The Landlord and Tenant Act 1954 confers statutory security of tenure on most business tenants in England and Wales — a protected tenancy continues after contractual expiry and can only be brought to an end by a valid section 25 notice. Landlords who want to recover possession at lease end (for redevelopment, own occupation, or other reasons) must serve a valid s.25 notice and establish a statutory ground of opposition. Landlords who simply want to renew on market terms serve a 'friendly' notice and then negotiate. Getting the notice right — form, timing, service, and grounds — is critical: a defective notice may be challenged by the tenant, and a landlord who fails to serve a notice at all will find the tenancy continuing indefinitely. This guide explains the mechanics of the s.25 notice, the grounds of opposition, the tenant's response, and interim rent.
Section 25 Notice — Form, Timing and Service
A section 25 notice must be served by the 'competent landlord' — typically the freeholder or, in a multi-level structure, the superior landlord who can grant a new tenancy for a term certain of at least 14 months. The notice must be served not more than 12 months and not less than 6 months before the proposed termination date specified in the notice. The proposed termination date cannot be earlier than the date on which the tenancy would expire by effluxion of time. Two prescribed forms are used under the Landlord and Tenant Act 1954 Part 2 Notices Regulations 2004 (SI 2004/1005): Form 1 (hostile) — the landlord opposes the grant of a new tenancy and must specify the ground(s) of opposition; Form 2 (friendly) — the landlord does not oppose the grant of a new tenancy and must set out the terms (including the proposed new rent) on which it is willing to grant a renewal. Service: the notice must be served on the tenant by a method that brings it to their attention — recorded delivery, personal service, or through the letterbox at the tenant's last known place of abode or business; on a company, service at the registered office.
- Timing: the notice must be served between 6 and 12 months before the proposed termination date — outside this window the notice is invalid
- Competent landlord: must be the person who would be the landlord under any new tenancy — typically the freeholder; in a sub-tenancy structure, careful analysis of who the competent landlord is required
- Form 1 (hostile): used when the landlord wishes to oppose renewal; must specify the ground(s) of opposition from s.30(1) LTA 1954 — the landlord is bound to the grounds specified and cannot add others later
- Form 2 (friendly): used when the landlord is willing to renew; must include the landlord's proposed rent and other terms for the new tenancy — starts the negotiation process
- Service method: recorded delivery or personal service are the safest methods; service on a company at its registered office is effective; service at the tenant's last known address is valid even if the tenant has moved
Grounds of Opposition Under Section 30(1) LTA 1954
Where a landlord serves a hostile s.25 notice (Form 1), it must establish one of the grounds of opposition listed in s.30(1) LTA 1954. The grounds are designated (a) to (g): (a) breach of repairing obligations — the tenant has not complied with repairing obligations in the tenancy; (b) persistent delay in paying rent — even if arrears have been paid, persistent lateness can suffice; (c) other substantial breaches — other breaches of the tenant's obligations (or any other reason connected with use or management) that make it reasonable to refuse renewal; (d) suitable alternative accommodation — the landlord can provide suitable alternative accommodation on reasonable terms; (e) uneconomic sub-tenancy of part — the current tenancy is a sub-tenancy of part and the landlord needs the whole premises for redevelopment; (f) intended demolition or reconstruction — the landlord intends to demolish or reconstruct or carry out substantial work of construction on the holding and cannot reasonably do so without possession (this is the most frequently relied-upon ground); (g) own occupation — the landlord intends to occupy the holding for the purposes of its own business or as a residence (subject to a 14-month minimum period of ownership before the termination date).
- Ground (f) — demolition/reconstruction: the landlord must demonstrate a genuine, firm, and settled intention to demolish or reconstruct at the date of the s.25 notice and at the date of trial (Betty's Cafés v Phillips [1959]); conditional intentions ('if planning granted') may be insufficient
- Ground (g) — own occupation: the landlord must have owned the qualifying interest for at least 14 months before the termination date specified in the s.25 notice; intention must be genuine, firm, and settled
- Grounds (f) and (g) — compensation: where the landlord successfully opposes renewal on grounds (e), (f) or (g), the tenant is entitled to statutory compensation equal to the rateable value of the holding (or double the rateable value if the tenant has occupied for 14+ years)
- Grounds (a), (b), (c): discretionary grounds — even if established, the court has a residual discretion to grant a new tenancy; mandatory for some grounds; landlords must plead the correct ground in the s.25 notice as they cannot add grounds later
- Landlord's intention at trial: for grounds (f) and (g), the landlord's intention is tested at the date of the court hearing, not just at the date of the s.25 notice — intention must remain genuine and settled throughout
Tenant's Response — Court Application and Negotiations
A tenant who wishes to obtain a new tenancy following a s.25 notice (whether friendly or hostile) must apply to the court within 4 months of the s.25 notice being served. Failure to apply within 4 months results in the loss of the statutory right to a new tenancy — the tenancy will end on the termination date specified in the s.25 notice (or at the end of the period of holding over if later). Alternatively, the parties can agree to extend the time for making the court application — but this must be done in writing before the 4-month deadline expires, in accordance with s.29B LTA 1954. If the landlord serves a friendly notice (Form 2), the parties typically negotiate the terms of a new lease directly without issuing court proceedings. If agreement cannot be reached, either party can apply to the court to determine the terms of the new tenancy. Where the landlord opposes renewal, the tenant can apply to court for a new tenancy (which the court may still grant if it rejects the grounds of opposition) or for compensation under s.37 LTA 1954.
