may be lost. We can initiate the lease renewal process on behalf of a landlord or tenant by preparing and serving the notice or request. 

When can a landlord refuse?

The landlord must grant a lease renewal unless there is a specific legal reason to oppose the renewal.

The landlord must notify the tenant of its opposition by serving either:

  • a section 25 notice if the landlord is terminating the lease; or
  • a counter-notice to a tenant’s section 26 request.

In both cases, the landlord must specify the grounds of opposition under section 30(1) of the LTA 1954. Examples of these grounds include:

  • The tenant is in persistent rent arrears;
  • The tenant has breached repair or maintenance obligations;
  • The landlord intends to demolish or reconstruct the premises;
  • the landlord intends to occupy the premises for the purpose of its own business.

We can act for landlords wishing to oppose a lease renewal by preparing and serving the appropriate notice or counter-notice on the tenant.

Can a tenant challenge a landlord’s opposition to lease renewal?

Once a landlord has expressed its opposition in a section 25 notice, or in a counter-notice to a tenant’s section 26 request, either the landlord or the tenant can apply to court:

  • The tenant can apply to court for a new tenancy and challenge the landlord’s grounds for opposition;
  • The landlord can apply to court for an order terminating the tenancy without renewal on any of the grounds for opposition contained in section 30 of the LTA 1954.

If the landlord fails to establish its grounds, the court will order a new tenancy.

If the court agrees that the landlord has established any of the grounds for opposition, the court will make an order terminating the current tenancy without the grant of a new tenancy.

We can act on behalf of a landlord opposing a lease renewal or a tenant challenging an opposition.

How are the terms of the new lease agreed?

The majority of the lease, if not all of it, will usually be negotiated by the landlord and the tenant without resorting to court. However, if the parties cannot agree, the landlord or the tenant can apply to court to determine the new terms of the lease.

Once the court has made an order on the new lease terms, a tenant will be bound to take the new lease unless:

  • the court revokes the order on the tenant’s application; or
  • the landlord and tenant agree in writing not to act upon the order for a new tenancy made by the court.

We can act on behalf of a landlord or a tenant in an unopposed lease renewal, by assisting negotiations and applying for a court order, if appropriate.

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