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Section 24: The Landlord and Tenant Act 1954 explained

The Landlord and Tenant Act 1954 is a guiding principle for commercial tenancies in England and Wales with the aim of protecting business tenants by giving them the right to renew their lease.

However, for landlords, this can create challenges, particularly with Section 24, which governs the lease renewal process.

We have outlined some of these challenges below but it’s important to note that this is a highly complex area of law, and each case should be approached from a unique perspective with the help of a qualified solicitor.

Having said that, landlords need to be fully aware of the issues involved to manage their properties effectively and to remain compliant with their legal responsibilities.

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.

Navigating Sections 25 and 26: Lease renewal procedures

The renewal process becomes even more complicated when you consider Sections 25 and 26, which outline the procedures both landlords and tenants must follow.

Section 25 requires landlords to serve notice if they wish to terminate the tenancy or offer new terms for renewal.

This notice must meet certain legal requirements, including:

Timing: The notice must be served no more than 12 months and no fewer than six months before the proposed termination date.

Content: The notice must state whether the landlord opposes renewal and, if so, on what grounds (as detailed in Section 30). If the landlord agrees to renewal, the proposed terms must be outlined.

If the notice doesn’t comply with these formalities, it can be invalid, leaving the landlord with fewer options.

Additionally, if the landlord opposes the renewal, they must rely on specific grounds from Section 30, such as redevelopment or the tenant breaching the lease.

These grounds are often disputed by tenants, which can lead to further legal complications.

Under Section 26, tenants can serve notice requesting a new tenancy, along with their proposed terms for the new lease.

If a landlord wants to oppose this, they must serve a counter-notice within two months.

Failing to respond in time may result in the tenant’s terms being accepted by default.

Of course, the pressure to negotiate new terms after receiving a Section 26 notice can strain landlord-tenant relationships and make the renewal process more difficult.

Grounds for opposing renewal: Section 30

Section 30 of the Act outlines specific legal grounds for landlords to oppose a lease renewal, including:

Tenant’s breach of lease: If the tenant has not maintained the property or regularly missed rent payments, the landlord can oppose the renewal.

Redevelopment: If the landlord plans to demolish or reconstruct the property, they can oppose the renewal, provided they have solid, realistic plans.

Landlord’s own use: The landlord may also oppose renewal if they plan to use the property themselves, either for business or residential purposes.

While these grounds offer landlords some protection, they also come with their own challenges.

As a landlord, you must provide solid evidence of your intentions, whether it be redevelopment plans or personal use.

Courts will closely examine these claims, and any doubt may result in a decision favouring the tenant.

From a solicitor’s perspective, navigating the complexities of the Act requires strategic planning, timing, and negotiation as failing to follow the strict legal procedures can lead to extended tenancies and missed opportunities for our landlord clients.

As part of this, the timing of notices is crucial.

You must ensure you serve your Section 25 notices at the correct time to avoid invalidating the notice.

Timing is also vital if you plan to oppose renewal on the grounds of redevelopment and you must have planning permission and financing in place to prove your intentions are genuine.

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

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

In fact, to avoid disputes and other legal pitfalls, we highly recommend speaking to a solicitor as soon as you decide to end the lease.

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

Please get in touch with our team if you are a commercial property landlord and we’ll give you tailored guidance based on your unique circumstances.

Carl Jones

Director - Head of Commercial Department

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.