Commercial Lease Renewal and Terminations under the 1954 Landlord & Tenant Act

/ dispute resolution

Richard Harriman, a Partner in our Litigation Department who deals with residential and commercial property disputes writes:

“Does a tenant of business premises have security of tenure?  The answer depends upon the Landlord and Tenant Act 1954 (“The 1954 Act”).  There are two elements to the security provided:-

  • Automatic continuation of the tenancy; and

  • An ability in certain circumstances to apply for a new tenancy.

At the end of a fixed term, the tenancy will not come to an end unless terminated in accordance with the Act.

The methods of termination provided by the Act in short are:-

  • Section 25 Terminating Notice served by the landlord followed by an application by the landlord to the Court terminating the continuing tenancy.

  • A request for a new tenancy under Section 26 Notice, followed by an application to the Court for termination.

  • Notice by the tenant terminating the tenancy under Section 27.

  • Notice to Quit served by the tenant, where there is a periodical tenancy.

  • Forfeiture, surrender or merger of the tenancy.

Where a Section 25 Notice has been served to determine the tenancy, or a request has been made for a new tenancy under Section 26, the tenant may apply to the Court for a new tenancy. The landlord can agree to the granting of a new tenancy, or oppose this under the grounds contained in Section 30. Those are in brief:-

  • Failure to comply with the repairing covenant (this is a discretionary ground).

  • Persistent delay by the tenant in paying rent. (This is again discretionary).

  • Other substantial breach by the tenant of its obligations under the tenancy, or for any other reason connected with the use or management of the premises.

  • Provision of suitable alternative accommodation.

  • The property is uneconomically sublet (discretionary).

  • Demolition, reconstruction or substantial works of construction by the Landlord.

  • The Landlord requires the premises for their own business, or as their residence.

If the landlord wants to grant a new tenancy they can either:-

  • Wait for the tenant to apply for a new tenancy and then put forward  their proposals.

  • Or instead of waiting the landlord can apply themselves for the tenant to be granted a new tenancy. If the parties cannot agree the terms of the tenancy, then these can be determined by the Court.

What happens when the tenant does not want to continue the tenancy?  In that case they may:-

  • Leave prior to the expiry date in the lease under Section 27(1A)

  • Serve a notice under Section 27(1) terminating the tenancy at the expiry date in the lease, by giving not less than 3 months’ notice.

  • Serve a notice under Section 27(2) terminating the tenancy at any time by giving not less than 3 months’ notice.

If the landlord fails to serve a Section 25 Notice and the tenant fails to serve a Section 26 request, the tenancy will simply continue on the same terms in the lease. 

The above does not apply to tenancies which are not “1954 Act” protected.

If the Act has never applied, the tenancy will come to an end at the expiry date in the lease, and the landlord will be entitled to possession, however, if rent is paid and accepted by the Landlord, a new periodical tenancy may be created which in turn may have security of tenure, which could cause the landlord considerable difficulties.”

Richard has advised upon many landlord and tenant disputes in his 20 years’ of practise and is aware of the pitfalls and possible solutions in such situations.