Termination

Where a property is occupied by a tenant for business purposes it does not automatically come to an end simply by reason of the original term of the lease expiring. Instead it continues by operation of the law – this is generally described as 'holding over'. Once in the period of ‘holding over’ it can only be terminated by one of the procedures laid down in the Landlord and Tenant Act 1954. The following information deals with some examples of situations that may arise.
 
  • Property occupied by a tenant for business purposes
  • Lease not contracted out
  • Tenant wishes to leave at expiry of contractual term

If in this scenario the tenant wishes to leave at the end of the fixed term he needs to ensure that there is no period of holding over. There are two ways in which he can do this.

The first is to make sure that he has vacated the property by the end of the contractual term. If this is done then the argument is that as he is no longer in occupation, then the lease no longer carries security of tenure and as such no question of holding over can arise. There have been various cases over the years questioning the validity of this argument though it is now accepted as good law and indeed confirmed by statute.

The problem with this approach is that, for whatever reason, the tenant may be delayed in vacating or may slightly miscalculate the termination date so that he ends up still being in occupation at expiry of the lease. Further there is always the worry that the tenant may not completely remove all his stock or equipment from the property and then the landlord may claim he has not properly vacated. If the tenant is still occupying at expiry of the lease term then the lease will be continued by operation of the law and the tenant will then have to follow a statutory procedure to bring it to an end – giving at least 3 months notice.

The second option is to serve on the landlord a notice under section 27 of the Landlord and Tenant Act 1954 at least 3 months before the contractual term expires. This is the safest way to end the term on the contractual expiry date because the notice serves to terminate the tenancy and so the tenant will have no continuing right of occupation – thus if the tenant is a few days late leaving it will not have the effect of automatically continuing the tenancy.

  • Property occupied by a tenant for business purposes
  • Lease contracted out
  • Tenant wishes to leave at expiry of contractual term

In this case there is no security of tenure and so there is no question of a continuation tenancy being automatically created. No notice is required and the tenant can just leave on the expiry of the lease term. If the tenant remains in occupation at expiry of the fixed term then it does not automatically extend the lease – though a new periodic tenancy may be created depending on the circumstances.

  • Property occupied by a tenant for business purposes
  • Lease not contracted out
  • Fixed term has expired – tenant now holding over but wishing to leave

The tenant must give the landlord at least 3 months notice under Section 27 Landlord and Tenant Act 1954. There was a time when the notice had to expire on a quarter day (which meant that in some cases almost 6 months notice had to be given) though this was changed by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 which came into force on 1st June 2004 – this provided that the 3 months notice can expire at any time (but not before expiry of the fixed term).

There is no particular form of notice prescribed by the legislation.

  • Property occupied by a tenant for business purposes
  • Lease not contracted out
  • Tenant wishes to have a new lease

The tenant can serve a notice on the landlord under Section 26 of the Landlord and Tenant Act 1954 which specifies a date for the commencement of a new tenancy of not more than 12 months nor less than 6 months after the date of service of the notice but in any event not earlier than the expiry of the contractual term of the tenancy. In this notice the tenant will request the landlord grant it a new lease – the notice must set out the terms that the tenant proposes for the new lease.

If the landlord wishes to oppose the grant of a new lease then it must serve on the tenant a counter notice within two months of the making of the Section 26 request. The counter notice must state upon which grounds the landlord would object to the grant of a new tenancy. There are only certain specific grounds upon which the landlord can object to a new lease. The exact wording of these grounds are set out in Section 30(1) of Landlord and Tenant Act 1954 and are reproduced in full in the body of the Section 26 request. In summary they are:

  1. The tenant has failed to comply with his repairing obligations under the present lease.
  2. The tenant has been persistently late in paying rent, which has become due.
  3. There is some other substantial breach by the tenant of the terms of the existing lease.
  4. That the landlord is willing to provide suitable alterative premises.
  5. The current lease is a sublease of part and the landlord would be able to obtain a better rent for the letting the whole building as one rather than the sum of the parts.
  6. The landlord intends to demolish or reconstruct the premises in such a way that it could not be done with the tenant in occupation.
  7. The landlord intends to occupy the premises for his own business, or as his residence.

