Renewing a business lease under the Landlord and Tenant Act 1954: the steps, the deadlines and what a court can order

What happens when a protected business lease reaches its end?

The Act protects a tenancy where the property is or includes premises occupied by the tenant for the purposes of a business carried on by the tenant (section 23(1)). Landlord and tenant can agree that sections 24 to 28 are excluded from a tenancy granted for a term of years certain (section 38A(1)), but the agreement is void unless the notice and other requirements in section 38A(3) are met. This is usually called contracting out, so check whether your lease has been contracted out.

A protected business tenancy does not simply end on its contractual date. Under section 24(1), the tenancy continues until it is ended in accordance with Part 2 of the Act. Either side can then start the process.

While the tenancy continues, either the landlord or the tenant may apply to the court to determine an interim rent, once a section 25 notice has been given or a section 26 request made (section 24A(1)). Neither may apply if the other has made such an application and has not withdrawn it (section 24A(2)), and no application is entertained if it is made more than six months after the tenancy ends (section 24A(3)).

Should the landlord’s section 25 notice or the tenant’s section 26 request be used?

The landlord starts the process with a section 25 notice, given not more than twelve nor less than six months before the termination date it names. The tenant can start it instead with a section 26 request, which is available where the current tenancy is for a term of years certain exceeding one year (section 26(1)).

A section 25 notice must be given in the prescribed form (section 25(1)), and a section 26 request is of no effect unless it is made by notice in the prescribed form (section 26(3)). The forms are set bythe Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004 (SI 2004/1005).

A tenant cannot make a section 26 request if the landlord has already given a section 25 notice, or if the tenant has already given notice to quit or a notice under section 27 (section 26(4)). After a request, the landlord has two months to give notice that it will oppose the application, stating its grounds (section 26(6)).

A section 26 request must specify the date the new tenancy is to begin, which must fall not more than twelve nor less than six months after the request (section 26(2)). It also cannot be earlier than the date the current tenancy would otherwise end. Our guides on the section 25 notice and the section 26 request cover each route in more detail.

What are the court deadlines?

Subject to section 29B, the court cannot entertain an application for a new tenancy made after the statutory period ends, whichever party makes it (section 29A(1)). For a section 25 notice, the period ends on the date specified in the notice (section 29A(2)(a)). For a section 26 request, it ends immediately before the date the tenant specified in the request (section 29A(2)(b)).

The parties can agree a later date under section 29B. Do not rely on an extension until it is agreed in writing, and take advice before the deadline passes.

What can the court order, and on what terms?

Where the parties do not agree, the court can grant a new tenancy. It can be for no more than fifteen years where the term is a term of years certain (section 33). The new tenancy is of the holding and, if the parties do not agree what the holding is, the court designates it by reference to the circumstances at the date of the order, subject to the other provisions of section 32 (section 32(1)).

If the rent is not agreed, the court determines the rent at which the holding might reasonably be expected to be let in the open market by a willing lessor, disregarding, among other things, the effect of the tenant’s occupation, the goodwill attached to the holding and any qualifying improvements the tenant made (section 34(1)). The improvement disregard is limited: it covers an improvement the tenant carried out otherwise than in pursuance of an obligation to its immediate landlord, during the current tenancy or, failing that, completed not more than twenty-one years before the application, with the holding (or the affected part) comprised in business tenancies at all times since and the tenant not having quit at the end of any of them (section 34(2)). The other terms are either agreed, or determined by the court, which must consider the current tenancy and all relevant circumstances (section 35(1)).

On what grounds can a landlord oppose a new tenancy?

A landlord who opposes renewal must rely on one or more of the grounds in section 30(1). In summary, they are:

• (a) the tenant’s repairing obligations have been breached, so that the premises are in disrepair (section 30(1)(a));
• (b) the tenant has persistently delayed paying rent (section 30(1)(b));
• (c) the tenant has other substantial breaches, or other reasons connected with its use or management of the holding (section 30(1)(c));
• (d) the landlord has offered and is willing to provide suitable alternative accommodation on reasonable terms (section 30(1)(d));
• (e) the tenancy was created by sub-letting part of the property in a superior tenancy, and the landlord needs possession to let or dispose of the whole property because separate lettings would earn substantially less (section 30(1)(e));
• (f) the landlord intends to demolish, reconstruct or carry out substantial work that needs possession (section 30(1)(f));
• (g) the landlord intends to occupy the holding for its own business or residence (section 30(1)(g)).

Ground (g) is barred if the landlord’s interest was purchased or created within the five years ending with the termination of the current tenancy, and the holding has been let on business tenancies at all times since (section 30(2)). Where a new tenancy is refused only on ground (e), (f) or (g), the tenant may be entitled to compensation on quitting the holding (section 37).

The court decides whether a ground is made out. The summaries above are short; read the full wording of the relevant paragraph before drawing any conclusion about a particular lease.

What are the steps, in order?

The table sets out the order of events for a typical renewal. The timings are the statutory ones; no calendar dates are given, because they depend on the notice served.