Commercial Lease Renewal: The Landlord and Tenant Act 1954 Explained

What Is the Landlord and Tenant Act 1954?

The Landlord and Tenant Act 1954 (LTA 1954) is a piece of legislation that gives business tenants in England and Wales the automatic right to renew their commercial lease when it expires. This right is known as security of tenure.

Before the Act was introduced, a landlord could simply refuse to renew a lease at the end of the term, leaving the tenant with no option but to vacate — even if they had run a successful business from the premises for decades. The LTA 1954 changed this by giving tenants a statutory right to remain and to request a new lease on broadly similar terms.

The Act applies to most commercial leases in England and Wales, including offices, retail units, warehouses, industrial premises and mixed-use properties. It does not apply to residential tenancies, agricultural tenancies, mining leases or licences to occupy.

Security of Tenure — What It Means for Business Tenants

Security of tenure under the LTA 1954 means that when your lease expires, it does not automatically end. Instead, it continues on the same terms as the original lease until either:

• A new lease is agreed between landlord and tenant
• The landlord successfully opposes renewal on one of the statutory grounds
• The tenant decides not to renew and serves notice to terminate
• A court determines the terms of a new lease

This is enormously valuable for business tenants. It means you cannot be evicted simply because your lease term has expired. You have the right to stay, to negotiate, and — if necessary — to have a court determine the terms of your new lease.

However, security of tenure is not automatic in every situation. There are important exceptions and procedures that you must follow correctly to preserve your rights.

Contracted-Out Leases — When the Act Does Not Apply

Not all commercial leases benefit from the protections of the LTA 1954. Before entering a lease, a landlord can ask a tenant to "contract out" of the Act — meaning the tenant agrees to give up their security of tenure rights.

To contract out, specific procedures must be followed before the lease is granted:

1. The landlord must serve a formal notice on the tenant warning them that they are giving up their security of tenure rights
2. The tenant must make a statutory declaration confirming they understand the effect of contracting out
3. If the notice is served fewer than 14 days before the lease is granted, the declaration must be made before an independent solicitor rather than a simple written declaration

If these procedures are not followed correctly, the contracting-out attempt may be invalid — which could mean the tenant actually does have security of tenure even though both parties thought they didn't.

Contracted-out leases are common for short lets, pop-up units and situations where the landlord has specific plans for the premises. If you've signed a contracted-out lease, you have no right to renew when the lease expires — so you need to negotiate any extension as a fresh commercial deal.

The Section 25 Notice — What Landlords Must Do

Under the LTA 1954, a landlord who wants to end a protected tenancy (or grant a new one on different terms) must serve a Section 25 notice on the tenant. This is a formal legal notice that sets out:

• The date the landlord wishes the tenancy to end (the termination date)
• Whether the landlord is willing to grant a new lease
• If not willing, which statutory grounds of opposition apply

The termination date in a Section 25 notice must be:

• Not earlier than the date the lease would naturally expire (the contractual term date)
• At least 6 months but no more than 12 months in the future from the date of service

Once a Section 25 notice is served, the clock starts ticking. The tenant has until the termination date to apply to the court for a new lease — if they want to exercise their right of renewal. Failing to respond appropriately within the deadlines can mean losing the right to renew.

The Section 26 Request — How Tenants Start the Process

Tenants don't have to wait for the landlord to act. If you want to renew your lease, you can take the initiative by serving a Section 26 request on your landlord. This notice:

• States your request for a new tenancy
• Specifies the commencement date of the proposed new tenancy (which must be between 6 and 12 months after the date of service)
• Sets out the terms you are proposing for the new lease

Once a Section 26 request is served, the landlord has 2 months to serve a counter-notice if they want to oppose the grant of a new lease. If they don't serve a counter-notice within 2 months, they lose the right to oppose renewal on any ground.

Serving a Section 26 request is often a smart tactical move for tenants — it takes the initiative, sets the proposed terms early, and forces the landlord to declare their intentions within a clear timeframe.