If the landlord relies on grounds  (e) (f) or (g) then he will have to pay the tenant compensation if he is successful in opposing the grant of a new lease. There is no particular form of counter-notice prescribed by legislation – though it is essential that it specifies those grounds that the landlord intends to rely on – the landlord cannot later rely on grounds that are not specified.

The tenant must then make an application to the court for a new tenancy before the date it specified in the Section 26 notice. The landlord and the tenant can however agree to extend the date. If they do this then the existing tenancy is automatically extended during that period. If the tenant fails to make the application to the court then the lease will terminate and his rights to apply for a new tenancy will be lost. If an application is made to the court then the court can determine the terms of the new lease – within certain parameters.

  • Property occupied by a tenant for business purposes
  • Lease not contracted out
  • Landlord wishes to terminate current lease and oppose the grant of a new one

The landlord can serve a notice under Section 25 of the Landlord and Tenant Act 1954 on the tenant specifying a termination date of not more than 12 months nor less than 6 months from the date of service and in any event the specified date must be not earlier than the expiry date of the initial fixed term of the lease.

In the notice the landlord must specify the reason(s) he objects to a new tenancy being granted. He can only do so on certain specified grounds. The exact wording of these grounds are set out in Section 30(1) of Landlord and Tenant Act 1954 and are reproduced in full in the body of the Section 25 request. In summary they are:

  1. The tenant has failed to comply with his repairing obligations under the present lease.
  2. The tenant has been persistently late in paying rent which has become due
  3. There is some other substantial breach by the tenant of the terms of the existing lease.
  4. That the landlord is willing to provide suitable alternative premises.
  5. The current lease is a sublease of part and the landlord would be able to obtain a better rent for the letting the whole building as one rather than the sum of the parts.
  6. The landlord intends to demolish or reconstruct the premises in such a way that it could not be done with the tenant in occupation..
  7. The landlord intends to occupy the premises for his own business, or as his residence.

If the landlord relies on grounds  (e) (f) or (g) then he will have to pay the tenant compensation if he is successful.

The tenant then needs to make an application to the court for a new tenancy before the termination date specified in the Section 25 notice. The landlord and the tenant can agree to extend this deadline. If they do agree to extend it then the tenancy is automatically extended to cover that period. If the tenant fails to make the application to the court then the tenants right to a new lease will be lost.

  • Property occupied by a tenant for business purposes
  • Lease not contracted out
  • Landlord wishes to terminate current lease and grant a new one to the tenant

The landlord can serve a notice under Section 25 Landlord and Tenant Act 1954 to terminate the current tenancy. Again this must specify a termination date not earlier than 6 months nor longer than 12 months after the date of service and in any event not earlier than the expiry of the contractual term. The notice will state that the landlord would not object if the tenant made an application for a new tenancy. The landlord must include in the notice proposals for a new tenancy. These are not intended as binding – they are just proposals upon which negotiations can be based.

If terms are not agreed by negotiation then either party can make an application to the court before the termination date specified in the notice. Below is a summary of forms mentioned above.

Form 1 Section 25 Notice
(the wording of this form is prescribed by statute) Notice served by landlord on tenant to terminate tenancy where the landlord would not oppose the grant of a new tenancy
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Form 2 Section 25 Notice
(the wording of this form is prescribed by statute) Notice served by landlord on tenant to terminate tenancy where the landlord would oppose the grant of a new tenancy
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Form 3 Section 26 Notice
(the wording of this form is prescribed by statute) Notice served by tenant on landlord requesting a new tenancy
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Section 27(1)
Notice served by tenant on landlord to prevent fixed term tenancy continuing after expiry date
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Section 27(2)
Notice served by tenant on landlord to bring to an end a period of holding over
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Landlord Counter Notice
To be served by landlord on tenant in response to tenants Section 26 Notice
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