At Myerson, we understand that you do not want to be embroiled in costly and lengthy litigation and aim to resolve disputes as quickly as possible. There are instances where you have no option other than to proceed through the Court process, particularly if you are a defendant to Court proceedings. If you find yourself in this situation then our experts have a wealth of experience and will be able to guide you through the process and fight your corner for you.
We recognise that disputes can be a huge distraction from your business and that the legal answer does not always provide the best outcome to the dispute. We assess each matter on its own facts and will outline all of your options and advise you on the best course of action depending upon the objective you want to achieve.
Myerson has a team of experts from across our contentious and non-contentious departments who work together to ensure that the approach to the dispute is the best for each client.
Our team of experts are happy to discuss your situation in a no-obligation and free consultation.
Commercial Tenant Disputes Expertise
Contested and Uncontested Renewal Lease Applications
A tenant of a commercial lease normally has a right, under the Landlord and Tenant Act 1954 (“the Act”), at the end of the contractual term, to be granted a new renewal lease on the same terms as the existing lease subject to reasonable modernisation.
To qualify for a new renewal lease, the premises must be occupied by the tenant for the purpose of its business. Where premises are only occupied under a licence (this usually applies where premises are shared with other occupiers) there is no right of renewal. There is also no right of renewal under the Act for agricultural tenancies, service tenancies, mining leases and tenancies for six months or less.
Commercial leases can exclude the right to a renewal lease under the Act to ensure that at the end of the contractual term the tenancy comes to an end. Therefore, it is important to ascertain at the outset whether the tenant qualifies.
If the tenant is entitled to a renewal lease and the tenant wants to start a lease renewal then they can serve a “section 26 notice” on the landlord proposing the terms for the renewal lease. Alternatively, the landlord can start the process by serving a “non-hostile section 25 notice” setting out the proposed terms.
If the tenant is entitled to a renewal lease but the landlord is opposed to granting a renewal lease then the landlord can either serve a counter-notice (within two months of the tenant serving the section 26 notice) or alternatively, serve a “hostile section 25 notice” setting out why the landlord objects to granting the tenant a new lease.
A landlord can only rely on one of the statutory grounds contained in section 30(1) of the Act to object to granting a new renewal lease. There are a number of grounds that the landlord can rely upon. The most commonly relied upon grounds are where the tenant has been in serious breach of the lease, the landlord has plans to redevelop or where the landlord wants to occupy the premises themselves.
The section 25 notice or section 26 notice will contain a date on which the current tenancy will come to an end. If the landlord and tenant cannot agree on terms for the new lease or that the tenant will vacate then either party can apply to Court for the grant of a new lease or for the Court to determine whether the landlord is able to satisfy the criteria to oppose the renewal lease.
If an application is not made by the date specified in the notices (or that has been extended in writing before the date expires) then the tenant will lose their right to a renewal lease and will have no right to remain in occupation of the property.
If the landlord successfully objects to the lease renewal then compensation will be payable to the tenant if the opposition was solely on a non-fault ground. Compensation is calculated by reference to the rateable value of the property.
Commercial Lease Renewal FAQs
Does a commercial lease automatically continue?
If the lease has the protection of the Landlord and Tenant Act 1954 (“the Act”) because it has not been contracted out of the security of tenure provisions of the Act, then the tenant is entitled to a new renewal lease on the same terms as the existing lease subject to reasonable modernisation.
This means the tenancy will not automatically terminate at the end of the contractual term. It will simply continue, on the same terms, until it is terminated using one of the methods under the Act.
As the tenant, you can start the process to obtain a renewal lease by serving a section 26 notice on the landlord.
You may, for example, want to do this if the rent is likely to decrease.
What if the lease is excluded from the Landlord and Tenant Act 1954?
If the lease is properly excluded from the Act then the tenant will not be entitled to a new renewal lease and will not be able to serve a section 26 notice.
If the contractual term has come to an end but the tenant remains in occupation for the purpose of their business then the tenant may, in certain circumstances, acquire security of tenure under the Act. The tenant will still not be able to serve a section 26 notice and initiate a lease renewal. However, it may be harder for the landlord to gain possession of the property as they would have to serve a section 25 notice on the tenant relying on one of the statutory grounds to oppose a lease renewal or alternatively, serve a section 25 notice offering to grant the tenant a new lease.
What is a section 26 notice?
A section 26 notice is a notice served by a tenant on the landlord requesting a new business tenancy.
It is a prescribed form and states the tenant’s proposed terms for the new lease including a proposed commencement date.
When should you renew a commercial lease?
The section 26 notice has to be served not more than 12 nor less than 6 months before the proposed commencement date specified in the notice. Therefore, you may want to consider serving a notice between 6 to 12 months before the contractual expiry of the term.
Can the landlord object to a tenant’s request for a new tenancy?
Yes, the landlord can object. However, the landlord must serve a counter-notice within two months of the tenant’s section 26 request being served.
If the landlord fails to serve a counter-notice within this period, then they cannot object to the grant of a new lease to the tenant.
The landlord must state in their counter-notice the statutory ground that they are relying upon to oppose the tenant’s request for a new business tenancy.
The grounds that the landlord can rely upon are set out in section 30(1) of the Landlord and Tenant Act 1954 and are, simply speaking:
- The premises are in disrepair
- Arrears of rent
- Other breaches of covenant
- Suitable alternative accommodation
- The tenancy was created by a sub-letting
- Landlord’s intention to redevelop
- Landlord’s intention to occupy
Some of the grounds are discretionary, so the Court could decide to grant a new lease even if the landlord successfully makes out the ground of opposition.
Other grounds are mandatory so if the landlord successfully makes out the ground of opposition, the Court cannot order that a new lease be granted.
Can a section 26 notice be served if the landlord has served a section 25 notice?
