Business Lease Renewals Under the Landlord & Tenant Act 1954 Business Lease Renewals Under the Landlord & Tenant Act 1954

What is security of tenure?

Security of tenure in the context of business leases is the term given to leases which have the protection of the LTA 1954. If a lease is protected, the landlord may only terminate the lease in certain circumstances. The lease will continue on a periodic basis after the contractual term has elapsed until either party takes steps to bring the lease to an end in accordance with the LTA 1954. The tenant will have a right to request a new lease of their business premises, which will be at a market rent and will normally be on similar terms, save for reasonable modernisation.

I am a business tenant – how do I start the business lease renewal process?

If your lease is protected, you can begin the process by serving a formal request for a new lease under s.26 of the LTA 1954.

I am a landlord under a business lease – how do I end the lease?

You can bring the lease to an end by serving a notice under s.25 of the LTA 1954. The notice will either be friendly, in which case it will offer terms for a new lease, or hostile, in which case it will set out reasons for refusing a new lease.

What are the grounds for refusing a new business lease?

The grounds upon which a landlord may refuse a new lease are as follows:

• State of repair (Ground (a)): the tenant has failed to comply with their obligations regarding the repair and maintenance of the premises, resulting in a poor state of repair.
• Persistent delay in paying rent (Ground (b)): the tenant has persistently delayed paying rent which has become due.
• Other substantial breaches (Ground (c)): the tenant has committed other substantial breaches of their obligations under the current tenancy or for any other reason connected with the tenant’s use or management of the premises.
• Suitable alternative accommodation (Ground (d)): the landlord has offered and is willing to provide, or secure the provision of, suitable alternative accommodation for the tenant. The terms must be reasonable, and the accommodation must be suitable for the tenant’s requirements, including preserving goodwill.
• Sub-letting (Ground (e)): the current tenancy was created by sub-letting part of the property, and the landlord requires possession to let or dispose of the property as a whole.
• Demolition, reconstruction or substantial works (Ground (f)): the landlord intends to demolish or reconstruct the premises or carry out substantial works and cannot reasonably do so without obtaining possession.
• Landlord’s own use (Ground (g)): the landlord intends to occupy the premises for their own business purposes or as their residence. The landlord must have been the landlord for at least five years to rely on this ground.

Will I have to pay my business tenant compensation for ending their business lease?

Sometimes, yes. If the landlord opposes renewal solely on Grounds (e), (f) or (g), statutory compensation, calculated by reference to the duration the tenant has been in occupation and the rateable value of the premises, may be payable to the tenant.

The landlord and tenant can’t agree on the terms of a new business lease – what happens next?

It will be necessary to ask the court to determine the new terms. The court can decide on matters such as rental valuation, rent reviews, the length of the new lease and other terms. The court will be guided by expert evidence, in particular on the question of rent. The party seeking to depart from the terms of the original lease must usually persuade the court as to the reasons for the departure.

I have been served with a s.25 notice – what should I do?

Decide whether you want to hand back possession of the property by the date specified in the notice or seek a new lease. A friendly s.25 notice will set out the landlord’s proposals for a new lease, but you are not bound to accept those. If you do not accept the proposed rent, it is worth obtaining valuation advice from a suitably qualified surveyor in order to understand what level the court would likely fix the rent at if the parties cannot agree. If the notice is hostile, meaning it does not offer a new lease, it is worth obtaining advice as to whether the grounds relied on by the landlord are likely to succeed and whether you are entitled to any compensation. It is critical that the deadline specified in the notice is not missed, because that will result in the loss of your security of tenure.