The LTA 1954 applies automatically to most business tenancies in England and Wales — the tenant occupies the premises for the purposes of a business carried on by them, and the landlord is not a residential landlord. The protection can only be excluded if the parties follow the statutory 'contracting out' procedure before the lease is entered into (a warning notice served by the landlord and a declaration by the tenant acknowledging the loss of security of tenure). A lease that has not been contracted out automatically carries LTA 1954 protection.
There are two routes to initiating the renewal process. The landlord can serve a Section 25 notice stating the proposed end date for the current tenancy and whether they oppose renewal (and on what ground). Alternatively, the tenant can take the initiative by serving a Section 26 request specifying the proposed commencement date of the new tenancy. Whichever route is taken, strict timing requirements apply — notices outside the 6-12 month window are invalid — and the parties must act within the time limits to apply to the court, or their rights lapse.
Section 25 notice, Section 26 request, opposing grounds (a)-(g) and new lease terms
The LTA 1954 renewal procedure — from the initial statutory notice to the determination of new lease terms:
- Continuation tenancy (s.24), s.25 notice and s.26 request: Continuation tenancy (s.24 LTA 1954): a protected business tenancy automatically continues after the contractual term expiry date on the same terms as the original lease — it is not periodic; it is a continuation of the same tenancy. The landlord cannot end it simply by not renewing; they must follow the statutory procedure. Neither can the landlord increase the rent unilaterally during the continuation — they must apply for interim rent under s.24A. Landlord's Section 25 notice: (a) A valid s.25 notice must be served not more than 12 months and not less than 6 months before the date specified in the notice as the termination date (the termination date must be no earlier than the contractual term expiry date). (b) The notice must state whether the landlord is opposing renewal — and if so, on which of the grounds in s.30 (grounds (a)-(g)). (c) If the landlord is not opposing renewal, the notice must set out the proposed terms for the new tenancy (proposed rent; lease term; other terms). (d) If the landlord is opposing renewal, the tenant has until the date specified in the notice (or 4 months after service, whichever is later) to apply to the court for a new tenancy. Tenant's Section 26 request: (a) A tenant who wishes to renew proactively can serve a s.26 request specifying: the proposed commencement date of the new tenancy (at least 6 months and not more than 12 months after the date of service of the s.26 request) and the proposed terms for the new tenancy. (b) Once a s.26 request is served, the landlord cannot serve a s.25 notice. (c) The landlord has 2 months from service of the s.26 request to serve a counter-notice opposing renewal — failure to serve a counter-notice within 2 months bars the landlord from opposing renewal. (d) After the landlord's counter-notice (or after 2 months without a counter-notice), the parties must apply to the court within the time window — or their rights lapse. Time limits for court applications: the court application for a new tenancy (by the tenant) or for termination without renewal (by the landlord) must be made before the date specified in the s.25 notice or the proposed commencement date in the s.26 request — or within any extended period agreed in writing between the parties. If neither party applies in time, the tenancy terminates and the tenant loses the right to renew.
