Lease Terminations under the Landlord and Tenant Act 1954 

If you rent or let commercial property, it is important to understand the legal protections that may apply at the end of a lease. In most cases, tenants benefit from security of tenure under Part II of the Act - a statutory right to request a new lease when the current one ends. 

This protection can arise in two ways: 

• Expressly, through written terms in the lease agreement 
• Impliedly, based upon the conduct of the parties — even if nothing is written down 

However, there are exceptions. In some cases, landlords and tenants can agree to "contract out" of security of tenure, but a strict legal process must be followed for this to be valid. 

What happens when Security of Tenure Applies? 

When security of tenure applies, a lease doesn’t simply end when its contractual term expires. If the tenant stays in the premises and continues using them for business purposes, a continuation tenancy is created. This process is often referred to as “holding over.” This continuation tenancy remains in place on the same terms as the original lease until either the landlord or tenant takes formal steps to bring it to an end. 

If a tenant has security of tenure, the landlord cannot simply end the lease or refuse a renewal without following the correct legal procedure.

There are only two formal ways a landlord can prevent a tenant from renewing their lease:

• By serving a “hostile” notice under Section 25 of the Act (which “opposes” a renewal)
• By issuing a “hostile” counter-notice in response to the tenant’s Section 26 request for a new lease

Both routes are designed to challenge the tenant’s statutory right to renew. 

Whilst technically these are procedures for ending a tenancy, they are commonly referred to as “opposed lease renewals”, because the landlord is opposing the tenant’s request to stay in the property.

These kind of terminations rely upon specific legal and evidential requirements being met. Whether you’re a landlord or a tenant, early advice is key to protecting your position. 
 

Whether the lease termination process is started by the landlord or in response to a renewal request from the tenant, the landlord must clearly state their reasons for opposing the renewal in the relevant notice or counter-notice. 

These reasons - known as “grounds of opposition” - are set out in Part II of the Landlord and Tenant Act 1954, and include situations where: 

• The property is in disrepair or poor condition due to the tenant's failure to maintain it 
• The tenant has persistently paid rent late 
• The landlord is offering suitable alternative premises 
• The landlord intends to redevelop the property 
• The landlord intends to occupy the property themselves. 

These grounds must be genuine and provable. If successfully made out, they allow the landlord to oppose the tenant’s statutory right to a new lease. Because of the legal and commercial implications involved, it’s important for both landlords and tenants to take early legal advice when facing or issuing such notices. 

Fault and No-Fault Grounds – What Tenants Need to Know 

The landlord’s reasons for opposing a lease renewal are grouped into two categories: 

• “Fault” grounds, where the tenant is considered to be at fault (e.g. disrepair or late rent payments) 
• “No-fault” grounds, where the tenant has done nothing wrong (such as the landlord needing the premises for redevelopment or personal use) 

If the landlord relies only upon “no-fault” grounds, the tenant may be entitled to statutory compensation when they vacate the premises, either voluntarily or by court order. The amount is based on the property’s rateable value and how long the tenant has been in occupation.

A landlord can rely upon one or more of the statutory grounds, but once these are set out in the notice, they cannot be changed later. Tenants have the right to challenge the landlord’s position by applying to the court for a new lease. In many cases, it may be strategic for the tenant to issue proceedings early — particularly if they disagree with the landlord’s stated grounds and/or suspect that they may not yet possess all of the evidence (planning permissions etc) in support of their stated ground(s). 

Opposed lease renewals are typically handled in two distinct stages: 

Stage 1: Preliminary Issue Hearing 

At this stage, the court focuses solely on whether the landlord’s ground(s) for opposing the renewal are valid. If the landlord successfully proves their case, the court may order the lease to end. However, it’s important to note that not all grounds require the court to terminate the tenancy - the court can still decide to grant a new lease even if the landlord’s grounds are established. 

Stage 2: Terms of the New Lease 
If the landlord’s grounds are not upheld at stage 1, the case moves to a second hearing, usually months later, where the court determines the terms of the new lease. 

Due to this process, landlords are advised to gather strong evidence to support their grounds before serving any notice or counter-notice, improving their chances at stage 1. On the other hand, tenants may benefit from starting proceedings early to bring the stage 1 hearing forward, limiting the landlord’s preparation time and potentially strengthening their position. 

Our expert team of real estate disputes lawyers are specialists in both asserting and resisting opposed lease renewals. Our experts are able to guide you through this complex area of law and help you to avoid some of the more common pitfalls. Being results driven, our team will carefully listen to your objectives to create the most effective strategy. 

To find out how our expert team of real estate disputes lawyers can help you, contact us today on  0330 123 1229, send us an email via  info@smithpartnership.co.uk or complete our  contact form.