Tenancy Renewal & Termination
A tenancy may end in a number of ways. The term may expire; either party may exercise their option to use a break clause; the landlord may exercise his rights to end (forfeit) the lease as a result of your breach; or you may surrender the lease with the landlord's consent.
However, you as the tenant may have legal rights (unless you have contracted out) to remain in occupation of the premises and renew your tenancyContracting-out is possible if the lease is for a fixed term and the landlord and the tenant follow the statutory notice procedure set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003.
The Mechanism for Renewal or Termination of a Protected Tenancy
If the landlord wishes to end a protected tenancy he must serve notice on you, as the tenant, between 6 and 12 months before the landlord’s proposed termination date in a form which complies with the requirements of the Landlord and Tenant Act 1954. (The proposed termination date cannot be sooner than the end of the contractual term of the lease.) This is known as a “section 25 notice”.
If you wish to renew the tenancy, rather than waiting for the landlord to serve this notice, you may wish to take the initiative, and within 6 and 12 months before your proposed termination date, serve notice on the landlord requesting a new tenancy after the current one ends, again using a prescribed form. (As above, the proposed termination date cannot be sooner than the end of the contractual term of the lease.) This is known as a “section 26 request”.
If you serve a counter-notice in response to the landlord’s section 25 notice, stating that you are unwilling to give up possession, it must be served within two months (failing which your rights to a new tenancy are normally lost).
If the landlord gives a counter-notice to your section 26 request the notice must state his grounds for opposition and be served within two months, failing which he loses his right to oppose the grant of a new tenancy.
Unless you agree the terms of a lease in the meantime, you must apply to Court before the termination date specified in the section 25 notice or the section 26 notice - this is so even if the landlord does not object to a new tenancy. If you do not apply to Court by this date (or agree with the landlord to extend the time limit), your right to a new tenancy is lost.
After you have applied for a new tenancy, the original expiry date no longer applies and the existing tenancy is deemed in law to continue at the old rent until three months after the proceedings have ended. However, the landlord can in the meantime apply for an interim rent to be set by the court. The time limits are strictly applied and professional advice should be followed from the outset of the procedure described above.
Grounds for Refusing a Renewal of a Tenancy
A landlord can oppose your application for a tenancy on certain defined grounds including - your failure to repair; persistent delays in rent payment; breaches of other obligations; where he can offer you reasonable alternative accommodation; where he has a firm intention to demolish or reconstruct the premises; or where he has held his interest for 5 years and he has a firm intention to occupy the premises for his own business or residence.
Compensation for Non-Renewal
When a lease is terminated, you may face the loss of the goodwill that you have built up and costs of relocation. If the landlord successfully objects to grant of a new tenancy because of a firm intention to demolish the premises or develop or occupy the premises himself and, as a result, you fail to obtain a new tenancy or withdraw your application for a new tenancy, then you may be entitled to compensation.
The amount of compensation payable is a multiple of rateable value (usually one), but this multiplier may be doubled if the same business tenant has been in occupation for 14 years or more.
The landlord may try to exclude your right to compensation but this clause will not be effective if you have been in occupation more than 5 years prior to quitting possession. You may also be entitled to compensation for improvements you have carried out at the premises with the landlord's consent.
The Terms of a New Tenancy
If you have a right in the lease or other contractual option to renew the lease, the new terms will generally be negotiated by your respective professional advisers based on the old lease. Alternatively, you may have applied to Court for the grant of a new lease under the statutory tenancy renewal procedure.
Hopefully, you and the landlord will agree the terms of a new lease between yourselves and in practice this is the normal route. However, if this proves impossible, the Court will have to decide.
The maximum term is at the Court's discretion, but cannot exceed 15 years. You can request a shorter term or the landlord can request it if he has unfinalised redevelopment plans. Other terms of the lease will normally be similar to those in place in the existing tenancy.
However, you as the tenant may have legal rights (unless you have contracted out) to remain in occupation of the premises and renew your tenancyContracting-out is possible if the lease is for a fixed term and the landlord and the tenant follow the statutory notice procedure set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003.
The Mechanism for Renewal or Termination of a Protected Tenancy
If the landlord wishes to end a protected tenancy he must serve notice on you, as the tenant, between 6 and 12 months before the landlord’s proposed termination date in a form which complies with the requirements of the Landlord and Tenant Act 1954. (The proposed termination date cannot be sooner than the end of the contractual term of the lease.) This is known as a “section 25 notice”.
If you wish to renew the tenancy, rather than waiting for the landlord to serve this notice, you may wish to take the initiative, and within 6 and 12 months before your proposed termination date, serve notice on the landlord requesting a new tenancy after the current one ends, again using a prescribed form. (As above, the proposed termination date cannot be sooner than the end of the contractual term of the lease.) This is known as a “section 26 request”.
If you serve a counter-notice in response to the landlord’s section 25 notice, stating that you are unwilling to give up possession, it must be served within two months (failing which your rights to a new tenancy are normally lost).
If the landlord gives a counter-notice to your section 26 request the notice must state his grounds for opposition and be served within two months, failing which he loses his right to oppose the grant of a new tenancy.
Unless you agree the terms of a lease in the meantime, you must apply to Court before the termination date specified in the section 25 notice or the section 26 notice - this is so even if the landlord does not object to a new tenancy. If you do not apply to Court by this date (or agree with the landlord to extend the time limit), your right to a new tenancy is lost.
After you have applied for a new tenancy, the original expiry date no longer applies and the existing tenancy is deemed in law to continue at the old rent until three months after the proceedings have ended. However, the landlord can in the meantime apply for an interim rent to be set by the court. The time limits are strictly applied and professional advice should be followed from the outset of the procedure described above.
Grounds for Refusing a Renewal of a Tenancy
A landlord can oppose your application for a tenancy on certain defined grounds including - your failure to repair; persistent delays in rent payment; breaches of other obligations; where he can offer you reasonable alternative accommodation; where he has a firm intention to demolish or reconstruct the premises; or where he has held his interest for 5 years and he has a firm intention to occupy the premises for his own business or residence.
Compensation for Non-Renewal
When a lease is terminated, you may face the loss of the goodwill that you have built up and costs of relocation. If the landlord successfully objects to grant of a new tenancy because of a firm intention to demolish the premises or develop or occupy the premises himself and, as a result, you fail to obtain a new tenancy or withdraw your application for a new tenancy, then you may be entitled to compensation.
The amount of compensation payable is a multiple of rateable value (usually one), but this multiplier may be doubled if the same business tenant has been in occupation for 14 years or more.
The landlord may try to exclude your right to compensation but this clause will not be effective if you have been in occupation more than 5 years prior to quitting possession. You may also be entitled to compensation for improvements you have carried out at the premises with the landlord's consent.
The Terms of a New Tenancy
If you have a right in the lease or other contractual option to renew the lease, the new terms will generally be negotiated by your respective professional advisers based on the old lease. Alternatively, you may have applied to Court for the grant of a new lease under the statutory tenancy renewal procedure.
Hopefully, you and the landlord will agree the terms of a new lease between yourselves and in practice this is the normal route. However, if this proves impossible, the Court will have to decide.
The maximum term is at the Court's discretion, but cannot exceed 15 years. You can request a shorter term or the landlord can request it if he has unfinalised redevelopment plans. Other terms of the lease will normally be similar to those in place in the existing tenancy.