Does a Tenant have a right to a new lease?
A Tenant has a statutory right to a new lease at the end of the contractual term if it satisfies the criteria in Section 23 of the Landlord and Tenant Act 1954 (LTA 1954) and the lease has not been contracted out of the security of tenure provisions of the LTA 1954.
S.23 can be summed up by the consideration of the five questions below;
- Is there a tenancy?
- Does the tenancy relate to the premises?
- Are the premises occupied and operated as a business?
- Is the business carried on by the Tenant?
- Does the tenancy fall within any of the specific exclusions?
If you have concerns as to whether your lease is a qualifying tenancy, please get in touch with your usual 3CS contact.
What is the impact of excluded or included security of tenure?
If the lease meets the requirements of S.23 of the LTA 1954, but the security of tenure provisions (being ss 24 – 28 of the LTA 1954) have been excluded by the terms of the lease then the Tenant will have no automatic right of renewal. If this is the case then you will need to negotiate directly with the Landlord who may be willing to grant a new lease but is under no legal obligation to do so.
A tenancy protected by the LTA 1954 will not terminate automatically at the end of the contractual term. If the tenancy is a qualifying tenancy under Section 23 above at the contractual expiry date, it will continue under Section 24(1) of the LTA 1954, on substantially the same terms as the contractual tenancy, until it is terminated in one of the ways specified by the LTA 1954. The Landlord does have a statutory right to apply to Court to settle an interim rent to cover any holding over situation, for example in a rising rental market.
If I meet the criteria and I have a protected lease – what do I do now?
There are different procedures for the renewal of a lease under the LTA 1954, depending on whether the Landlord or the Tenant initiates the renewal. The Landlord can initiate renewal by serving a Section 25 notice on the Tenant or the Tenant can initiate renewal by serving a Section 26 request on the Landlord.
What is a Section 25 Notice – Landlord’s Notice?
The S.25 Notice is addressed to and served on the Tenant, and all the Tenants if there is more than one Tenant, using a form that is prescribed by the LTA 1954.
The service of such a notice can be complicated, as it needs to be properly and validly served. For example, notice cannot be served upon the Tenant more than 12 months before the end of the lease term and not less than 6 months before the termination date of the lease.
What if there are less than six months left on the Tenant’s lease?
It should be noted at this juncture, if there are less than 6 months to run on the Tenant’s contractual term (the term of years granted by the lease), then the notice period will simply run beyond the contractual expiry date specified by the lease.
If the notice is not validly and properly served, it will not be effective and the lease will continue to run in accordance with S.24(1). A subsequent notice will need to be properly and validly served to trigger the end date of the lease.
What is the purpose of the Landlord’s S.25 Notice?
The purpose of the Landlord’s S.25 notice can either be to provide notice to bring the term of the lease to an end and to propose terms of a new lease – which should be the same as the existing lease save for the rent, or to bring the lease to an end – i.e. not to offer a new lease.
If a new lease is not being offered under the S.25 Notice then a suitable reason as to why a new lease is not being granted should be detailed by the Landlord in its notice and must sit within one of the reasons prescribed by S.30(1) of the LTA (statutory grounds for termination).
What is a Section 26 Notice – Tenant’s Notice?
A Tenant that wants to request a new business tenancy can serve a formal request under Section 26 of the LTA 1954. A Section 26 request must be in the prescribed form, setting out the proposed terms of the new lease in the schedule. Where a Tenant serves a request on the Landlord for a new tenancy under Section 26, the Tenant is also initiating the termination of their current tenancy. The current tenancy will terminate immediately before the commencement date specified in the Tenant’s request.
What constitutes a valid Section 26 request?
To be valid, a Section 26 request must comply with the statutory requirements. In particular, the Tenant should ensure that the Section 26 request Is addressed to, and served on, the competent Landlord and is served not more than 12 months, nor less than six months before the proposed commencement date. The Tenant can serve a Section 26 request before the end of the contractual term, or after the end of the contractual term if the tenancy is continuing under the LTA 1954.
Where the Landlord wishes to oppose the Tenant’s request for a new tenancy, it must serve a counter-notice within two months after the Tenant’s request has been made. The counter-notice must specify the grounds in Section 30 of the LTA 1954 on which the Landlord is opposing the renewal application.
What if the Landlord and Tenant can’t agree on a new tenancy or terms?
If the Landlord and Tenant cannot agree on a new tenancy or the terms of the new lease, either party can apply to the court for a new tenancy.
The court application must be made by the end of the "statutory period". The statutory period ends on either of the following dates:
- The day specified as the termination date in the Landlord's Section 25 notice.
- The day before the commencement date specified in the Tenant's Section 26 request.
If no application has been made by the end of the statutory period the Tenant will lose its right to a new lease. The process will be over and the Tenant will need to vacate the premises.
What happens once the court has made an order?
Once the court has made an order, if the Tenant decides that it does not want to take a new lease on the terms that have been ordered and it no longer wants a lease renewal, the Tenant has a period of 14 days to ask the court to rescind the order.
The court must revoke the order for a new tenancy if the Tenant asks for it. The existing tenancy will continue for three months and 21 days after the order has been cancelled. The court is entitled to extend this period as it thinks fit, to give the Landlord a reasonable opportunity to find a new Tenant for the premises.
The Landlord and Tenant may still agree not to act upon the order for a new tenancy made by the court. But any agreement between the Landlord and Tenant must be in writing.
If the Tenant does not make an application to revoke the court order within 14 days after the order is made, or cannot agree with the Landlord not to act on the order, the Tenant will be legally obliged to take the new lease.
How 3CS can help
3CS Corporate Solicitors regularly assist both Landlords and Tenants in the renewal process of their leases.
If you have any queries as to if, how and when you can end and/or renew your lease, please, get in touch with your usual 3CS contact and we would be pleased to offer guidance to you concerning the process and options that best suit you.