Grounds for Opposing Renewal

Even if a tenant has security of tenure, a landlord can oppose the grant of a new lease — but only on specific statutory grounds set out in the LTA 1954. These grounds are divided into discretionary grounds (where the court weighs up the circumstances) and mandatory grounds (where the court must refuse renewal if the ground is established).

Mandatory Grounds

• Ground (f) — Redevelopment: The landlord intends to demolish or reconstruct the premises and needs vacant possession to do so
• Ground (g) — Owner-occupation: The landlord intends to occupy the premises for their own business or residential use (though this ground cannot be used if the landlord acquired their interest within 5 years of the application)

Discretionary Grounds

• Ground (a) — Disrepair: The tenant has failed to keep the property in repair under the repairing obligation in the lease
• Ground (b) — Persistent rent arrears: The tenant has persistently delayed in paying rent
• Ground (c) — Other breaches: The tenant has breached other obligations under the tenancy in a substantial way
• Ground (d) — Suitable alternative accommodation: The landlord can provide suitable alternative accommodation
• Ground (e) — Sub-tenancy of part: The landlord holds the superior tenancy, part of the property is sublet and the whole would fetch a higher rent than the parts separately

Negotiating the New Lease Terms

If the landlord is willing to grant a new lease (or if the court orders one), the parties need to agree the terms. Key terms to negotiate include:

Rent

The new rent must reflect the open market rent for the premises. If the parties can't agree, the court will determine the rent by reference to comparable lettings in the area. This is where an expert surveyor adds enormous value — understanding the local market and presenting comparable evidence effectively can make a significant difference to the rent settled.

Lease Length

There is no statutory minimum or maximum for the new lease term. In practice, courts will typically order a term of around 5–15 years depending on the circumstances. Tenants often want a shorter initial term with options to renew; landlords often want longer commitments.

Repairing Obligations

The repairing obligations in the new lease should be carefully negotiated. If you are taking on a full repairing and insuring (FRI) lease, consider commissioning a schedule of condition to record the state of the property at the start of the term. This limits your liability to the condition the property was in when you took it on — not pristine condition at the end.

Break Clauses

Tenants should negotiate for a break clause — the right to terminate the lease early, typically with 6 months' notice. Break clauses provide flexibility if your business circumstances change. Landlords will often resist them or seek to attach conditions to their exercise.

Rent Review

Most commercial leases include provisions for rent review — typically every 5 years. The basis for review (market rent, index-linked, fixed increase) should be clearly defined. Be cautious of upwards-only rent review clauses, which only allow rent to increase, never decrease.

How a Commercial Building Surveyor Protects Your Interests

Lease renewal is not purely a legal process — it is also a technical and commercial one. A specialist commercial building surveyor plays a vital role in protecting tenants (and landlords) through the renewal process.

Schedule of Condition

Before the new lease is granted, your surveyor can prepare a detailed schedule of condition — a photographic and written record of the property's state at the start of the new term. This is especially important if the new lease includes a full repairing obligation, as it limits your future dilapidations liability to the condition at the time of taking the lease.

Dilapidations Assessment

At lease renewal, landlords sometimes seek to resolve any dilapidations from the expiring lease. Your surveyor can assess whether the claims are justified, negotiate on your behalf, and prevent you from paying more than you legally owe.

Rental Valuation

RICS-accredited surveyors are qualified to advise on market rents and to act as expert witnesses in court proceedings if the parties cannot agree on rent. Having independent expert rental evidence can significantly reduce the rent agreed on a new lease.

Survey Before Committing

If you are entering a new full-repairing lease, a commercial building survey before the new lease is granted will identify any significant defects in the property that you would otherwise be taking on responsibility for. Knowing about structural issues, roof problems or services failures before you sign gives you negotiating power — or the option to walk away.

Frequently Asked Questions About Commercial Lease Renewal