- 4-month deadline: the tenant must apply to court within 4 months of the s.25 notice — this deadline cannot be missed without losing the right to a new tenancy
- Agreed extension: the parties can extend the 4-month deadline by written agreement under s.29B LTA 1954; extensions are common in practice to allow negotiations to proceed without the pressure of litigation
- Court jurisdiction: most LTA 1954 renewal applications are made to the County Court; more complex cases (particularly where the rent is very high or there are complex legal issues) may be more appropriately heard in the High Court
- Terms of new tenancy: where the court orders a new tenancy and the parties cannot agree terms, the court fixes the rent at the open market rate and determines other terms; s.33 LTA 1954 grants the court broad discretion on lease terms
- Compensation (ss.37, 37A): where renewal is opposed on grounds (e), (f) or (g) and the landlord succeeds, the tenant is entitled to compensation; if the tenant has occupied for 14+ years, compensation is double the rateable value
Interim Rent Under the LTA 1954
Once a s.25 notice has been served, either the landlord or the tenant can apply to the court for an interim rent to be fixed for the period between the contractual expiry of the current tenancy and the date on which the new tenancy is granted or the tenancy ends. The interim rent provisions are in ss.24A to 24D LTA 1954. In an unopposed renewal (where the landlord does not oppose the grant of a new tenancy), the interim rent is presumed to be the same as the new market rent under the new tenancy — unless the open market rent or the terms of the new tenancy differ substantially from the existing tenancy. Where the landlord opposes renewal, the interim rent is assessed on different assumptions (the tenancy is annual; the premises are in the same condition; other terms are the same). In practice, the interim rent is usually set at or close to the current open market rent for the premises. Interim rent is payable from the earliest date that could have been specified as the termination date in a s.25 notice (not from the date of the application).
- Either party can apply: both the landlord and the tenant have the right to apply for an interim rent under s.24A LTA 1954
- Unopposed renewal: interim rent presumed to equal the new lease rent (market rent) unless there is a substantial difference in terms or rent between the existing and new tenancy
- Opposed renewal: interim rent assessed on a hypothetical annual tenancy basis — a different and usually lower figure than the new lease market rent
- Start date: interim rent runs from the earliest date that could have been specified as the termination date in the s.25 notice — not from the date of the application; this is important where there is a delay in the proceedings
- Scotland: LTA 1954 does not apply in Scotland; commercial lease renewal in Scotland is governed by tacit relocation (the tenancy continues from year to year unless timely notice to quit is given) and any specific renewal provisions in the lease
Frequently asked questions
What is a section 25 notice under the LTA 1954?+
A section 25 notice is the formal notice by which a commercial landlord terminates a business tenancy protected by the Landlord and Tenant Act 1954. The landlord must serve either Form 1 (opposing renewal on a statutory ground) or Form 2 (not opposing and proposing terms for a new tenancy) between 6 and 12 months before the proposed termination date.
What grounds can a landlord rely on to oppose a new commercial tenancy?+
The grounds of opposition are in s.30(1) LTA 1954: (a) breach of repair; (b) persistent delay in rent; (c) other substantial breach; (d) alternative accommodation; (e) uneconomic sub-tenancy of whole; (f) intention to demolish or reconstruct; (g) own occupation (14-month ownership required). Grounds (f) and (g) are most commonly relied upon in contested renewals.
How long does a tenant have to respond to a section 25 notice?+
The tenant must apply to court within 4 months of the section 25 notice being served if it wishes to obtain a new tenancy. Failure to apply in time results in the loss of the statutory right to a new tenancy. The deadline can be extended by written agreement between the parties before it expires.
What is interim rent under the LTA 1954?+
Interim rent is a market rent fixed by the court for the period between the contractual lease expiry and the date on which a new tenancy is granted or the tenancy ends. Either party can apply for interim rent under ss.24A-24D LTA 1954 after a section 25 notice has been served. In an unopposed renewal, interim rent is presumed to equal the new lease rent.
Does the LTA 1954 apply in Scotland?+
No — the LTA 1954 applies only in England and Wales. In Scotland, commercial lease renewal is governed by tacit relocation (the tenancy continues from year to year unless either party gives timely notice to quit before the end of a lease year) and any specific provisions in the lease. Scottish commercial landlords and tenants should take specialist Scots law advice.