Commercial property notice to vacate

You’ll need to make sure that you understand the details involved in serving notice to vacate your commercial property.  The Landlord and Tenant Act 1954 governs most commercial leases and enables tenants to renew their lease at the end of their contractual term. So, what this means for you as a landlord is that waiting for a lease to expire simply isn’t enough to regain possession of your commercial property. 

Here, we’ll take a look at how you can navigate this legal landscape, giving you the knowledge to be able to serve a notice to quit a commercial tenancy. We’ll discuss section 25 and section 26 notices, lease renewal rights and vital considerations to be able to ensure a smooth transition between tenancies. 

Understanding commercial tenancy security of tenure

It’s common in England and Wales for commercial leases to be subject to the Landlord and Tenant Act 1954, granting tenants the right to renew their lease when the fixed term ends. 

As you may already know, this is a fundamental difference compared to residential tenancies, meaning that commercial tenancies won’t necessarily terminate on the end date, unless it has been formally contracted out from the outset. 

If the commercial property is not contracted out, the tenancy will continue on the same terms until it has been formally ended by you, as the landlord, or your tenant. 

Next, we’ll take a look at section  25 notices and the best way in which to serve them as a commercial landlord. 

Section 25 notices

When you serve a notice to quit a commercial tenancy or propose new terms for a renewal, you’ll most likely serve a section 25 notice. This is a legal document that initiates the process under the guidance of the Landlord and Tenant Act 1954. 

There are two primary types of section 25 notices:

• Friendly notice: which states that you, as the landlord, are willing to grant a new lease but are proposing new terms (for example, changes to rent). These are usually served after discussions with your tenant about renewal. 
• Hostile notice: served when you intend to reject the renewal of the lease and want to regain possession of the commercial property. You need to ensure that you serve this notice on the grounds for opposition that are laid out in the Landlord and Tenant Act 1954. 

Common statutory grounds for opposition (hostile notice)

When looking to serve a commercial property notice to vacate using a section 25 notice, you need to ensure that you use one of the following grounds: 

• Tenant’s failure to repair the property.
• Persistent delay in paying rent.
• Breaches of other tenant covenants.
• You are offering suitable alternative accommodation.
• The tenancy is being created by a subletting of part.
• You intend to demolish or reconstruct the premises or a substantial part of them.
• You intend to occupy the premises for your own business or as a residence.

Timelines and wording

Section 25 notices have strict timelines and need to be served to the tenant no more than 12 months and no less than 6 months before the date specified in the notice for the termination of the current tenancy. 

Also, you need to ensure that the notice is written with the correct legal wording and that there are no errors in timing, wording or service. Otherwise, this may render the notice invalid, which can lead to significant delays in the process with potential legal complications. 

Section 26 notices

When your commercial tenant wishes to request a new lease, they can serve you a section 26 notice. They will set out their proposal for the new lease, including their desire to lengthen the lease and their proposed rent amount. 

Once you receive a section 26 notice, you have 2 months to respond to this in writing. You can either accept the tenant’s request for a new lease or oppose the grant of a new lease, relying on any of the statutory grounds mentioned earlier.

Section 26 notices can’t be served by the tenant if you have already served a section 25 notice. So, this means that the first type of notice served will dictate the procedural path. 

Lease renewal rights and negotiations

The Landlord and Tenant Act 1954 tends to favour commercial tenants, giving them a strong right to a new lease. So, if both parties are open to suggestions, the notices can trigger negotiations regarding the terms of a new lease (for example, rent, duration, rent review clauses or any break clauses). 

If, for some reason, you cannot find a middle ground or an agreement with your commercial tenant, either party can apply to the court in order to determine the terms of the new lease or rule in favour of your grounds of opposing the tenancy renewal. Usually, the court will look to maintain the existing lease terms. 

Potential pitfalls for landlords

There are a few things that you need to keep on top of as the landlord to ensure that you get the best outcome possible. A few common mistakes made by landlords include: 

• Invalid notices: Minor deviations from the set-out requirements can cause a commercial property notice to vacate to be invalid. This includes wording, form or timing. 
• Missing deadlines: when you fail to respond to a tenant within the 2-month period, or if you fail to serve a notice within the statutory timescales, you can decrease your chances of your favoured outcome. 
• Weak grounds for opposition: if your section 25 notice is weak or vague, your chances of not being successful are much higher. 
• Procedural errors: You need to make sure that you follow the procedures to the letter, as any misstep can cause major delays in the process. 
• Dilapidations: make sure that you stick to any repairing covenants you may have, so that you ensure all of your obligations are managed and understood correctly. 

Staying compliant to avoid disputes

The best case scenario for you as a commercial landlord is to ensure that you always stay compliant with the Landlord and Tenant Act 1954. It can be a complex act, so make sure that you seek legal advice as soon as possible before serving a commercial property notice to vacate. This way, you can make sure that your grounds for opposition are solid. 

Also, be sure to review your lease agreement so that you are aware of any specific clauses related to notice periods, renewals or contracting out of the Landlord and Tenants Act 1954. 

Always maintain clear and open communication with your commercial tenants throughout the process to help manage their expectations and to potentially avoid any disputes. Be sure to keep accurate records and document all correspondence related to this issue. 

Don’t wait until the last minute. Begin considering your intentions for the property well in advance of a lease expiry date to allow ample time for strategic planning and legal compliance.

By understanding the legal framework related to serving a notice to quit a commercial tenancy, you can minimise as much risk as possible and maintain control over your commercial property. 

For more information on how to protect your property as a landlord, be sure to visit our resource centre.  At CIA Landlords, we have the expertise to find the best landlord insurance deals that are suitable for your needs. Contact us today at 01788 818 670 for a quote!