No, a section 26 notice cannot be served if the landlord has already served a section 25 notice.
It also cannot be served if the tenant has already given notice to terminate the tenancy or if the tenancy does not meet the criteria set out in the Landlord and Tenant Act 1954.
What happens after the section 26 notice has been served?
The landlord may serve a counter-notice if they wish to oppose the tenant’s application for a new lease.
If the landlord is happy to grant a new lease then the parties will start to negotiate the terms.
What happens if a new lease is not entered into by the proposed commencement date in the section 26 notice?
The effect of serving the section 26 notice is that the tenancy comes to an end on the day before the proposed commencement date for the new tenancy (“the Deadline”).
If the parties have not:
- Entered into a new tenancy;
- Extended the Deadline in writing; or
- Made an application to Court
by the Deadline then the tenant will lose their right to a new lease on the same terms as the existing lease subject to reasonable modernisation.
A landlord can bring a terminal dilapidation claim at the end of the lease for any breaches of the repairing obligations. We can advise you in relation to the claim, defend it and negotiate a settlement on your behalf.
It is not the case that a landlord can simply recover the cost of the repair works. There are many more aspects to a dilapidation claim and we can advise you on any claim that is made and the options available to you to reduce your liability to the landlord.
We can also advise you on any claims the landlord brings during the term for example, by serving a Notice to Repair and discuss the options available to you.
Leases can contain landlord or tenant break options. We have experience in preparing and serving the break notices as well as advising on the validity of the notices. Failure to effectively serve a break notice will mean that the lease will continue and can have significant consequences for the landlord or tenant.
We can view more information on Break notices on our dedicated page here.
Forfeiture and Relief from Forfeiture
If your landlord serves a section 146 notice or forfeits your lease by changing the locks then this will have a dramatic impact on your business. We can advise you as to whether the forfeiture was lawful and can make an application on your behalf for Relief from Forfeiture and any damages claim.
Terminating your lease
If you no longer want to continue with the lease then we can advise you on the options available to you to exit the lease and vacate the premises. It may be that you can negotiate a surrender of the lease, exercise a break notice or that you sublet the property or assign the lease to a third party.
Applications for Landlord’s Consent
The lease may state that landlord’s consent is required for example, to assign the lease to a third party. In this situation, the law places certain responsibilities on the landlord.
We regularly deal with applications for consent and can guide you through the application process, the responsibilities that the law places on you and advise you on the options available to you if your landlord unreasonable withholds consent.
Breaches of the Landlord’s Covenants
The landlord normally covenants with you to provide quiet enjoyment to the property. If the landlord breaches this covenant then you will have a claim against the landlord and will be able to recover any losses you have suffered. We recognise that these claims can be urgent and require injunctive relief and we have great experience of dealing with these matters.
We can advise you on the rent review procedures contained in your lease and the process that needs to take place to effect and record a rent review. Some rent reviews have triggers that involve serving notices. We can guide you through the process.
Meet Our Specialists
Home-grown or recruited from national, regional or City firms. Our specialists are experts in their fields and respected by their peers.
Laura is a Partner and Head of our Property Litigation Team
Seán is a Partner in our Property Litigation Team
Karen is a Senior Associate in our Property Litigation Team
Jennifer is a Solicitor in our Property Litigation Team
Commercial Tenant Case Studies
Case Study 1
Client Intro: Urban Burger Bar
Our client is the tenant of a commercial premises that it occupies as a restaurant.
We advised our client in relation to a renewal lease for the premises that they were occupying for the purpose of their business which was trading as a restaurant. Our client had been served with a section 25 notice from their landlord stating that they would grant a new lease but on different terms.
Case Study 2
Client Intro: Convergys Corporation
Our client is a tenant of a commercial property and works in the telecommunications sector.
Our client is the leasehold owner of a property in Altrincham. The roof at the property was leaking and the landlord attempted to repair it on a number of occasions. The landlord sought to argue that the roof was passed its life time and needs new cladding. The landlord wanted to charge our client for this via the service charge.
The advice involved a careful consideration of the contractual provision in the lease and the difference between what amounts to repair, maintenance, renewal and improvement and ascertaining what the works amount to and what can be recharged to our client.
We advised our client as to a strategy about how to ensure that the roof is repaired whilst limited its liability to the landlord in relation to the cost of the works.
Case Study 3
Client Intro: Landmark Inns Limited
Our client is a tenant of commercial properties.
Our client is the tenant of the basement and ground floor commercial areas of a building. Above are residential apartments.
The landlord of the building has failed to provide the services and carry out repair works that are set out in the lease of the residential apartments.
The tenants of the residential apartments applied to the First Tier Property Tribunal and secured a management order for a third-party company to “step in” and take over from the obligations and responsibilities of the landlord. The order was time-limited.
The third-party company commenced a S.20 consultation before the time-limited management order expired but concluded it and have raised service charge demands of the tenants after the management order expired.
The works which the third-party company are proposing are substantial and the sums demanded of our client are significant. The third-party company has commenced the works.
We have advised our client in respect of the issues which the Third-party company faces given the expiry of the “management order”.
Case Study 4
Client Intro: Dulux Decorator Centres
Our client is the tenant of a significant number of commercial properties.
Our client is the tenant of a property in Ealing, Middlesex. They had a break option in their lease that they wanted to exercise as they had found an alternative unit elsewhere to move to. We had to prepare and serve the break notice on the landlord, who was in the Seychelles. We also advised our client on the break conditions.
Case Study 5
Client Intro: Rhode Island Coffee Limited
Our client is the tenant of a commercial property that it occupies as a coffee house.
Our client has a lease of a commercial property that it uses to run its business, a coffee house. Our client wanted to bring the lease to an end early by exercising the break option. We drafted and served the break notice.
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