Lease Renewals & the 1954 Act.

Yes — where a landlord successfully opposes renewal on one of the no-fault grounds under the 1954 Act (suitable alternative accommodation, sub-letting of part, redevelopment, or owner occupation), the tenant is entitled to statutory compensation for having to leave. The compensation is calculated by reference to the rateable value of the premises — generally either the rateable value, or twice the rateable value where the tenant (and any predecessor in the same business) has been in occupation for 14 years or more. This compensation reflects the disruption and loss of goodwill caused by being forced to relocate. It is payable regardless of any actual losses the tenant can prove. No compensation is payable where the landlord opposes renewal on a fault-based ground. The right to compensation can be excluded in some leases, so the lease terms should be checked.

Where your lease has security of tenure under the 1954 Act, renewal can happen in one of two ways. The landlord can initiate the process by serving a Section 25 notice, which either proposes terms for a new lease or states the landlord's intention to oppose renewal. Alternatively, the tenant can take the initiative by serving a Section 26 request, setting out the terms they propose for a new lease. Once the process is triggered, the parties negotiate the terms of the new lease — rent, term, and other provisions. If they cannot agree, either party can apply to the court to determine the terms before the relevant deadline. Most renewals are settled by negotiation without the need for a court hearing. The process is governed by strict time limits, so taking legal advice as soon as renewal is on the horizon — or a notice is received — is essential.

The rent for a lease renewed under the 1954 Act is set at the open market rent — the rent at which the premises could reasonably be let on the open market at the renewal date, on the terms of the new lease. The court disregards certain matters when assessing the rent, including: any goodwill attached to the premises by the tenant's business; any improvements the tenant has made (in certain circumstances); and the fact that the tenant is already in occupation. If the parties cannot agree the rent, it is determined by the court, usually with the assistance of expert valuation evidence from both sides. In practice, most renewal rents are agreed by negotiation between the parties' surveyors. An interim rent may also be payable for the period between the expiry of the old lease and the grant of the new one.

A landlord can only oppose renewal of a protected business tenancy on one or more of the seven grounds set out in Section 30(1) of the 1954 Act. These are: the tenant's failure to repair; persistent delay in paying rent; other substantial breaches of the lease; the landlord offering suitable alternative accommodation; that the tenancy is a sub-letting of part and the landlord requires the whole property; that the landlord intends to demolish or reconstruct the premises (the redevelopment ground); and that the landlord intends to occupy the premises themselves for their own business or as a residence. The first three are fault-based grounds; the last four are no-fault grounds. Where a landlord successfully opposes renewal on a no-fault ground, the tenant is entitled to statutory compensation. The grounds must be stated in the landlord's Section 25 notice or counter-notice, and the burden is on the landlord to prove them.

In most cases, negotiation and the statutory process run alongside each other — the vast majority of 1954 Act renewals are settled by negotiation, with the statutory process providing the framework and the backstop. Relying on negotiation alone, without protecting your position under the Act, is risky: if negotiations stall and a deadline passes, you may lose your renewal rights. The safest approach is usually to engage in negotiation while also taking the procedural steps necessary to protect your statutory position — serving or responding to notices and, where necessary, making a protective court application before the deadline. This preserves your rights while leaving room for a negotiated settlement. A solicitor can manage the statutory process and the negotiation together, ensuring your position is protected while you work towards an agreed renewal.

The 1954 Act contains strict time limits that are critical to protecting renewal rights. A landlord's Section 25 notice or a tenant's Section 26 request must specify a date between 6 and 12 months ahead. Where renewal is opposed or terms cannot be agreed, an application to court must be made before the termination date specified in the notice (or before the day before the commencement date in a Section 26 request) — though this deadline can be extended by agreement between the parties. Missing the deadline to apply to court can result in the loss of the right to renew and the ending of the tenancy. The time limits are technical and the consequences of missing them severe — which is why taking legal advice as soon as a notice is served or received, and diarising all deadlines, is essential.