- Opposing grounds (s.30), compensation (s.37), interim rent and contracting out: Opposing grounds (s.30 LTA 1954): the landlord can only oppose renewal on one or more of the seven statutory grounds: (a) Ground (a): the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, having regard to the tenant's obligations; (b) Ground (b): the tenant has persistently delayed in paying rent that has become due; (c) Ground (c): the tenant has been in substantial breach of their other obligations; (d) Ground (d): the landlord has offered and is willing to provide or secure the provision of alternative accommodation on terms reasonably suitable to the tenant's needs; (e) Ground (e): where the current tenancy was created by sub-letting part of a building previously let as a whole and the aggregate of rents reasonably obtainable on separate lettings would be substantially less than the rent reasonably obtainable on a letting as a whole; (f) Ground (f): on the termination of the current tenancy, the landlord intends to demolish or reconstruct the premises comprised in the holding (or a substantial part thereof) and could not reasonably do so without obtaining possession — the landlord must demonstrate a fixed, firm, and genuine intention to carry out the works (established by planning permission; building contract; financing in place); (g) Ground (g): on the termination of the current tenancy, the landlord intends to occupy the holding for the purposes of a business to be carried on by the landlord or as the landlord's residence — the landlord must have owned the interest for at least 5 years (the '5-year rule' — to prevent a landlord purchasing a property and immediately relying on ground (g)). 'Fault' grounds (a), (b), (c): no compensation payable if the landlord succeeds. 'No-fault' grounds (d), (e), (f), (g): the tenant is entitled to statutory compensation under s.37 LTA 1954 — 1× the rateable value of the holding; increased to 2× the rateable value where the tenant and/or their predecessors in the same business have been in occupation for 14 years or more. Interim rent (ss.24A-24D): during the continuation tenancy period (after contractual expiry, pending renewal), either party can apply to the court for an interim rent — typically set at the market rent for the property (reflecting any vacant possession value uplift). Contracting out: parties can exclude LTA 1954 protection for a specific business tenancy by following the statutory procedure under s.38A and the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003: (i) the landlord serves a 'health warning' notice (prescribed form) on the prospective tenant not less than 14 days before the lease is entered into; (ii) the tenant makes a statutory declaration acknowledging the loss of security of tenure; (iii) both steps must be completed before the lease is granted. A 'contracted out' lease cannot be renewed — the tenant has no right to a new tenancy or compensation. Scotland: the LTA 1954 does not apply in Scotland; commercial leases in Scotland are governed by the common law and the specific lease terms; there is no equivalent statutory security of tenure for commercial tenants in Scotland (the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 modernised execution of commercial leases; commercial lease reform has been subject to Scottish Law Commission review)
Frequently asked questions
Does a commercial tenant automatically have the right to renew their lease under the LTA 1954?+
Yes — if the tenancy is protected by the Landlord and Tenant Act 1954 (not contracted out), the business tenancy does not end at the contractual term expiry. It continues as a 'continuation tenancy' under s.24 LTA 1954 on the same terms until terminated by the statutory procedure. The tenant has the right to apply to the court for a new tenancy. The landlord can only prevent renewal by successfully opposing on one of the seven statutory grounds in s.30 LTA 1954.
What is the timing requirement for a Section 25 notice?+
A valid Section 25 notice must be served not more than 12 months and not less than 6 months before the termination date specified in the notice. The termination date must not be earlier than the contractual term expiry date. The notice must state whether the landlord is opposing renewal — and if so, on which of the s.30 grounds. If the landlord is not opposing renewal, the notice must set out the proposed terms for the new tenancy. Errors in the notice timing or form can invalidate the notice, potentially trapping the landlord in a continuation tenancy on the existing terms.
On which grounds can a commercial landlord oppose lease renewal?+
The seven grounds in s.30 LTA 1954 are: (a) state of repair; (b) persistent rent arrears; (c) substantial breaches of other obligations; (d) suitable alternative accommodation offered; (e) sub-letting of part where aggregate rents are lower; (f) landlord intends to demolish or reconstruct (must show fixed, firm intention with planning, finance, and contractor in place); (g) landlord intends to occupy for own business or residence (must have owned for at least 5 years). For grounds (e), (f), and (g) — the 'no-fault' grounds — the tenant is entitled to compensation of 1× (or 2× for 14+ years' occupation) the rateable value.
What compensation is a commercial tenant entitled to if the landlord successfully opposes renewal?+
If the landlord successfully opposes renewal on the 'no-fault' grounds — ground (d) suitable alternative accommodation; ground (e) sub-letting of part; ground (f) demolition/reconstruction; or ground (g) own occupation — the tenant is entitled to statutory compensation under s.37 LTA 1954. The compensation is 1× the rateable value of the holding, increased to 2× the rateable value if the tenant (and/or their predecessors in the same business) have been in occupation for 14 years or more. No compensation is payable where the landlord succeeds on the 'fault' grounds (a), (b), or (c).
- Landlord and Tenant Act 1954 — the full commercial lease security of tenure guide →
- Dilapidations — schedule of dilapidations, s.18(1) diminution cap and Jervis v Harris →
- Forfeiture of commercial lease — s.146 notice and waiver rules →
- Commercial Rent Arrears Recovery (CRAR) — landlord remedies for rent arrears →
- Rent review clause — upward-only rent review and open market review →
- Break clause — commercial lease break notice requirements →