The Landlord and Tenant Act 1954 (the "Act") provides critical provisions and protections for business tenancies, prescribing the procedure for terminating leases protected by the Act.
Continuation of Protected Leases
Under the Act, leases do not automatically terminate upon reaching their contractual expiry date. For example, a business tenancy of a fixed term of ten years will not conclude at the end of this period unless terminated in accordance with the procedures outlined in the Act. Section 24(1) stipulates that such leases will continue on the same terms until properly terminated as per the Act.
Importance of Serving Notices
A pivotal component of the lease termination process under the Act is the service of notices, which clarifies the intentions of the involved parties. Many modern commercial leases fall within the ambit of the Act, meaning that at the end of the existing lease, the tenant is entitled to a new lease unless the landlord can object on the limited grounds of opposition available. The right to a new lease ensures business continuity and provides the tenant with a valuable asset that can be assigned, if permitted.
Types of Notices Under the Landlord and Tenant Act
Section 25 Notice for Lease Renewal: Issued by the landlord proposing terms for the renewal of the lease.
Section 25 Notice Opposing Renewal: Issued by the landlord opposing the renewal of the lease based on statutory grounds specified in Section 30(1) of the Act.
Section 26 Notice by Tenant: Issued by the tenant proposing terms for the renewal of the lease.
Section 27 Notice by Tenant: Issued by the tenant indicating that no renewal is required (less common).
Section 25 Notice Proposing Terms for Renewal
When a landlord serves a Section 25 Notice proposing renewal, it must delineate the proposed terms and specify the date on which the current lease will terminate. Pursuant to Section 29A(2)(a) of the Act, either party may apply to the court for a new lease by the date specified in the notice. This date may be extended by written agreement, and the parties are free to negotiate terms at any time. Should proceedings be initiated, the claim will concern the terms of the new lease rather than the entitlement to a renewal, as the tenant is entitled to renewal following the service of the notice.
Section 25 Notice Opposing Renewal
A landlord serving a Section 25 Notice opposing renewal must specify one or more grounds enumerated in Section 30(1) of the Act:
Ground (a): Premises are in disrepair.
Ground (b): Arrears of rent.
Ground (c): Other breaches of covenant.
Ground (d): Suitable alternative accommodation.
Ground (e): Tenancy was created by a sub-letting.
Ground (f): Landlord's intention to redevelop.
Ground (g): Landlord's intention to occupy.
If renewal is denied on grounds (e), (f), or (g), known as "no fault" grounds, the tenant is entitled to compensation. The tenant forfeits the right to renewal unless an application is made to the court by the date specified in the notice (Section 29A(2)(a)). Either party may initiate an opposed lease renewal claim, wherein the court will adjudicate whether a lease will be granted and, if so, the terms thereof.
Legal Requirements and Compliance
The Section 25 Notice must adhere to a prescribed form, with distinct forms for opposing and not opposing renewal. The notice may be served up to twelve months before the end of the contractual term, but no earlier than twelve months nor later than six months before the termination date specified in the notice. The notice may not be served if a valid Section 25 or Section 26 Notice has already been served.
Serving Section 25 Notices
Pursuant to Section 23 of the Landlord and Tenant Act 1927, a notice is deemed served on the day it is posted if sent by registered post to the tenant’s last known place of business or residence (if an individual), or its registered office (if a company), by leaving the notice at such address, or by personal service. Notices should be dispatched by recorded post or special delivery, with the tracking number retained and verified. If served personally, the server should contemporaneously document the details of when, how, and upon whom the notice was served.
How a Section 25 Notice Affects Lease Negotiations
Once the Section 25 Notice is served, it typically triggers negotiations with the tenant either in relation to the terms of a new lease or in relation to the grounds on which the landlord is opposing a new tenancy and the merits of those grounds. It is important for landlords to be aware of their right to terminate a new lease (once the existing lease is at an end) and to negotiate a new rent or oppose a new one.
Conclusion
In many cases, leases will simply continue until a Section 25 Notice is served. It is crucial that the Section 25 Notice is drafted and served properly, and for the tenant, it is important to note the deadlines and take swift action to protect their position. Should you have any questions on this topic or wish to discuss your situation, please do not hesitate to contact our commercial disputes team. This guide to Section 25 Notices elucidates their purpose, statutory requirements, methods of service, and appropriate responses in various contexts.
For further information on Section 25 Notices, we encourage you to reach out to our experienced property litigation solicitors. We can provide comprehensive guidance on the intricacies of the Landlord and Tenant Act 1954, including the procedures for issuing and responding to Section 25 Notices. Your business's lease renewal or termination process can significantly impact your operations, and our team is here to ensure you navigate these complexities effectively. Please contact Majid Malik to discuss your specific situation and how we can assist you.
Comments