Ask an Expert

Shannon Hartland, a commercial property solicitor at Amphlett Lissimore explains protected commercial leases and outlines what security of tenure means for both the landlord and the tenant.

When would a landlord serve a Section 25 notice?

When a lease has security of tenure, a landlord wishing to change or terminate the lease can issue a Section 25 notice. It can be a “hostile” notice, opposing the renewal of a lease, or a “friendly” notice agreeing to a renewal but setting out new terms.

What is a Section 26 notice?

A tenant can trigger renewal by serving a Section 26 proposing new lease terms. Unless the landlord serves a counter-notice within two months the tenant can apply to the court for a new lease.

Does security of tenure only apply to commercial leases?

A commercial lease is protected by the Landlord and Tenant Act 1954 (“the Act”), and the tenant has "security of tenure" unless the landlord and the tenant agreed to exclude this protection.

What is security of tenure?

Security of tenure means that the lease will not automatically end on its expiry date but will continue so long as the tenant carries on business unless the landlord or the tenant serves a notice to end it.

When a protected lease ends, the tenant has a right to a new lease on similar terms but at an updated rent, unless the landlord opposes renewal on one of the grounds set out in the Act.

What if a tenant does not have security of tenure?

If the landlord and tenant agree in the lease that the Act will not apply, and the tenant signs a declaration, the lease is not protected, and the tenant must leave when it expires.

Not having a protected lease could affect a tenant’s business plan. A business can be harder to sell without a protected lease.

Section 30(1) of the Act sets out the grounds a landlord can rely on to oppose renewal, including persistent delays in paying rent, breaches of lease terms, or intended redevelopment.

Some grounds are compulsory, meaning that a court must refuse renewal if the landlord proves they apply. Others are discretionary, when the court can consider the tenant's circumstances even if the ground is proved.

What are the rules about the termination date of a Section 25 notice?

A Section 25 notice must specify a termination date no earlier than when the lease expires and be served 6 to 12 months beforehand. A tenant can challenge a hostile notice by applying to the court for a new lease. If a friendly notice is served, the landlord and tenant can negotiate terms and sign a renewal lease before the termination date.

Tenants lose protection under the Act unless they apply to the Court before the termination date, unless the landlord and the tenant agree to allow longer for negotiations.

Yes. The 1954 Act only applies to tenants occupying premises for business purposes. For residential tenancies the law is different.

Can tenants get compensation if a renewal lease is opposed?

Whether tenants can get compensation depends on which grounds the landlord relies on to oppose renewal. How much they get depends on how long they have occupied the property.

Tenants may lose compensation by vacating the premises early or winding up their business. So, remember if you are a tenant, to stay in the property until the Section 25 notice expires!

Should landlords be concerned?

Landlords should consider their future plans before granting a protected lease. Wanting to sell does not enable a landlord to oppose a renewal lease.

Landords intending to rely on Section 30(1) grounds to oppose a renewal should ensure they have evidence to support their claim. Just mentioning a ground in the Section 25 notice is not enough; you may have to prove it in court.