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Property Litigation Q&A December 2021: Section 25 and Section 26 Notices - ending or renewing a Commercial Tenancy

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Property Litigation Q&A December 2021: Section 25 and Section 26 Notices - ending or renewing a Commercial Tenancy

Property Litigation specialist lawyer, Will Bartley, provides advice on Section 25 and Section 26 Notices – what they mean, and how to use them.

This is a technical area of Commercial Property and Notice provisions and deadlines need to be followed to the letter, otherwise parties can be barred from relying upon them.

For further information on residential lettings, click here.

For further information on commercial lettings, click here.

What are Section 25 and Section 26 Notices?

Both of these Notices refer to the Landlord and Tenant Act 1954.

A Section 25 Notice enables the landlord of a commercial property to either end or renew the tenancy, providing that certain conditions are met, which we will discuss shortly.

A Section 26 Notice enables the tenant to request a new commercial tenancy and affords the landlord an opportunity to reply and agree to that request.

In the event of either a rejection to it or a landlord failing to respond within the specified 2 month period, the tenant is able to commence Court proceedings to allow a Judge to determine the provisions/granting of a new agreement.

Both of these notices are for use where the parties have not contracted out at the start of the existing tenancy from Sections 24-28 of the Landlord and Tenant Act 1954.

I am a Landlord of a Commercial Property, when and why would I use a Section 25 Notice?

As mentioned above, a Section 25 Notice would be used by a landlord to either bring an end to a commercial tenancy or to suggest new terms for a renewal.

When should a s25 notice be served?

This Notice must be provided to the tenant no sooner than 12 months from the expiry of the current fixed term, but also no later than 6 months from the expiry of the current fixed term.

As some commercial tenancies have fixed terms of many years, the window for serving a Section 25 Notice is relatively small, and therefore it makes it all the more important that it is done correctly.

How do I retain my tenant after the expiry of the lease?

If you are a landlord and looking to retain your current tenant, you can serve a Section 25 Notice and propose new terms to the tenant for that new tenancy.

You can then negotiate with your tenant and hopefully reach a compromise and enter into a new commercial tenancy.

Where the tenant does not respond to the Notice, the tenancy will either continue on the proposed new terms or where the landlord has served a termination Notice, the tenancy will end on the date specified in the landlord's Notice.

How does a landlord end a tenancy?

If you are looking to end the agreement and have your current tenant vacate the property, then a Section 25 Notice can set out your reasons why and what legislative provisions you are relying upon to do so.

The Notice provisions and reasons are quite prescriptive and specialist advice should be sought if you are contemplating this step.

If the tenant disputes the grounds and wishes to remain in the Property, a Court will decide whether to grant a new tenancy, and if so, on what terms.

Please note that a Section 25 Notice cannot be used if the tenant has already served the landlord with a Section 26 Notice.

What should be included in a Section 26 Notice?

The Section 26 Notice will contain your request to enter into a new agreement and set out the terms on which you are proposing for the new tenancy, such as the amount of rent payable, the start date and suggested fixed term etc.

What if my landlord doesn’t agree or respond to the Section 26 Notice?

In the event that your landlord does not reply to your Section 26 Notice within 2 months of being served with it, they will not be able to object to its provisions and a Court can determine the terms of a new tenancy.

Please note that a Section 26 Notice cannot be used when a landlord has already served the tenant with a valid Section 25 Notice.

Find out more about serving a Section 26 notice, in commercial property, here.

What if we can’t agree to terms?

In the event that either a S25 or S26 Notice is served and both parties wish to agree to a new lease, then they will have an opportunity to negotiate and try and settle on terms.

It is encouraged that the parties do this before escalating matters to Court, which can be costly and time consuming.

The parties should negotiate in good faith, using surveys and market rent valuations to try and narrow the gap in dispute.

In the event that the terms simply cannot be agreed, a Court Application can be made and a Court will determine the terms of a new tenancy, including rent and term length etc.

Please note that proceedings must be commenced before the expiry of either the S25 or S26 Notice.

What happens when a fixed term tenancy contract expires?

The tenancy will continue on its current terms until either party takes steps to either renew the tenancy on new terms or end the tenancy in its entirety.

Our Specialist Advice

We can advise you on the appropriate method of serving the respective Notice and can review your lease and draft Notices on your behalf, as well as represent you throughout negotiations and Court proceedings if necessary.

Will Bartley, who specialises in Property Litigation matters, authors a monthly Q&A on the website on a wide variety of Property Litigation related topics and would be happy to assist with enquiries of this nature.

Specialist Property Litigation and L&T Solicitors

If you feel that you would benefit from advice either as a commercial landlord or tenant on the provisions of Section 25 and Section 26 Notices, please contact the Property Litigation Department here at Frettens on 01202 499255.

At Frettens, we offer a free initial appointment for all new clients.