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Legal requirements for property managers when dealing with lease renewals and terminations

For property managers, lease renewals and terminations are moments that shape tenant relationships, financial outcomes, and long-term property strategies.

Handling these processes requires a blend of legal knowledge, planning, and practical judgement.

Our Director of Commercial Property and Charities, Elizabeth Jennings, outlines the legal requirements for property managers when dealing with lease renewals and terminations.

The Landlord and Tenant Act 1954

The Landlord and Tenant Act 1954 (the Act) supports many commercial leases, giving tenants the right to renew unless specific conditions are met.

Section 24, for example, gives business tenants the automatic right to apply for a new lease when their current one expires.

This provides tenants with security, knowing they can stay in the same premises unless the landlord has valid reasons to refuse the renewal.

While this is beneficial for tenants, it can be a complex issue for landlords for several reasons:

Limited Control: Landlords may find it harder to regain possession of their property or re-let it on better terms. This can be especially frustrating if the market is rising, or they have redevelopment plans.

Negotiating power: Section 24 restricts a landlord’s ability to negotiate lease terms freely. Although landlords can propose new terms, they must follow strict procedures, limiting their influence.

Potential for disputes: Lease renewals under Section 24 often lead to disagreements. Common disputes involve rent, lease duration, and other terms, which can result in lengthy and costly legal battles.

For property managers, knowing whether a lease is inside or outside the Act sets the foundation for how you approach the process.

Tenants within the Act’s protection enjoy additional rights, meaning landlords must have valid grounds, such as redevelopment or persistent arrears, to end the lease.

Without this understanding, even the best-laid plans can fall apart.

Getting lease renewals right

Renewals often come with tight deadlines and complex negotiations.

A Section 25 or Section 26 notice must be properly served to begin the process.

Section 25 notice

This notice is served by the landlord and is typically used to either:

Terminate the lease, stating opposition to renewal (on specific grounds such as redevelopment or tenant breach)

Propose new terms for the lease renewal, such as changes to rent, lease length, or specific clauses.

The notice must be served no less than six months and no more than 12 months before the proposed termination or renewal date.

For property managers, this means staying ahead of key lease deadlines and ensuring the notice is legally sound.

Any errors in the notice, such as incorrect dates or a failure to include statutory grounds for termination, can invalidate it and lead to delays.

Section 26 notice

This notice allows tenants to request a new lease on terms they propose.

If a tenant serves this notice, landlords must respond within two months if they intend to oppose the renewal.

Failure to respond in time may result in the landlord losing their right to challenge the renewal.

Property managers then need to evaluate market conditions, understand the tenant’s needs, and balance those with the landlord’s objectives.

Missing any detail, such as terms, or rent adjustments, can lead to disputes or missed opportunities.

The delicate process of ending a lease

Terminations often require more than a notice. Landlords may need to prove their intentions, whether it is taking back the property for redevelopment or addressing breaches of lease terms.

For property managers, this means gathering evidence, ensuring notices are served correctly, and often acting as a mediator between landlords and tenants.

When negotiating lease terms, it is important that you also stay informed about market conditions and understand your tenant’s business needs.

Seeking legal advice early can help avoid unfavourable terms and ensure that deadlines are met.

Our commercial property solicitors can ensure that the process does not leave you in legal trouble and help make the transition as smooth as possible.

If you are facing difficulties with lease negotiations, get in touch with our team today for expert advice and guidance.

Elizabeth Jennings

Director - Commercial Property & Charities

I joined Mander Hadley in 2004, qualified as a solicitor in 2006 and have focussed on commercial law throughout. I am also a member of Coventry and Warwickshire First and Warwickshire Law Society.

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