Understanding “The Holding” in Commercial Lease Renewals: Part II of the Landlord and Tenant Act 1954

Our Property Litigation team are preparing a series of articles to help you navigate commercial property lease disputes. You can see the series so far by clicking here.

In the previous article we introduced some key features and principles underpinning the concept of unopposed and opposed lease renewals under Part II of the Landlord and Tenant Act 1954 (Act).

In this article, we explain what “the holding” means in practical terms, how it’s determined, and why a recent case (Sainsbury’s Supermarkets Ltd v Medley Assets Ltd) sheds new light on how this plays out, especially in situations where the landlord is looking to oppose the lease renewal.

“The Holding” in a Commercial Lease: Key Takeaways

• Under the Act, a tenant is entitled to a new tenancy of “the holding”. “The holding” includes only the parts of the premises that are actively used for business purposes when the court makes its decision.
• A landlord can insist that the tenant takes a new lease of the whole original premises included within the original lease.
• In “opposed” lease renewal claims (like Medley) the Court is usually being asked to decide what amounts to “the holding” at two separate Hearings, which can often be many months apart.
• A tenant can retreat into a part of “the holding” that would be unaffected by redevelopment to defeat that particular ground of opposition.

Your rights under the Landlord and Tenant Act 1954 Lease Renewal

When it comes to renewing a commercial lease, both landlords and tenants face a process shaped by legislation, case law, and strategic decisions. One key concept in this area is “the holding”, a legal term that defines which parts of the property a tenant is entitled to a new lease for. Understanding this concept is essential for anyone involved in a lease renewal under Part II of the Landlord and Tenant Act 1954 (the Act).

What does “the holding” mean in commercial lease renewals?

Under the Act, a business tenant is generally entitled to a new lease once the current one comes to an end, unless the landlord has valid grounds to oppose it. However, the tenant is only entitled to a new lease of “the holding”, which is defined in the Act as

“…the property comprised in the tenancy, there being excluded any part thereof which is occupied neither by the tenant nor by a person employed by the tenant… for the purposes of a business.”

This means the tenant is only entitled to renew a lease over the space they’re actively using for their business. For instance, if a tenant originally leased an entire building but is only using the ground floor as office space at the time of renewal, then “the holding” would be the ground floor only, unless the landlord takes further steps.

This distinction is especially important in buildings with multiple floors or mixed-use arrangements, where some areas might have fallen out of use over time.

The landlord’s role in requesting a renewal of the whole

The default position under the Act can be changed, but only if the landlord requires the tenant to renew the lease on the entire premises originally let under the first agreement. This is known as electing to offer a lease of “the whole”

If the landlord makes this election, the tenant will either have to accept a lease of the full original premises or risk no renewal at all. However, in the absence of such an election, it’s up to the court to determine what constitutes “the holding”, and that decision is based on what the tenant is occupying “as at the date of the order.”

This phrase has created some complexity in practice, particularly when the lease renewal is opposed and the process involves multiple court hearings over time.

Unopposed and Opposed Lease Renewals: “As at the date of the order”

In straightforward unopposed lease renewals, the court makes its’ decision based on the tenant’s occupation at the time of the hearing. If the tenant can provide evidence that they are using parts of the premises for business purposes, those areas are entitled to a lease of all of those parts.

However, in opposed renewals (where the landlord objects to the lease being renewed) things become less predictable. These cases are usually heard in two stages:

Stage 1: The court determines whether the landlord has valid grounds to oppose renewal (e.g., plans to redevelop).

Stage 2: If the landlord fails in stage 1, the court then moves on to determine the terms of the renewal lease (if there has not been an agreement between the parties in the interim).

The two stages can be months apart, which means the court might have to consider what amounts to “the holding” at two both points in time. If the tenant’s use of the property changes in the interim, this can affect the outcome.

This issue took centre stage in the Sainsbury’s Supermarkets Ltd v Medley Assets Ltd case.

Sainsbury’s Supermarkets Ltd vs. Medley Assets Ltd Case

The background

Sainsbury’s was the tenant of a property where it operated a supermarket on the ground floor. The original lease also included the upper floors (once used as offices) and a basement, both of which had been out of use for some time.

The landlord, Medley Assets Ltd, wanted to redevelop the property by converting the upper floor to flats and served a Section 25 Notice to terminate the tenancy, citing Ground (f), the redevelopment ground, which allows a landlord to refuse a lease renewal if they intend to carry out significant building works and need the tenant to vacate in order to proceed.

At the stage 1 hearing, the landlord’s redevelopment plans had shifted. It no longer planned to convert the upper floors into flats (as originally proposed), but instead to lower the basement floor, widen a staircase, and convert the upper floors back to office space. The landlord had planning permission and funding in place, and had already made financial investments in the project.

The proposed works to the ground floor would have intruded into an area that Sainsbury’s once occupied for stock storage.

Where the landlord went wrong: Can ‘the holding’ be changed in a commercial lease renewal?

Just a week before the hearing, Sainsbury’s moved out of part of the ground floor it had used for storage, the very part that would be affected by the landlord’s works. The tenant continued using the rest of the ground floor for normal business operations.

The landlord argued that the court should treat “the holding” as the entire original premises, including the now-vacant areas. They claimed otherwise, tenants could dodge redevelopment by simply vacating parts of the property before a hearing.

Sainsbury’s disagreed, arguing that the Act clearly states that “the holding” only includes the parts still occupied for business at the relevant date, in this case, the date of the stage 1 hearing.

The decision: Sainsbury’s Supermarkets Ltd v Medley Assets Ltd

The court ultimately sided with Sainsbury’s. It held that even though the landlord had asked for a renewal of the full original premises, that didn’t change what “the holding” meant for the purposes of Ground (f). Only the areas that were still being used for business purposes at the time of the hearing could be considered part of “the holding”.

As a result, the proposed redevelopment of the basement and the now-vacated storage area did not meet the legal test, and the landlord's opposition failed.

Why legal advice matters

Lease renewals, especially those involving redevelopment, can be legally and strategically complex. Missteps on timing and/or procedure around “the holding” can seriously impact outcomes for both landlords and tenants.

At Smith Partnership, our property litigation specialists work closely with clients to ensure their positions are protected and their options are clear. Whether you’re seeking to renew your lease or exploring redevelopment, we’ll help you navigate the legal landscape with confidence and clarity.

How can we help?

Lease renewals under the Act must be approached with great care. At Smith Partnership in Leicester, our approachable, plain-speaking team is ready to help.

Get in touch with our specialist property litigation solicitors. Contact our team by telephone on 0116 247 2000, complete our contact form, or send us an email via info@smithpartnership.co.uk. 

We also have offices across the East Midlands and Staffordshire with expert property litigation solicitors, in Burton, Derby, Stoke-On-Trent and Swadlincote.