If your lease was contracted out of the 1954 Act before it was granted, you have no security of tenure and no automatic right to renew. The lease ends on its contractual expiry date, and you must leave unless the landlord agrees to grant a new lease. There is no statutory renewal process, no right to apply to court for a new lease, and no entitlement to statutory compensation. Any new lease is a matter of negotiation, and the landlord is free to refuse or to offer terms of their choosing. If your lease was contracted out, you should plan well in advance of expiry — whether by negotiating a renewal with the landlord, seeking alternative premises, or planning your business around the possibility of having to relocate. Check your lease and the contracting-out documentation to confirm whether the Act was validly excluded.

A Section 25 notice is the formal notice a landlord serves to bring a business tenancy to an end under the 1954 Act. There are two types: a friendly notice, which proposes terms for a new lease; and a hostile notice, which states that the landlord opposes renewal and sets out the statutory ground relied on. The notice must specify a termination date, which must be between 6 and 12 months ahead and not earlier than the contractual expiry. If you receive a Section 25 notice, act promptly: the notice triggers time limits within which you must respond to protect your renewal rights, and if the landlord is opposing renewal, you may need to apply to court before the termination date to preserve your position. Do not ignore a Section 25 notice — take legal advice immediately, as missing a deadline can cost you the right to renew.

A Section 26 request is the formal request a tenant serves on the landlord to initiate the renewal of a business tenancy under the 1954 Act. It sets out the terms the tenant proposes for the new lease, including the proposed rent and commencement date. A tenant might use a Section 26 request to take control of the timing of the renewal — for example, to secure a new lease before a rent review, to lock in terms while market conditions are favourable, or simply to bring certainty to the future of the premises rather than waiting for the landlord to act. The request must specify a commencement date for the new tenancy between 6 and 12 months ahead. Serving a Section 26 request is a strategic decision with timing implications, and tenants should take legal advice before doing so — once served, it cannot be withdrawn and it starts the statutory clock running.

Part II of the Landlord and Tenant Act 1954 gives business tenants security of tenure — the right to remain in their premises and to renew their lease when it expires, rather than being required to leave. Where the Act applies, a business tenancy does not simply end at the expiry of the contractual term; it continues automatically on the same terms until it is brought to an end in accordance with the Act. The tenant has the right to request a new lease, and the landlord can only refuse renewal on specific statutory grounds. This protection exists to give businesses continuity and to protect the goodwill they build up at their premises. The Act applies automatically to most business tenancies unless they have been contracted out before the lease was granted.

The redevelopment ground — ground (f) under Section 30(1) of the 1954 Act — allows a landlord to oppose renewal where, on the termination of the current tenancy, the landlord intends to demolish or reconstruct the premises or a substantial part of them, and could not reasonably do so without obtaining possession. To rely on this ground, the landlord must prove a genuine, firm, and settled intention to carry out the works — not merely a possibility or a wish. Following the Supreme Court's decision in S Franses v Cavendish Hotel [2018], a landlord cannot rely on the redevelopment ground where the works are designed solely to satisfy the ground and remove the tenant — the intention to redevelop must be genuine and would exist regardless of the tenant's renewal claim. Where the landlord succeeds on the redevelopment ground, the tenant is entitled to statutory compensation. Tenants facing a redevelopment ground opposition should take specialist advice on whether the landlord's intention is genuinely made out.

A lease renewed under the 1954 Act is generally granted on similar terms to the existing lease, but the terms are not automatically identical and can change. The court — or the parties by agreement — will determine the terms of the new lease, taking account of the existing terms and the current circumstances. The rent will be set at the open market rent (which may be higher or lower than the existing rent). The duration of the new lease can be up to 15 years, as determined by the court if not agreed. Other terms may be updated to reflect modern leasing practice or changed circumstances — though the court will not impose substantial changes without good reason, applying the principle that the renewed lease should broadly reflect the existing one unless there is a compelling case for change. Both landlord and tenant can argue for changes to particular terms.