Insights

Eviction of Commercial Tenants: Section 25 Notices

When commercial leases reach the end of their term, commercial tenants rely, to a large extent, on the ability to renew such leases in order to ensure business continuity. Leases are an integral part of the value of a business, and can usually be assigned in the event of a business sale.

In practical terms, under the Landlord and Tenant Act 1954, there are limited grounds for a commercial landlord to oppose this renewal.

Service

To end a lease under the Landlord and Tenant Act 1954, a landlord must serve a section 25 notice. If it is not so ended at the conclusion of its fixed term, the lease will usually roll on, governed by its terms. A landlord may choose to negotiate new terms, including new rental.

A section 25 notice can continue on the basis of new terms (a so-called “friendly notice”) or it can end the lease and oppose a new one (a so-called “hostile” notice). The mechanism for serving the notice is usually set out in the lease, failing which s.196 of the Law of Property Act 1925 will usually apply, which in practical terms will be service is either by recorded post or by hand. The notice period for a section 25 notice is between six and twelve months.

Grounds for Objection

A landlord can object to a new lease on the basis of any of seven grounds.

Two of these grounds are mandatory, being where the landlord can prove an intention to demolish or reconstruct the property; and/or intends to occupy the premises itself. Courts do not have discretion if these are proven.

Five of the grounds are discretionary and the court will have discretion as to whether a new lease should be allowed even if they are proven:

  • breach of a repairing covenant;
  • persistent delay in paying rent;
  • breaches of other obligations;
  • the availability of alternative accommodation; and/or
  • (if there is a sub-tenant) where the landlord can show that it can let the whole premises for more than the parts.

Compensation may be payable to the tenant on some of the above grounds, once proved.

Negotiation

Upon service of the section 25 notice, there usually follows a period of negotiation between the landlord and the tenant in respect of the terms of the new lease or the opposition to the new tenancy.

Tenants should pay heed to any deadlines in the section 25 notice, by which time the new lease should be completed, or court proceedings are issued demanding a new lease, or the landlord and tenant agree an extension deadline. Failure to meet such deadlines may result in the tenant losing the right to a new lease.

Conclusion

Landlords and tenants should be aware of their rights in respect of the termination of leases and the negotiation of new ones. In most cases, commercial leases will simply continue until the service of a section 25 notice.

Any section 25 notice that is serviced should be drafted and served carefully, and parties should have an eye on deadlines to protect their interest.

Please contact us for a consultation if you need assistance in the service of section 25 notices. Our experienced litigation solicitors are happy to offer help.

*This article is not legal advice but provides a general overview. The specific details of your case will determine the best course of action.