If you’re a commercial tenant, understanding the key provisions of the Landlord and Tenant Act 1954 (the "Act") is essential to securing your business premises and negotiating lease terms effectively.
We would like to summarise the key points of the LTA 1954 for commercial tenants before deciding to take on a new lease:
Under Part II of the LTA 1954 Act, most commercial tenants have the legal right to remain in their premises and apply for a new lease when the current one expires. This means that, unless the lease has been excluded from the Act or the landlord can establish specific grounds for possession, a tenant cannot be evicted simply because the lease has ended.
There are conditions which ought to be complied with to benefit from a right of renewal; one of the key conditions is that the lease must be of premises used for a business. The tenant must be in occupation of the property for business use at the time of lease expiry. Certain types of tenancies—such as agricultural holdings, service tenancies, or short-term tenancies of six months or less—are excluded from protection.
Landlords and tenants may agree to "contract out" of the Act before the lease begins. This removes the tenant’s right to automatic renewal. For this to be valid, specific legal procedures must be followed, such as the landlord must serve a formal notice and the tenant must sign a declaration confirming they understand and accept the loss of these rights. Contracting out is common in short-term or flexible leasing arrangements.
If the lease is protected under the Act and is approaching its end, the tenant can serve a Section 26 notice requesting a new tenancy (no sooner than 12 months and no later than 6 months before the lease ends). Alternatively, the landlord may serve a Section 25 notice either proposing new terms or stating grounds for opposing renewal.
The parties can negotiate new lease terms. If agreement is not reached, the matter can be referred to the court, which will determine whether a new lease should be granted and on what terms.
There are also specific grounds under which a landlord can refuse to grant a new lease. These include:
• Tenant’s failure to repair or pay rent.
• Persistent delay in rent payments.
• The landlord’s intention to redevelop the premises.
• The landlord’s intention to occupy the premises for its use.
Some of these grounds are discretionary, while others are mandatory.
If the landlord successfully opposes renewal on certain grounds (e.g., redevelopment or own use), the tenant may be entitled to compensation based on the property's rateable value. This serves to mitigate the disruption to the tenant’s business.
The Landlord and Tenant Act 1954 offers crucial protections to commercial tenants, primarily through the right to renew their leases. However, it also introduces a structured process that both landlords and tenants must follow. Understanding your rights and obligations under the Act can help you safeguard your business premises and plan long-term operations with greater certainty. Tenants are strongly advised to seek legal advice when entering or renewing a commercial lease.
Should you wish to speak with us about this, you can contact us at Syed.Hoque@lawcomm.co.uk or 01489 864 160
