If you are a landlord or tenant of business premises, you should be aware that notices to terminate and/or renew leases under the Landlord and Tenant Act 1954 are time critical. You ignore such a notice at your peril.
The purpose of a Section 25 Notice, usually served on a tenant by the landlord six to twelve months prior to the end of the lease, is either to:
(i) propose that the tenancy be renewed and suggest the terms on which the landlord wishes to renew; or
(ii) notify the tenant that the landlord opposes the grant of a new tenancy on one of several statutory grounds, for example, breaches of covenant or because the landlord intends to redevelop.
If a Section 25 Notice has been served, what steps should a tenant take? If the tenant intends to vacate the premises at the end of the lease term, no action needs to be taken. However, if the tenant intends to stay, unless the landlord can prove one of the statutory grounds mentioned above, he is entitled to a new tenancy. The terms proposed in the Section 25 Notice may provide a springboard for negotiations which should help the two parties to agree a terms for a new lease without further action being necessary. If the landlord opposes the grant of a new tenancy, the tenant will have to decide whether it accepts, or intends to challenge, the grounds on which the landlord’s opposition is based.
In order to protect its position, the tenant must have completed the new lease by the date specified for termination of the lease in the Section 25 Notice. Alternatively it must have made a claim to the Court for a new tenancy or obtained an extension of time in writing to do so from the landlord.
Many tenants assume that the new lease will have been sorted out by the termination date or that agreement of Heads of Terms are good enough and thus fail to protect their position. Negotiations can be protracted leading to the loss of the right to stay in the premises with all the attendant disruption, upset and loss. To avoid this situation, we strongly recommend that you consult a solicitor on receipt of the Notice who will be able to advise whether the Notice is valid, explain the next steps to be taken, advise on the proposed terms of the new lease, make any claim to the Court to renew the lease if necessary and, most particularly, ensure that crucial deadlines are not missed. The costs are relatively low bearing in mind that the tenant will have effectively secured an insurance policy to protect what may be a valuable lease.
A tenant can initiate the lease renewal procedure itself by serving a Section 26 Notice. The subsequent procedure is similar to that for a Section 25 Notice.
We have seen many sad situations, for example, where a tenant, about to retire, failed to make a claim for a new tenancy within the time period and therefore lost all the goodwill that went with the business - and his retirement fund - overnight.
In conclusion, Notices under the Landlord and Tenant Act 1954 should be treated very seriously and critical time limits scrupulously observed.
For more information on Section 25 Notices or on any other landlord and tenant matters, please contact Jane Senior on 01926 880712 or email jane.senior@wrighthassall.co.uk.
