Lease Renewal Under the Landlord and Tenant Act 1954: A Broker's Guide

The Landlord and Tenant Act 1954 is the foundation of commercial tenancy law in England and Wales. Part II gives most business tenants the statutory right to renew their lease at the end of the contractual term — and gives landlords a defined set of grounds on which to oppose renewal.

For a CRE broker acting on either side of a commercial letting, understanding the 1954 Act is not optional. The process is governed by strict statutory timescales and formal notices. Getting it wrong can mean a tenant loses their security of tenure — or a landlord faces an unwanted renewal at below-market rent.

Which tenancies are protected?

The Act applies to tenancies where:

• The tenant occupies the premises for the purposes of a business
• The tenancy is in writing or arises by conduct
• The tenancy is not specifically excluded

Excluded tenancies — since 2004, landlords and tenants can agree to contract out of the Act, removing the statutory renewal right. This requires a formal procedure: the landlord serves a warning notice, the tenant makes a statutory declaration, and the agreement to contract out is recorded in the lease. Contracted-out leases are common for short terms or where the landlord wants flexibility.

If you are advising a tenant taking a lease, check whether the lease is contracted out. This is one of the most consequential provisions in a commercial lease.

How renewal works

When a protected tenancy is approaching its contractual end date, the Act provides two routes to trigger the renewal process:

Section 25 notice (landlord's notice) — the landlord serves a Section 25 notice specifying a termination date (between 6 and 12 months from the date of notice) and stating whether the landlord opposes renewal. If opposing, the landlord must state the grounds.

Section 26 request (tenant's request) — the tenant serves a Section 26 request proposing a new tenancy. The landlord must respond with a counter-notice if opposing.

Either notice starts the clock. Once a Section 25 or 26 has been served:

• The current tenancy continues past the contractual end date until the new lease is agreed or the court determines terms
• If the parties cannot agree, either can apply to the County Court for a new lease on terms determined by the court
• The application to court must be made before the date specified in the notice, or the right is lost

Missing the court deadline is a serious professional error. It requires active calendar management and early solicitor instruction.

Grounds of opposition

A landlord can oppose renewal on the following grounds (Section 30):

• (a) Failure to repair
• (b) Persistent rent arrears
• (c) Other substantial breach of covenant
• (d) The landlord can provide suitable alternative accommodation
• (e) Tenancy was created by sub-letting and landlord can let the whole more profitably
• (f) Landlord intends to demolish or reconstruct (and cannot do so with the tenant in occupation)
• (g) Landlord intends to occupy the premises themselves

Grounds (a), (b), and (c) are conduct grounds — they require the landlord to evidence actual breaches. Grounds (f) and (g) require the landlord to demonstrate a genuine and settled intention at the time the notice is served. The courts scrutinise this carefully.

If the landlord succeeds on grounds (f) or (g), the tenant is entitled to statutory compensation calculated by reference to rateable value.

Commercial terms on renewal

Where renewal proceeds and the parties cannot agree terms, the court determines:

• Rent — the open market rent on the assumptions in the 1954 Act (willing landlord, willing tenant, new lease, vacant possession). The court can appoint a surveyor to assess.
• Other terms — generally, the court starts from the existing lease terms and considers what is reasonable for a modern commercial lease.

Tenants often assume they can hold out for significantly below-market rent in court proceedings. In practice, court-determined rents track the market, and the costs of litigation usually outweigh any rent advantage.

Where brokers add value

CRE brokers acting on lease renewals contribute by:

• Identifying the contracted-out status of the existing lease early
• Advising on notice timescales and ensuring clients instruct solicitors promptly
• Providing comparable market evidence to support rent negotiations
• Coordinating the renewal process between solicitors, surveyors, and clients

What brokers should not do: draft or serve Section 25 notices or Section 26 requests without solicitor involvement. These are legal documents with strict form requirements.

Where AI helps

AI is useful for:

• Extracting the tenancy terms, contracted-out clause, and break options from an existing lease
• Summarising the renewal timetable once the key dates are known
• Drafting client advisory notes explaining the Act and the renewal process
• Flagging when a tenancy is approaching the statutory renewal window so you can prompt the client to instruct solicitors

AI cannot advise on the merits of opposing renewal on a particular ground, or determine the market rent. But it can materially reduce preparation time and ensure no dates are missed.