Section 26 Notice – My Commercial (Business Tenancy) Lease Agreement is coming to an end soon and my tenant has served on me a Section 26 Notice. What is this and what should I do?
Commercial (Business) Tenancies in England & Wales are regulated by the Landlord & Tenant Act 1954 (Part 2).
This means that when the fixed term ends (end of lease) the business tenant has legal protection under the terms of the Act – security of tenure. In practice this means that the tenant has an automatic right to renew his lease on similar terms to the old one.
The Section 26 Notice can be used by the tenant of business premises in England & Wales (a similar system operates in Scotland).
Not all landlords are aware that once they let a commercial property, in theory, the tenant could be there indefinitely, that’s why it’s so important to have a water-tight lease agreement.
Off-the-shelf commercial lease agreements are unlikely to give sufficient protection for the landlord, long-term.
The landlord can challenge this right to renew if the tenant has seriously breached any of the terms of his lease, or on certain limited grounds such as the need to re-develop the property or if the landlord needs the property for his own use. (see grounds for possession). The landlord may use these grounds to oppose the tenant’s application to renew.
The tenant can preempt the landlord’s Section 25 Notice, which gives the tenant notice of the end of the lease, and request a new tenancy and propose terms for renewal using the Section 26 Notice.
This notice must be served not more than 12 and not less than 6 months before the tenant wants the new tenancy to commence. This commencement date must be after the normal expiry date of the lease. The Section 26 Notice cannot be sent if the landlord has already sent a section 25 notice.
Where both parties are willing to renew the lease on the tenant’s proposed terms, the new tenancy can begin on the date specified in the notice.
Alternatively, the parties may need to negotiate different terms for a settlement, or, if the landlord is opposing renewal, either party may apply to the court.
The court will either uphold the landlord’s opposition or order the grant of a new tenancy and settle the terms upon which the parties cannot agree.
A landlord must respond to a tenant’s Section 26 Notice within two months of receiving it if he wishes to oppose the grant of a new lease.
All of this does not apply where the parties had opted out of the Landlord and Tenant Act 1954 prior to signing the original lease agreement.
- The Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004
- Security of Tenure for Business Tenants – 1954 Act
- Business Tenancies: An Outline Guide to Renewing or Ending a Tenancy
- LandlordZONE/FAQ – Section 25 Notice
By Tom Entwistle,
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©LandlordZONE All Rights Reserved – never rely totally on these general guidelines which apply primarily to England and Wales. They are not definitive statements of the law. Before taking action or not, always do your own research and/or seek professional advice with the full facts of your case and all documents to hand.