Blogs

What can Landlords do when a Business Tenancy is coming at an end? 

Some commercial leases give tenants security of tenure under section 24 of the Landlord and Tenant Act 1954.  What does this mean? This means that a commercial tenancy will continue to exist as a ‘statutory’ tenancy on the same terms even after the expiry date of the contractual tenancy if the tenant continues to be in occupation and until terminated by the Landlord or the Tenant.

Landlords can either:

1. terminate the statutory tenancy, without offering a new tenancy, on or after its expiry by relying on one or more of the  grounds set out in the 1954 Act;  or
2. terminate the existing statutory tenancy and at the same time offer to renew it on substantially similar terms and, usually, for an increased rent.

These options are described in more detail below.

Section 25 Notice - Terminating a Tenancy After the expiry of the Lease

The Landlord can terminate a tenancy on or after the expiry of the tenancy term by serving a ‘Section 25’ Notice in a form required by the Landlord and Tenant Act 1954. 

The Section 25 Notice must (in most cases) be served not less than 6 months and not more than 12 months’ before the tenant is to leave the premises. The Notice must specify the statutory ground or grounds on which the Landlord seeks possession.

Legal advice should be sought at first instance for the preparation of the correct Notice.  Should the Notice not be in the correct form or not be properly served, then it could be held to be invalid and the Landlord will be deemed not to have served a notice terminating the tenancy.  Another Notice would therefore have to be prepared and served on the Tenant thus delaying the date the Tenant is required to vacate.  The Lease would be terminated at the end of the Notice period and the Tenants required to vacate the premises. 

Section 25 Notice - Offering a New Tenancy

Alternatively, the Landlord may wish to offer to grant a new tenancy on or after the date that the contractual tenancy ends and whether for the same number of years as the prior tenancy or not and may wish to specify a higher rent than the previous rent. The landlord would normally be well advised to take the advice of a professional valuer/surveyor before specifying the new rent.

The section 25 Notice must be served on the Tenant at least 6 months and not more than 12 months before the new lease is to start.  The deadline given in the notice and by which time the new lease is to start, however, cannot be earlier than the contractual termination date of the lease.  If insufficient time is given, then the Notice will be invalid. 

After receipt of the Notice, the Tenant may respond by making its own representations for the terms of the new tenancy upon which a period of negotiations will follow between the parties.

Either party may be able, if done in good time, to ask the court to settle an ‘interim’ rent that the tenant is to pay until the new lease is granted. The landlord must seek advice on this early on in the process if they wish to do this.

Legal proceedings to settle terms of a new lease

Normally the parties will agree the terms of a new tenancy before the date the Notice period expires.  However, if not, either the Landlord or the Tenant may apply to the court before the statutory deadline given in the Section 25 Notice to settle the terms of the new lease.  Normally the Tenant would want to do this to protect its position, because if the new lease is not completed or if no application is made to court for a new lease by the statutory deadline given in the section 25 Notice, the tenant will lose their right to a new lease altogether.

The parties can agree between them an extension of time for making an application to the court.

Contact our Specialist Commercial Property Lawyers Today

Our teams of commercial property and litigation lawyers have over twenty years’ experience in this field and would be able to assist you with all the stages of the termination or renewal of a business tenancy, from the preparation of the Section 25 Notice all the way to the litigation process.   

We offer competitive prices so do not hesitate to contact one of our team on 020 8363 4444 and we will be happy to discuss the options with you. 

This briefing has been prepared only for guidance purposes.