Security of tenure – Law Commission consultation on business tenancies

Niall Helferty, Solicitor, Property Dispute Resolution

In November 2024, the Law Commission published the first paper it prepared on reviewing Part 2 of the Landlord and Tenant Act 1954, and whether that Act was fit for purpose in a modern commercial leasehold environment.

The initial consultation period ended on 19th February, and whilst we cannot accurately predict what the future may hold, it got me thinking specifically about security of tenure now, and how parties to a lease can protect their security and their rights to renewal leases.

The most regular forms of Notices I come across in relation to Business Tenancies and security of tenure are either a Landlord’s s.25 Notice, or a Tenant’s s.26 Notice.

Currently, and very briefly:

A Landlord, has an option to serve upon its Tenant a s.25 Notice, setting out whether it opposes a new lease or whether it is agreeable to a new lease being entered into. Under the law as it exists today, a Landlord must give no less than 6 months’ and no more than 12 months’ notice to its Tenant; and the date terminating the existing lease cannot be earlier than the existing contractual expiry date.

A Tenant could choose to serve a s.26 Notice on the Landlord, setting out its proposals for a renewal lease. Under the law as it exists today, a Tenant must give no less than 6 months’ and no more than 12 months’ notice to its Landlord; and the date terminating the existing lease cannot be earlier than the existing contractual expiry date. If a Landlord objects to a new lease being entered into, it must, within 2 months of the date of the Notice, respond with a Counter-Notice, setting out its opposition. If the Landlord is agreeable however, there is no such requirement and the parties simply can negotiate the renewal terms.

Thereafter, there are important key dates to be borne in mind and steps that must be taken in advance of such, or parties can lose their security, but these matters, along with the grounds upon which a Landlord can oppose a renewal lease, go beyond the scope of this note, but I would always advise a party to obtain legal advice on these issues.

It is vitally important that Notices are served in accordance with the terms of the lease, on the correct party, by the correct party, in time, and on the correct form. Any failure in these respects can invalidate a Notice, which can create significant problems and can undermine a party’s position and commercial strategy. I always advise having Notices prepared and served by a solicitor, to ensure it is compliant and valid together with obtaining strategic advice as to the course of action being planned.

Notwithstanding this, the recent Consultation has got me thinking about a little used form of Notice; a s.27 Notice. A s.27 Notice is a Tenant’s notice to its Landlord, setting a termination date. Under the 1954 Act as it stands, a Tenant must give at least 3 months’ notice to its landlord when terminating its lease, but no maximum period of notice is set out. The provisions of s.27 do not mirror ss.25 and 26.

As a result, there is in my view plenty of scope for conflict between the interests of Landlords and Tenants; and there is absolute importance of being first to serve a Notice.

My colleagues and I at Kuits are always happy to work with a client in considering its strategic goals and we work with our clients to achieve theses goals in the most commercial and cost-effective way possible. Early advice is essential. I strongly suggest that any party to a business tenancy needs to start thinking now about what its medium and longer term aims are. Obtaining critical legal and strategic advice about your business and operational plans and your premises will be in some part key to achieving your goals.

If you wish to discuss your business, your lease or if you have received a Notice from your Landlord, please do not hesitate in contacting either myself at niall.helferty@kuits.com or my colleagues at PDR@kuits.com. Please also feel free to call us in the first instance for an initial chat on 0161 832 3434.